- Date published:
12:26 pm, May 15th, 2017 - 128 comments
Categories: Andrew Little, class war, housing, labour - Tags: housing, housing crisis, labour, policy, property speculation
Labour has set the cat among the property speculator pigeons, and they don’t like it at all. Good coverage of the announcement here – Little gets personal with housing policy
Andrew Little rallied his troops with an aggressive speech full of personal touches and a new housing policy at Labour’s last party congress before the election, Bernard Hickey reports.
If there was any doubt that Labour would focus on housing as its main point of attack in the election campaign, it was removed in leader Andrew Little’s final address to the Labour Party’s annual congress in Wellington on Sunday.
He focused his speech completely on housing and roused the packed audience at Te Papa to its feet several times with his focus on Labour’s housing policy, and the party’s early history of building state houses.
The news in the speech was Little’s announcement that a Labour-Led government would phase out over five years the ability of rental property investors to offset their property losses against their personal income. He cited Inland Revenue Department figures showing this practice of negative gearing reduced potential tax revenues by $150 million a year and the policy of phasing out negative gearing would raise an extra $1.2 billion over a decade. Labour would use that extra revenue to fund a grant of up to $2,000 per dwelling for insulation, double glazing and heating upgrades.
You know it’s going to be an effective policy because of the panic of those who benefit from the current tax structure – Property Council ‘cynical electioneering’ (RNZ Audio)
Property Council says Labour’s property tax proposal is cynical electioneering and could make the housing crisis a lot worse.
This old classic of course – Landlords threaten rent rise for Labour reforms
Landlords are threatening to push up rents in reaction to Labour’s new rental sector tax policy change.
Andrew King, NZ Property Investors Federation executive officer, said there was no doubt rents would rise nationally if policy announced by Labour leader Andrew Little was introduced.
Vested interests should have coordinated better with the Nats – PM fires back at Labour’s property flip tax loophole claims, saying it’s already sorted
Prime Minister Bill English says Andrew Little’s promise to crack down on property speculators is nothing new, and housing construction is on track.
Get your stories straight guys! (Yeah housing on track – Auckland under-building drastic: barely half demand being met.)
It’s a good policy – Close negative gearing tax loophole, spend money on insulation – Labour. And the panic of the property speculators shows that it’s going to be an effective policy.
Landlords warned of rent hikes after the depreciation changes. Didn't make a difference. Rents due to demand/supply https://t.co/yPghzteNmF
— Bernard Hickey (@bernardchickey) May 14, 2017
The investor parasites who are a large part of the problem in housing are shitting themselves the gravy train taxpayer handouts they benefit from may be taken away. So much entitlement, so much greed.
But to the rescue rides the National Party’s Linda Cooper (Auckland Councillor) who said: “The reality is, there will be people who will not be owning houses. How do we incentivise private landlords to keep these good tenants, keep these people in the same community?”
Hmm, let me think Linda, “the reality” is Nationals making, those who can never own a house because your party like it that way. Do you own a few investment homes and do you want some more hand outs? Whose the “Benny’s” Linda, the ones Paula and your party like to put the boot into, those who are poor or much more likely middle class Nat voters?
I guess the investors won’t be voting Labour. But hang on, they never did.
It has taken far too long to remove the incentives to invest in property. The sooner investment is redirected to productive activities and away from property the better.
These policies should have been introduced by a socially responsible left leaning govt thirty years ago, but we had the infamous 1980’s Labour instead ! Helen had ample opportunity to address this as well. I guess being too late is a little better than never.
All strength to these moves ,and may they go further to disincentivise property investment as a get rich scheme.
Helen Clark led a minority government and it would have been hard to get cross party support for, as an example, a capital gains tax, at the time. The LP would have had a hugely negative media reaction. If you remember in those days a capital gains tax was one of those no-go areas, and housing shortages and expenses not so major. Instead income related rents were brought back and state housing improved.
Clark was conflicted as a multiple property owner and trust beneficiary.
“After all, Helen Clark alone owned whilst be prime minister, an Auckland villa worth $720,000, a Wellington townhouse worth about $350,000, an apartment in Christchurch, property at Rodney, and was a beneficiary of two family trusts.”
The Auckland villa was bought as a family home when it was very affordable area. The Christchurch flat was because Peter Davis was a professor at Christchurch for some time.
Wellington flat was for Clarks use in Wellington when an MP.
Family trusts were I think bequests, her parents did own a Waikato dairy farm.
The Labour Party under Helen Clark could have looked really socialist once they had got into power, and started a concerted but balanced effort on building more State houses, and keeping on with their sweat equity efforts which would have been small in the scheme of things, but large in the effect and the ripples that swept out from that into the near community. There were more things they could have, and should have, done besides pulling levers of some remote machine like CGT.
Small workshops and training as handymen, householders, gardeners could have directed energy in any spare time poorer people had, into things that would be useful to the immediately, and also got them onto a list of people keen and trained as householders ready to go when any opportunities came up for state houses, or new sweat equity projects.
Less talk, talk, blame, blame, and getting onto an escalator taking aspirational householders ever upwards with way stations taking part in training workshops, growing workshops and successful trainees would have been top of the list ready to go, and dragging family and neighbours with them keen and capable instead of sad and falling off the rails.
“I guess the investors won’t be voting Labour. But hang on, they never did.”
They did when Labour introduced LAQC’s and essentially incentivised negative gearing allowing investors to reduce their taxable income. National got rid of this and now investors have much less that they can claim to reduce their taxable income.
I’m really struggling to see who Labour identifies as the “Property Speculator” or even define what a “Property Speculator” does.
Someone who buys property for capital gains but hides that motive by negatively gearing for a few years before selling for a tidy capital gain without paying any tax on those gains or anything else.
Can you effectively prove that the property was brought for capital gains? Quantify a “few years”…
Renting is not an easy option for making money. But capital gains is, while you have a supine RW government, whether left leaning or right leaning, both with their own love of ‘P’, in this case Property Investment of the housing variety. And with accommodation supplement subsidy which comes straight from govt. to landlord. This from the strong business party where the market rules and business people are self-made men even if they are women. BS.
Just one more step to go and that is pre 1984, NZ allowed homeowners to claim back interest and maintenance costs on their owner occupied homes. Of courses that main point is always, always, left out of the intergenerational warfare stories as to why the 55+ crowd own a home and the younger cohort don’t.
I don’t remember that James Thrace. It would be if the home was being partly used for business purposes surely? And then only a proportion matching the portion that was business only.
Offices are still still deductible I think as a proportion of
Renting is probably a perfectly adequate means of making a respectable profit as long as the landlord can aquire a property without borrowing. Excess gearing is what kills it. Make interest non deductible and virtually all landlords relying on excess gearing would still be making good (book) profits and paying reasonable amounts of tax. Mind you, that tax would have to be paid from there other income since interest payments would no doubt be gobbling up the profits that might otherwise have been available for that purpose from their rental income.
Don’t worry, no-one expects you to be able to understand the details. If you have any further complaints about having to pay your taxes, the Inland Revenue can set you straight.
Indiana, let me put it simply for you. “Property speculators’ profit-gouge, that is what they do. The system is loaded in their favour – and this causes the excessive rises in property and renting costs. Under the current conditions, even what you would call ‘investors’ rate as profit-gougers. That is what has caused the ridiculous growth in property values. I have benefited mildly from it in the past, and I am happy to call bullshit on it. The ridiculously easy profits from property necessitate the dismantling of an unbalanced system which is unhealthy for our society. It does not create wealth – it creates illusory bubbles that will eventually burst. As well as the social problems now becoming over-obvious.
The growth in property values has been caused by lack of supply in the face of rising demand. A ‘profit-gouging’ investor cannot increase rent easily in the face of growing competition.
The last person that I saw trying to phone Inland Revenue during the day was in a wait queue of 19 minutes. It is important that poor people have landlines available to them when they want to parley with the government and its agencies, cellphone time costs.
Government offices are closed down, entry is forbidden unless an appointment has been granted, which must be made over a cellphone. And cellphones are mandatory so the peeps can be phoned to jump to attention if wanted by someone, somewhere, for work or have their nails checked for cleanliness. No wonder everyone is staring at them all the time, they are like passports so one can travel the mean streets.
How did NZ become like an open prison for so many. And why is it acceptable to so many? Pride in a great little country, in this NZ? We don’t seem to have amounted to anything since 1916 and Gallipoli if you listen to politicians.
Of course not, that’s why bright line tests exist. Still, an astute property investor would not deliberately run at a loss unless there was an angle somewhere.
It is time to face up to reality and the Auckland Housing Market ?
Which tells us that the free-market isn’t working as the break high inflation that it’s supposed to do as the market is owned by people who collude with each other. Just as Adam Smith said in fact.
Of course, if Labour builds enough houses and rents them out for a very small amount on an as need basis then the profiteers wouldn’t have that sort of power.
I think there is a public appetite for going hard on this – especially among the young. If Labour are too weak they will have the wind taken from their sails by National coming out with a pale ‘Labour lite’ imitation of their policies. Labour will have lost the moment.
From the link in the OP:
Which is only half the story. Say in 15 years time the investor has paid down the mortgage and is only paying say $5,000 in interest, and the company is now making a cash profit which should be liable for tax. Except with ring fencing you have all these previous year tax losses accumulated on the books and these are deducted from profit. So no tax is liable for many more years until the losses are finally exhausted.
In the end the total tax paid is pretty much the same.
In that example, the take is similar, but in the case of someone who negatively gears for 3 years and then sells for capital gain, there is no tax paid on the property, and a tax refund earlier.
Thats right they usually sell on fairly quickly to take the capital gain.
Plus to get under the banks lending policies they just couldnt sit on a loss
a few moth ago i looked at a commercial property. while it was not awesome, it ticked a few boxes and could have worked. We made our offer, which of course was declined :). Now the same property is still on the market and is now on Trade me advertised, but low and behold not for the price it was offered to us, now this same property is advertised for an extra 6 grand a year.
The landlord of this property has no reason what so ever to rent this premise , why? he can offset the loss he makes by not renting it – Market pays yeah, right TUI – against his personal earnings.
Once this tax incentive to not rent a premise, be it commercial or private is removed, i can see some properties that now have been empty for a year + go up on the market again, but this time will find people that can ‘afford’ to run a business out of them.
So yeah, i and other small business owners that would like to be able to work for more then just the ground lease should applaud this move.
Limited companies are able to carry losses forward to future years because they usually don’t have other income against which they can offset those losses. Individual proprietors who offset losses against other income should not be allowed to carry those losses forward to be deducted from future income. Alternatively, losses should be ‘ringfenced’ . This would ensure that those losses are not deducted twice.
The old rallying cry “we’ll have to put rents up”.
What proportion of landlords don’t already charge what the market will bear? If those landlords try to charge significantly more, then there’ll be more vacant houses and more people living in cars.
I suspect that of those landlords that knowingly charge less than “market rate”, most do so to keep good long term tenants and their finances are such that they will be unaffected by the proposal.
I agree. Rents are historically more linked to incomes than property prices.
But costs get trimmed, maintenance is deferred, and improvements … forgeddaboudit.
Long term tenants who’ve haven’t seen a rent review for years because they are very low risk and look after the place well … suddenly find a letter in the mail they didn’t expect.
And WINZ staff get a whole bunch of Housing Supplement reviews arrive in their inboxes.
And so on. However it plays out, it won’t make anyone’s life better.
By itself, probably not, but in conjunction with building and selling 100,000 houses at cost, and ramping up Housing NZ’s building programme, I think a lot of lives will be improved.
Absolutely … something I’ve strongly advocated for here in the past. The state is far better placed to do social housing (with all its attendant risks) than the private sector.
And it is capable of putting a quality ‘floor’ to the market below which no private landlord could stay in business.
He still hasn’t explained how he’s going to build so many new homes without any new immigrants doing the work?
Really? You mean, if I go to Labour’s website and look for info on ‘Kiwibuild’ there’ll be no answer to your question?
Have you actually checked, though, because I’d hate for you to utterly waste my time because you were too biased, lazy or dishonest or something.
Forget the trivial bit about who is going to bang in the nails and start with the basics.
70 Sq kms of land is needed and about $5bil of infrastructure.
Were is that to be found.? Are councils going to fund the expansion?
What does Labour’s website say?
A lot of “we will” without the “this is how we will”
So no surprise there.
It comes as no surprise to me that someone who identifies as right-wing cannot imagine that, or even how, a government might build houses, despite actual history.
The last Labour government significantly increased state housing stock. No doubt that would be impossible for you too.
As Bob Jones says, “stultifying” is all you can manage.
Some countries make it illegal to increase rents by more than 4% per year. There are answers to drastic rent rises.
Yeah I could go with that if there was a similar rule limiting house prices…
4% per year is drastic enough, year in year out, while we have 0.4 percent inflation, and maybe 2% wage increases, its still not going to work out very well for life time renters.
And it’s the taxpayer who picks up the bill paying for more Accommodation Supplements and Family Tax credits as I know many families who rely on that to help pay the rent.
But even so, it’s something……yet landlords are a predictable bunch and pretty good at getting round these things..
Its a bold and gutsy move and I hope Labour fair sail through the coming shitstorm.
And its about time . Total support for them.
And just quietly , the more these landlords , banks and speculators kick up and cry about unfairness or whatever else they want to call it , the more it will cast them in a predatory light. Its a no win situation for them. Either they back down now and cut some losses or be prepared for mounting antagonism against them.
They’ve had a decent run at sucking the life blood out of family’s and renters and first home buyers without any real checks or balances. Now its time for them to start pulling their heads in and start paying their dues.
We can no longer tolerate having family’s living out of cars, in garages and large numbers of homeless. Nor can we tolerate squalid , overcrowded living conditions with multiple family’s living in a house designed for only one family where people develop serious illness.
Its GOT to change.
Its a complete outrage the way this society has been left to rot under the National government.
Is anyone from the productive or innovative sectors of the economy complaining? No?
Good. Carry on.
Exactly. This ponzi scheme hurts nz
They will welcome it as national have deliberately made residential property a speculators wet dream at the expense of the productive sectors.
The middle have lapped it up like the apathetic docile lot they are thinking it means wealth……till they have to drive around akl, visit a hospital, send kids to school, swim in a river, drive on our crumbling highways, visit chch, pay the power bill etc.
I’d not be quite so smug about it OAB.
Right now we’re looking at taking on another big project. Considering.
Regional town, North Is.
Somewhere between 8 – 10 one and two bedroom units, brand new. Very cool location, attractive and professionally designed multi-unit dwellings with plenty of borrowed space, great views and 10 min walk from the centre of town.
The units themselves will be 60 -80m2, insulated to the max and all have heat pumps/ fire boxes. Double glazing, decks, private/public space and common walk ways. The kind of modern smart design ideas we see in new developments here in Australia. I’d be stoked to live in one myself.
And if we can pull the numbers together we can make it work with rents at say 2 bed for $330 pw. Everything will be unit titled and we’re willing to consider rent to buy. Not super cheap, but within the range of similar rents in town for much older, unappealing houses.
I guess you would define this as a non-productive, non-innovative, rent-seeking parasitical project. Because at the moment while it’s no more than doodles on paper, ring fencing losses (which will be high in the first three years) will piss on it’s parade.
I’m not looking for a free ride, I’m quite happy for assets to be taxed properly. And in that respect I see Gareth Morgan’s proposals as a good deal more radical and fair.
You guess wrong.
If I meant parasitical I’d’ve said so.
A few years back I was surprised to learn that at that time it was estimated that 15% of all new builds were done by investors who typically focussed on affordable, middle of the road homes 2 -3 bed under 150m2.
The other 85% was dominated by developers selling to new home owners looking to build 4 – 8 bed McMansions 200m2 and upwards. Very definition of not affordable.
So oddly enough the biggest source of new affordable homes in the market at that time was coming from us evil investors.
If I meant evil I’d’ve said so.
AB said it best on the Looming Battle post: at present ‘Mum & Dad’ investors are eligible for a tax break that ‘Mum & Dad’ renters or first home buyers are not.
“Won’t someone think of the Mums and Dads?” is a limited response at best, and that’s before we get to the arguments Little presented on RNZ this morning.
Despite all their rhetoric about personal responsibility, the National Party and its proxies are now going into bat for people who run their businesses at a loss.
at present ‘Mum & Dad’ investors are eligible for a tax break that ‘Mum & Dad’ renters or first home buyers are not.
It’s a fair point and I’ve said a few times now … why not let home owners claim interest costs from income? Even up the playing field a lot.
its proxies are now going into bat for people who run their businesses at a loss.
Capital gain speculators often do, because they know the untaxed gains will more than compensate. But investors usually plan to get to a modest profit around the time they retire.
…which is pretty much what Little said this morning; that Labour’s intention is to discourage capital gains speculation, not long-term (eg: retirement) investments.
mmm … well as a I tried to illustrate above, ring fencing losses doesn’t seem to be the most obvious way to go about it.
I don’t doubt Little’s intentions. I just question the rather conventional and narrow toolkit the Labour Party seem to be bringing to this fight.
Another way they get around tax payments
1) put home in family trust
2) make the kids as beneficiaries
3) income is split amoung x children where income is taxed at 10.5% not at the parents marginal rate
of course the kids income is family income.
Well, would you be willing to do the same job for the government at a salary of say $75k?
The govt job doesn’t require me to borrow several million and put my entire lifesavings at risk.
I fully get that speculators and money launderers have totally fucked up our housing market. I really do. It’s a live issue and Labour have finally shown some real interest in responding to it. Great.
But right now the tools I see them planning to use don’t seem all that sharp.
But would you do it?
Why on earth would he?
Anyone capable of putting a project like that together is working for a consultancy and charging absolute minimum $200/hr and they have more work than they have hours in the day.
I have (this morning) been trying to get a structural engineer, I cant find one with less than a two month lead time.
Because it would give him a reasonable living standard.
IIRC, RL is working in Australia in his main job because he’s not getting that from his rentals.
And yet there’s 150k unemployed.
Think there may be a problem there? Perhaps it has something to do with not training people in NZ any more unless they go into massive debt first.
Kiwi blog has an interesting post on this
Here’s the link he put up showing how many landlords are in New Zealand and how many houses do they own.
80% of landlords own one house
17.5 % own 2 -5 houses
At a rough guess 1/2, the houses are owned by “Mum and Dad” type investors and the other half by professional investors.
What percentage take advantage of negative gearing?
Not many at all according to little – of course he has not backed that up.
All you have to offer is trolling.
Yes that lines up with our experience. Anything past say 5 units and you are pretty much into ‘professional’ territory.
The other core distinction is between speculators who are in it for capital gain only, and will likely sell or re-finance to extract that value … and investors who are looking for long term cash flow and never plan to sell. Quite different beasties, with different motives and behaviours … although I will acknowledge there can be a fair bit of overlap in some cases.
There were interesting caveats in the OIA response, though: older boarding house tenancies would count as one property (now they are counted by room), and one landlord/property manager might have several numbers.
So… yeah. I wouldn’t be drawing huge conclusions on that.
I doubt your caveats would change the data to a significant extent … maybe +/-5 % or so. The underlying numbers seem good enough to me, enough to draw some reasonable conclusions from.
At 8 units we seem to be pretty much at the top end, while relatively small number who make it past 10 seem to then go on to 30, 50 or more. But they really are a tiny <2% of all landlords. At that level it's a non-trivial business and takes skill, energy and ballz to pull off without crashing. Eventually they can run out of banks willing to take on more risk. A bit out of my comfort zone.
Thing is, I’ve worked with datasets that had that caveat and turned out to affect onely a couple of dozen out of thousands of observation. But I’ve also seen them with the same caveat that basically made any analysis along those lines completely farcical. As in “discontinue work on it and go on to something else”. Garbage. For me the big one is the boarding house thing, given a number of long term boarders around the place.
So I actually place more value in your anecdote than BM’s link. I mean, you might be observing only your locality, but at least most professional folks know who’s who in their area.
he Does it deliberately to make it look less threatening
The point is not by landlords, it should be % by houses
105 k owners have 1 house which is 105K houses
300 have over 200 houses each. That alone 60,000 houses could be quite a few more as it wasnt average.
You can see this group alone has more half the number of houses of the single owners
No way would you use 0.22% unless you are Farrar trying to mislead
Its clear that large landlords (20+)own the majority of houses, not 1%
For starters the .22 wasn’t from farrar – it was from another blog that got the number from an OIA – so how do you explain farrar getting them to provide that figure so he can mislead ?
Another trollling comment.
According to Ed – someone makes a false comment – but the person pointing out the correction is the troll.
its all well over due property speculators have had there time in the sun a society can not function in the interests of the few and lets throw one back at them nobody made them go boots in all into debt the rent seekers made there life choices
society isn’t here to fund there greed or life styles.the speculators wont be picking up the cost of the long term damage to society and they will be the first to put there hands out for a bailout when not if the housing ponzi scheme pops
go for it Andrew you have my vote.
ps farmers use negative gearing as well.
Other than the farm house, farms count as commercial, so would not be included in the crackdown.
The fair dividend rate for overseas shares pushes a lot of money into housing that would otherwise be invested elsewhere.
One could view this as a levelling of the playing field.
Does this still hold true in 2017?
“One in seven houses sold in Auckland’s fiercely competitive housing market are being bought by people who already own five or more properties, new data shows.
This group of multiple property owners have increasingly swallowed up more of the city’s houses over the last four years, mostly at the expense of people looking for their first home.”
That is an appalling statistic.
I was taught 50 years ago that you need to speculate to accumulate and it was bloody good advice.
First home buyers need to think the same way. Becoming wealthy is a choice you make not something that will happen to you as of right.
Don’t get sucked in by all the socialist bullshit .
Work for your money and then you can let it work for you.
The flipside of that is that most gamblers lose because the game is rigged in favour of the house.
Becoming wealthy is a choice you make
Yawn. The bullshit you were spoonfed has several names: ‘the self-attribution fallacy’ and ‘the just world fallacy’ are two of them.
Look them up. I can’t be bothered schooling you.
I personally don’t think either of those fallacies are entirely correct as regards capital accumulation.
I think luck can certainly explain the difference between a person who has accumulated $10 million in assets versus $100 – $200 million, but the fact that there are people like Jobs, Musk, Perot, Thiel, etc. who have started multiple billion dollar companies shows that skill, experience, relationships, etc. does play a part.
Ultimately I think anyone who is in a position to save, control expenditure and invest and be disciplined about all three can accumulate capital, but it takes a focus that can detract from the quality of life, and doesn’t seem like a price many are willing or able to pay.
Jobs got hit by a drunk driver who ran a stop sign in 1979. Got brain damage, couldn’t give dynamic presentations, couldn’t focus on code.
Or he was born in 1867, sold snake oil, died in obscurity.
Yeah, it’s all luck.
Maybe if your a Nihilist, but I personally believe we do have some degree of control over our fate in the time we are born, excluding the type of outlier event listed above.
Might as well send ourselves off to oblivion otherwise.
It’s not nihilism.
It’s a recognition that when elephants fight, the grass gets trampled.
You can build a good business, then an earthquake happens.
The most successful things I’ve done have been the result of decisions that nobody with a career plan would have made.
But we have more power over our lives when we work together. When we help each other up, and hold a safety net for each other. We’re not economic supermen, building success out of the simple power of our will. We stand on the shoulders of everyone else who built the society that gave us these opportunities.
You believe in that Atlas Shrugged nonsense?
You believe we have no control over the direction of our lives?
McFlock laid it all out for you at 18.104.22.168.1.1 and still the best you can do is a stupid strawman?
We need better wingnuts.
Everyone, let’s be like Steve Jobs and the world’s problems will be no more!
Yep, invent something the world wants.
You’re ignoring that conditions under which people succeed vary widely as does talent and ability they were given at conception.
This is typical of the self important RWNJ who believes ‘if I can do it, anyone can – just be like me!’
…and then some idiot lets them get control of Walmart and they drive it into the ground.
I’m pretty new to this blog and I’m surprised that suggesting we have some degree of individual control over the financial outcome of our lives, is “Atlas Shrugged nonsense”, or makes one a “RWNJ”.
There are of course some events that are luck but many of those listed above; getting hit by cars, earthquakes, when one is born etc. one can take precautions against, insure against or doesn’t seem relevant.
Is this the mainstream view amongst Socialists, i.e. that we have no control over our individual financial future? If so, does this belief in a lack of control extend to individual control over health outcomes and other areas of life too?
Dunno about mainstream view, but are you seriously telling me that luck isn’t the major factor in where you are now? That you correctly predicted what qualifications would be in demand when you began your tertiary education, with none of it being reliant on government policy or technological progress in that time? That you never had an opportunity simply because someone you met gave you the heads up on a job, or picked up a CV typo at the last minute? Hell, just today I mentioned to someone that I was considering upgrading my home computer, and he happened to have a machine just lying around as part of his organisation’s routine disposal of their high end machines. Saved me a couple of grand.
Every single day I have luck, good or bad. Yesterday my car wouldn’t start, making me miss a meeting (luckily not a critical one). Today it started first time. A paper I took at random back in the day became highly relevant in a successful job interview. A couple of years ago I slipped on black ice in the dark, but thanks to another random life decision I fall exceptionally well. When I was a teenager, did I think that wandering into that gym would repeatedly save my limbs from pain and possible breakage in twenty years time? Nope. But now I’ve fallen several times more than I’ve actually needed self defense skills for their main purpose, and I used to be a bouncer ffs. The best fall was down a flight of stairs with no injury at all – that’s real life-changing luck.
I mean, nobody’s saying that we just throw our hands up and leave ourselves to the fates. If you fall in the ocean, you swim and try to find a floatation device. So I work, and try to save money, and try not to piss too many people off. But several hundred people in my town have just had their factory shut down. How the fuck could they have prevented or take precautions against that? You mentioned insurance: insurance is the very definition of luck-based determination, rigged in favour of the house. You seriously think that “insurance” gives you some sort of protection and self-determination? Come on. It’s an illusion.
I certainly do accept that luck and chance play a large part in all our lives everyday, but I do not believe it plays a larger part than the choices we make everyday both good and bad.
I think the view that we have little to no control over our lives (in this argument financial) because chance, risk and luck exists is wrong.
I think we are talking past each other a bit, as you’ve given the example of a factory closing down in your town (perhaps SFF in Ashburton which was announced today), and that sucks. But what percentage of people go through their working lives without suffering a lay off versus those that do? How many people change jobs of their own choice in year versus how many are laid off? How many people laid off are then unemployed for long periods, versus those that find a job quickly or never find one again? I think that even in the horrible situation of lay offs one can exert some degree of control. I was a Bailiff when they announced they were reducing the number from 100 or so in Auckland to 40 or so. I found another job before I potentially got the boot, a good friend of mine stayed around and got laid off. Was it chance I found another job? Was it chance he got laid off, or did we both make decisions that affected our financial future?
Certainly do believe insurance offers protection and self-determination, I took great comfort in having a life insurance policy when I was first married knowing that if I died my wife would be able to pay off the house and get back on her feet. It really did help me self well at night, and I don’t mind the insurance company made some profit while offering it. I think it has been a great boon for the poor and the middle class to have such a thing. I’m surprised to hear this argument actually, what are unemployment benefits, ACC, state housing etc. if not a form of state sponsored insurance?
By chance, you were able to afford insurance, and the rest is the self-attribution fallacy.
Of course it was chance you found another job.
It was luck that they were looking for someone with your skillset and characteristics at the time that was best for you. It was luck that you found out about the opening, rather than that was the ad that was covered by a coffee stain or something. They chose you. You didn’t walk into the workplace of your decision and say “behold, I am your new worker! Rejoice one and all, for I have graced you with my presence!” and the manager just went with it, did you?
Jeromeee what would you know about the Irish Potatoes famine.
The colonial power of the time used the famine to exert its power over the non compliant serfs,deliberately taking any surplus food to England.
The result 1 million dead Irish people women and children.
New research shows those who are religious are less intelligent than atheists.
Sigh: try a couple of use cases.
So if you go to a decile 1 school compared to a decile 10 school as a child, it makes no difference because as a child you have control over your individual financial future? After all a 5 year old with a P’ed up mother and father in prison is able to time travel and pick their parents or be really financially mature enough to move to the correct suburb right?
So if you get glue ear as a child to the level of requiring grommets and then have to wait for a year of partial deafness and it doesn’t affect your education? Plus having to do the same again every few years as you grow and require larger grommett sizes.
60 years ago as a child, your maternal grandmother was starved while being a refugee. That affected the development of her unborn daughter’s eggs. So her child wound up sickly and scrawny.
During adolescence, you start getting disassociation issues and start losing concentration in school or university. Because of your vast personal experience you instantly recognize the symptoms and get diagnosed and treated – not for being an adolesence – but for the incipient mental imbalance.
These are all things that affect your ability to plan your life and to have a financial future as an adult. Because trying to live at or below a minimal wage is completely different from being in the top 5% of income earners in NZ (as I have been for most of my working life). There is not really anything you can plan on low incomes. You just wind up living day to day with no buffers between you and misfortune. I’ve seen all of the above and many others happen. If you haven’t then I suspect that you are willfully blind to others or pretty damn young by my standards.
Almost all of the things that are deterministic for the low lifetime income are set before you are born or during development. Unless you happen to be one of a very small percentage who get very lucky, usually by the kindness of someone else. Or by a sustained intervention by the state to pull you out of the poverty trap.
There are a pile of studies that display that. Try the Dunedin medical school longitudinal study. Consequently I always thank my parents and grandparents for being who they were. They gave me a chance to live the life that I live.
Don’t be a completely gormless fool. Try extending your mind and imagine living in the real world rather than fuckwit fantasy perfect world. Otherwise fix the world and then come back in 70 years to explain how the world is now perfect. Personally I suspect that you’d be more interested in taxcuts for the wealthy rather than
BTW: as a newbie please read the about and the policy so you don’t replicate the usual idiotic mistakes that life ignorant Randian shitheads (who read just like you) usually make here. Like trying to whine that robust debate is rude because other people know more than you do about life.
No whining on my part, just genuine surprise that believing that all society (including those currently on low incomes) who haven’t suffered a dramatic life event, have more than a minuscule degree of control over their individual financial futures, makes one a gormless Randian shit head.
I tried to find studies online showing what percentage of the population believes they have some control over their financial future to demonstrate that it is not an extreme view, and therefore most of the population must be gormless Radian shit heads, but from the list of physiological and financial studies that came up this seemed to simply be accepted as a given without need of qualification, perhaps making the same point.
I have certainly seen many examples of the victim of birth, circumstance or tragic event type of situations you outline above, and I have no doubt that all studies show that a lot of your life outcomes are determined before birth. However, I spent much of my twenties as a Bailiff and Forensic Officer attached to a burglary squad and have seen too many examples of people overcoming these types of situations (with little to no outside help) to believe we all have little to no control over the situation. A few examples come to mind. I used to deal with a large family on Waiheke Island that was notorious for their dysfunction, the children were following in the footsteps of their parents, except for one of their sons who was only in his early 20s and already had a sterling reputation on the Island as a reliable independent builder. Being of similar age from a much better background and a bit aimless in life in general at that age I greatly admired him. I also remember being involved in a search warrant on the house of alleged P dealers. When searching their 15-16 year old son’s room I found some material from the armed forces recruitment. I was very surprised to find it, and I remembered the kid and his name very specifically. I few years later I saw him at an Anzac Day parade in an army uniform. I’m happy he escaped and I think of him from time to time, and hope he didn’t get deployed and hope he kept his determination after he left the army.
Finally, both my Father and Uncle were physically and physiologically abused by my alcoholic Grandfather as children. Their lives took very different paths and when I asked my Dad why they turned out so different, he said the essential difference was he used the anger and pain as fuel to be determined to be the complete opposite of my Grandfather and to be the best Dad he could, and my Uncle let the pain and hatred consume him.
So even though I’m in my mid-30s (not sure if that is young in your view) and I’m under no illusion the world is perfect, my own personal experiences, those of people I’ve met from all walks of life, and subject matter I’ve read leads me to believe we do have a large measure of control over our financial futures (and other futures) outside extreme events, and holding this view is valid.
After reading the policy I hope the above is not considered trolling, etc. and has added to the debate.
Nope that isn’t trolling. Welcome to the robust debate.
The problem is exactly in what you said. Sure anyone can pull themselves out of the mire but it is usually only if someone else volunteers a helping hand or they were damn lucky. It is easy in a large population to find examples of it happening over several generations. It is rare for it to happen in one.
For instance professional military forces like those in NZ are very selective on who they allow to volunteer for RF or TF (I spent a number of years as TF). I’m not sure of what the rejection rate is these days but they always used to reject more than they selected. They select for basic physical fitness and for mental fitness, and then they try to weed out any marginal cases during basic. Someone who has had a bad childhood is far more likely to be rejected than someone who didn’t.
Then even if they did pass through that, you often require some technical training inside to be able to survive outside if you don’t get promoted and get to stay in. I’ve run across quite a few middle aged ex-soldiers who didn’t survive well outside of the uniform and quite a few who did.
The rest of what you describe is pretty typical multi-generational advancement. Looking back over my extended family it isn’t hard to see the progression from real poverty a couple of generations back to the well paid professionals in my nieces, nephews and cousins children. Being a crippled and poorly educated teen in the depression wasn’t a life enhancing experience. Sometimes luck that gives you parents who can lift you up far enough to get so you don’t get stuck in whatever they came from.
But more often over the past century it has been society via the the state that provides the required housing, medical care and educational opportunities that allow you as a child or your parents as children the choices.
In my case, that one of the sets of my grandparents were able to get a state house was crucial to what my parents were able to achieve, and what allowed me to achieve what I do. I merely used the opportunities that they provided and that the state offered in things like being able to go to university to. Sure my parents, my siblings and I had to work for it. But that was maybe 20-30% of the success AFTER we’d already had a enormous boost from the state provisions and their parents.
The characteristic of “Randian shit heads” is that they invariably think that they got whatever success they have through their intrinsic abilities and sterling hard work rather than through the society and parental support. Trump is a particularly fine narcissistic example of the breed.
Just left young adulthood 🙂 I’m 57 and starting to feel mature.
Jeremy, we already know you believe the self-attribution and just world fallacies very very much. Presenting your personal anecdata explains in part why you are inclined to your beliefs, and not much else.
Hasn’t it occurred to you that your anecdata demonstrate why chance is so influential?
I didn’t mention it in my post, but the reason I choose those examples was they were the ones that has most clearly (through my conversations with the people involved) demonstrated the personal mental choice the people involved had made to change their circumstances (which included a financial component), and then had the determination and were lucky enough not to have those plans derailed by outlier life events.
Yes, I know.
It didn’t occur to you that
1. Their siblings didn’t, or that
2. The particular circumstances or character that led to the different outcomes being a matter of chance, or that
3. You have no idea what they or their siblings are doing now, whether or not you’re accurately reporting the facts in the first place.
This “mental choice” you assert they made, by the way. Can you point to some Neurobiology in support? Help me out here.
That one looks like it is for J. 🙂
1). Yes I did, it seems to me to be evident that inertia kept them where they are, while their siblings made the herculean effort to change, after their minds were made up that they wanted something different and then they were lucky to not be knocked off course.
2). Yes, but I wasn’t having a psychiatry session with the people I mentioned. I could go a bit deeper with the example of my Father and Uncle, but I’ve said all I want to online about that except to mention their lives diverged more and more as they got older, my Uncle only suffered depression toward the end of his life, seemly from self induced afflictions. They were, as far as I can tell, very similar young men, of the same genetics.
3). No, since my life isn’t a long range study of everyone I’ve ever met, and I can only present the fact as I’ve had them relayed to me or as I have interpreted them, as is the case for all of us who relate life events.
Sure let me point to the Neurobiology of the young man on Waiheke through the paraphrased conversion we had 10+ years ago:
Me (naively condescending): Why are you so different from the rest of your family?
Him: Just sick of that shit. I don’t want it in my life.
So, according to you, his circumstances lent him strength of character?
And you think this (if true) doesn’t fall into the category of ‘good fortune’?
One out of how many (?) siblings, in your example, “escaped” their circumstances. Unlucky for the rest of them, eh.
Please let the penny drop.
Edit: perhaps you think (mistakenly) that this is a fatalistic viewpoint: not at all. For one thing, it says that we should use tools such as universal free education and healthcare, minimum standards of income, housing, security and resilience, to load the dice. Just don’t forget that’s all we’re doing: rolling dice. Snake eyes are inevitable.
Well if you ascribe strength of character to good fortune then I think it becomes a philosophical debate about whether we have will power, and can develop character, self determination, etc. or whether we have only the illusion of choice in a random materialist universe.
In my personal study of the main philosophies and religions, in my opinion, it seems to be only Atheistic or more nutty beliefs that subscribe to the illusion of choice.
Since I’m not an Atheist and don’t consider myself a nut, it’s unfortunately not a view I’ll be sharing with anyone anytime soon. Believe me I’d like too, I think I’d make a great narcissistic hedonist, which is where I’d end up at.
Edit: I posted the above before I saw your edit, but I think it still holds true. I don’t think adding that you believe in collective programs to lessen the effect of the essentially guaranteed initial outcomes changes things all that much. It is essentially a debate between two opposing world views, and it seems we just irreconcilably disagree.
If this were simple esoterica, curiosities for philosophy majors, sure.
It isn’t. Have a look at the Lerner experiment and then think about the implications for policy makers.
I did, and as a species we’ve come a long way from saying that poor Irishmen should die during the potato famine because they are getting their comeuppance.
A quick look on Wikipedia reveals a number of alternate explanations for the subjects behaviour apart from simply just world belief.
Surely it is apparent we should not make government policy based on a single experiment with competing explanations?
Everybody who votes right-wing is saying that the Irishmen should starve. They may not believe that but that’s really what they’re doing. The Potato Famine not only resulted in huge amount of death but increased poverty and concentration of the communal wealth into even fewer hands.
Now, people can pull themselves out of the mire that is the result of bad social circumstances but it’s not usual and even when they do it’s often the result of outside influence and not simply themselves.
Sometimes, probably most often, it’s that they got direct help and other times it’s simply that something has struck them as wrong and they’ve managed to apply that to their own lives and thus change their life from it. The latter would be the rarest of times and is pure luck and nothing else.
For the majority of people in poverty or other bad situations they don’t get that direct help nor do they get that single piece of blind luck. They see no way out of their position and their experience tells them that they’re stuck there.
Thankyou for an interesting thread guys, Jeremy I respect your position insofar as society should and does expect adults to be responsible for their lives, but the problem is there are structural issues that disempower these same people and especially after 9 years of National austerity and Maori Party bowing to an ideology that punishes the poor, your arguments ring hollow.
Really? Then how did you miss the fact that Lerner’s experiment has been replicated over and over again, and his conclusions are just one part of a large body of evidence?
Ropata is correct: “hollow” indeed.
The only position I’ve tried to maintain in this discussion is that choice plays more than an infinitesimal role in people determining their own future outcomes, in this case financial, as opposed to luck / chance. Others have narrowed the debate to the poorest people in our society and I accept that luck / chance plays a larger part in the life and financial outcomes in this group’s lives, while still maintaining their ability to influence the outcome through choice is more than minuscule.
I don’t really think this is an extreme position, I would hazard a guess that it is a view shared by 75%+ of the population, but since I can’t find a study of people’s views in this area it is just a guess.
In my lifetime we’ve had the GFC, earthquakes, 911, a couple of bubbles, the 87 crash, rogernomics/ruthenasia, and so on.
Sure you can try to mitigate risk in some areas, but realistically the only reason any one of those didn’t put me and my family into poverty, or clean out all my parents’ retirement savings, is really down to luck. They lost a bit in some areas, dealt with career-ending injuries, gained a bit in others, budgeted sensibly and gave their kids a bloody good upbringing (my personal failures are definitely my own). But equally things could have turned out massively worse, and maybe a bit better, just on the metaphorical toss of a coin.
If macroeconomics and suchlike were more predictable, I might agree with you, but really we’re all at sea. Some are better navigators or sailors than others, and if you neglect boat maintenance you’ll need better luck and weather than a solid craft. We can pick a course to find landfall, but which way is the wind blowing, if at all?
Some captains are idiots, this is true. But at the end of the day, we’re all at the mercy of forces much bigger than we are.
Excuse me, if you don’t mind, the fact that lots of people believe this stuff is one of the things the Lerner experiment demonstrates.
It’s a pervasive and pernicious myth, and the sooner we’re rid of its distorting influence on public policy, the better.
My appeal to the majority isn’t a line of evidence, just trying to demonstrate that holding the position I do isn’t extreme, and if holding it makes one a rabid Objectivist than 75%+ of the population (at a guess) are rabid Objectivists.
Secondly it’s only a problem if the belief is wholly incorrect. The fact that the Lerner experiments have been repeated with the same result is just what you would expect with any well formed experiment and exactly what you would expect if one of the alternate explanations, well outlined on Wikipedia, is correct. You cite a large body of supporting evidence, but I mentioned above when I searched for studies showing what percentage of the population held the view that they have more than a tiny effect over the outcome of their (financial) lives, and there wasn’t such a study to be found, but that there was a large number of studies on how financial beliefs affected financial outcomes, and from reading the abstracts and conclusions and checking the footnotes, I couldn’t find a reference in a study where they felt they even needed to justify the above belief. A large portion of academia seems to accept it as common sense, and a self evident truth.
The point being, there is certainly evidence that the faith you place in the fallacies of self determination, and your favoured interpretation of the Lerner experiments may be misplaced.
One thing I don’t understand is how someone can believe that demonstrating strength of character can be good fortune, and that all the factors that determine our life outcomes are outside of our control, except when we decide we want to develop collective government programmes to pick up the pieces, then, all of a sudden, we can have all the will power in the world.
To my mind you can either believe the universe was randomly spawned 14 odd billion years ago, and the force of gravity was randomly set and then shaped the universe and our solar system, chance driven evolution then randomly took over on Earth leading eventually to us, who falsely believe that we have choice in our lives, and that random events completely shape or outcomes, or your can’t. Adding an asterisk for Socialism in a couple of South Pacific Islands at a point in time in-between complete and utter oblivion and complete and utter oblivion doesn’t logically follow.
In fact, in such a world view whether NZ ends up a Socialist Utopia or not has already been decided and the fact that you are not a Libertarian, or anything else, that you believe what you currently believe, is simply a matter of chance.
It’s not a worldview I share. I couldn’t be bothered getting out of bed if I did – it wouldn’t make sense.
If we had more long term control over our lives than was down to luck, why are more people poor than are rich?
I think Robert Burns said it best.
this belief in a lack of control
You have that the wrong way around. Those who assert that they have ‘control’ are required to provide the evidence, not those who assert the null hypothesis.
Collectively there are many many ways in which we can shape our futures. As individuals, not so much.
Plus what McFlock said.
These are hardly new ideas: I’m no christian, but what do you understand by a ‘state of grace’? Or ‘throwing oneself on gods’ mercy’? Moving from the religious to the philosophical, the Tao is chock-full of similar sentiments.
A rough preacher (Lprent, perhaps) might advise you to drop your hubris and embrace gratitude and humility.
Fortunately we seem to have left the preachers behind in my family a few generations ago. We went irreligious a while back.
I’m more in personality orientated shock tactics because you don’t drone on for nearly as long. I can get back to writing code a lot faster.
Jeromy only 5% of people born into poverty get out of poverty
Your Anecdotal evidence is not far off the mark.
“it wouldn’t make sense.”
That you cannot make sense of it doesn’t really say very much.
Maybe get past your notion that anyone is trying to foster Utopia, Socialist or otherwise, or a new theory of cosmological physics. Argumentum ad nauseam, no matter how verbose, isn’t very persuasive.
And the fact you haven’t tried to make explain how you make sense of it says nothing at all.
My comments on Utopia were hyperbole, I thought that was obvious.
It’s not a new theory on cosmology, it’s the natural conclusion of strict materialist determinism, which numerous members of the “New Atheists” have told us we have to just simply accept. Realising that this is a dead rat most of the public can’t swallow, there have been some (in my opinion feeble) attempts to create an Atheistic objective morality, most notably by Sam Harris.
“Argumentum ad nauseam, no matter how verbose, isn’t very persuasive.”
I was thinking the same thing.
In fact, I’ve already suggested various ways in which it makes sense.
Forget about the fairies that don’t exist at the bottom of the garden and appreciate the garden for a moment.
Hyperbole is taking the recognition that there are things much more powerful than us in the world, and turning it into some sort of proclamation about atheistic materialist determinism.
Actually, adding religion makes the point even more obvious – let’s say the bible is literally true. The folks of Sodom and Gomorrah were masters of their own destiny and had well-established cities until god decide “nope, burn ’em”. The citizens of Jericho invested wisely in city walls to defend themselves from invading armies, then god decided the walls should tumble down. Egypt was tooling along well, until god came along and killed an entire generation of firstborn. What about the Israelite soldiers who god commanded be killed simply because they drank water in the wrong manner?
And as for the book of Job… fark.
In short, the very nature of many religions requires us to accept that there are things to which we are subject and have absolutely no control over.
So out 7 billion people Jerrymanderer has found a list of 7 people who mean more to him than the other 6 whatever billion don’t count because their not his billionaire hero’s.
A religious person my guess christian.
Didn’t the bible say it was harder for a camel to get through the eye of a needle than a rich man into heaven .
The Empires used religions to colonise conquered lands and close lands by brain washing people to believe that being rich is gods reward for being of high moral standard.
While Jesus was against greed selfishness just about against modern christian behaviour.
Of I’m OK I’m wealthy enough ha ha the rest of you are looser’s I’m superior.
Modern Christianity is pure Narcissism.
That’s why you find so many false Christians on the right wing.
I’m not really sure how you got any of that from what I’ve written.
Hi Jeremy, great discussion, I think both sides of this argument are right.
2 people looking out the same window, one views the low hanging fruit of opportunity the other sees tummy ache and chemical sprays. Both people are right. We get what we ask for. The difference stems from our attitude, the glasses through which we view the world. Our Mums and Dads make the frames, life grinds the lenses.
I think we need to get better at instilling quality attitudes in children. I don’t mean shaping wee bankers. I mean igniting curiosity and creativity, a competitive spirit, a love for each other…all the stuff that goes into a great attitude.
I would dearly love to see the word ‘money’ disconnected from the meaning of success. A simmering sense of fulfillment and a heart filled with love has little to do with money. That’s success…isn’t it? Is for me. Ghandi died owning his clothes, sandals and loom, hardly a failure.
The trouble is your gain is somebody else’s loss, unless that gain comes from producing some useful service.
According to last years rich list of about 200 people, there are no Māori or Pasifika names on it and only about 12 women’s names of the 200.
Of course you will probably say these groups of people just don’t work hard enough. Yeah right!
The property investors are really going to squeal when Labour reintroduces land tax, or brings in a deemed capital return tax… (not in the manifesto, but a possible result of the taxation review)
Will that tax penalise the family home?
Tax is a penalty is it? Stop whinging.
Tax isn’t a penalty, and it depends on whether Labour take the advice of Gareth Morgan.