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The fundamental question

Written By: - Date published: 10:17 am, November 7th, 2008 - 45 comments
Categories: Deep stuff, election 2008, workers' rights - Tags:

The fundamental question of politics is how the wealth of society should be divided among the members of society. We live in a capitalist society. That means it is the people who own the capital (businesses, factories, farms) who own the things that are made and get to choose how to divide the wealth between themselves and the people who work in their businesses and factories, and on the farms. Governments can change this balance by giving workers more rights or fewer rights, rising or lowering the minimum wage, taking wealth off those who get most and using it to provide public service free for everyone.

These graphs show the economy, the annual amount of wealth produced by our society. It is divided into the amount that is paid to workers in wages and salaries (in red) and the part kept by the owners of capital (in blue). Notice how the portion going to workers fell when National from when National started governing in 1991 to 2000 when Labour came to power and how the workers’ share has grown since then.

Fundamentally, that’s the choice between Labour and National.

National was founded by and continues to be run and backed by the owners of capital – businessmen and farmers. In their natural self-interest, they have a political party that makes sure they get a bigger share of the wealth by not placing restrictions on the use of capital for the individual gain of the owners, lowering taxes and cutting public services, and weakening the power of workers to demand a larger share.

Labour was established by and continues to be run and backed by people from the workers’ rights movement. In their natural self-interest, they have a political party that makes sure they get a bigger share of the wealth by restricting capital so that it acts in the broader interest of society, redistribution of wealth to poorer workers through taxation and public services, and strengthening the power of workers to demand a larger share.

When National says it wants ‘change’ it is actually saying it wants to restore a time when the balance was more in favour of the owners of capital. When Labour says it offers ‘stability’ it is actually saying it offers to continue a gradual evolution of the balance in favour of those who do the work.

The size of the circle grows over the years as the economy grows. One fundamental of National-type parties is to promise to make the economy grow faster to make up for the fact that those who do the work, most people, get a smaller share of the economy when they govern. However, Labour also wants to grow the economy as the easiest way to increase workers’ wealth without facing resistance from the capitalist class. When you compare their records, it has been Labour that has grown the economy faster while also growing the share that goes to workers.

The Greens argue (and Labour agrees to an extent) that, while giving a fairer share to workers is important, we must also make sure that in growing our wealth we don’t destroy the foundations of that wealth, our environment. If we abuse our natural resources, the amount of wealth we have will start to decrease. Moreover, they argue we shouldn’t be so obsessed with creating more ‘stuff’ in the first place.

The Maori Party argues that, while giving a fairer share to workers is important, the capitalist/worker divide is not he only one in society. They argue that as well as not getting a fair share as workers, Maori don’t get a fair share because they are Maori and deserve a fairer share.

ACT argues the market is the only fair way. The Progressives basically agree with Labour. United Future does what’s best for Peter Dunne’s pay packet.

45 comments on “The fundamental question ”

  1. It would be interesting to see the number of people in the red section versus the number of people in the blue section.

  2. There are 2 million people in work (so in the red slice). The remaining 1 million adults are not all in the blue blue, probalby most aren’t – most are benefacires, stay at home parents, or students.

    There’s actually a third, small slice, people whose incomes are government payments – benefits of super. That’s pretty steady at about 10%.

    there is overlap between the red and blue slices too. some, probably most, people who own capital also get a wage or salary, and some people who earn a wage or salary also own capital. But the people who own most of the capital are a very small group – off the top of my head I think it’s the wealthiest 10% of adults (300,000) who control 50% of the wealth.

  3. DeeDub 3

    Yep, I’d like to see the approx. numbers of people too . . .

  4. lol @ “United Future does what’s best for Peter Dunne’s pay packet” thats the most truthful piece of information in the media coverage of this election!!!

    It is an awful pity that so many good, hard working people have been duped by JK into believing that our country is going to hell in a hand basket. Western Society has been structured so that we are self-destructive as a species, so crime and other bad things will get progressively worse as the population grows.

    So, fundmentally, it does not matter who you vote for, because at the end of the day, with the monetary system in place, the rich will get richer, the poor will get poorer. That can plainly be seen. Do some research, i suggest zeitgeist.com and watch the documentry zeitgeist and zeitgeist addendum

    It is very enlightening

    Good luck to the left tomorrow, at least their hearts are in the right place (their rib cage) not where the right keep theirs (in their wallet)

    Kia Kaha Aotearoa

  5. tsmithfield 5

    We don’t need a more evenly divided pie. We need a bigger pie. A small pie that is evenly divided will most likely provide less to workers than a larger pie that may be less evenly divided in favour of businesses. Businesses will use the capital to grow their business and create more jobs and wealth for workers.

    That, my friends, is the primary difference between National and Labour.

    [Labour has grown the eocnomy faster than National did in the 1990s. So a fairer divide and a parger pie – 2-0 for Labour? SP]

  6. milo 6

    Steve Pierson: Your fundamental question is only half the issue. The other half is how to increase the wealth of society. It is not a fixed cake, varying only due to the cycles of the world. The size of the cake depends on economic policy and political and economic institutions.

    And that is my fundamental disagreement with you. Yes we need fairness, support, citizenship and the rest. But we also need productivity, innovation, reward and growth. History (and current events) shows that is what has made western societies successful.

    If you can’t put any priority on increasing the size of the pie, you might as well go back to the stone age. And if it’s all due to international currents, how do you explain that we have dropped down two places on the OECD ladder, and used to be much higher?

    My 2c worth.

    [read the post, I talk about growth. If growth is over overridding importance to you, you should vote Labour on its record. SP]

  7. DeeDub 7

    November 7, 2008 at 10:39 am
    ” Businesses will use the capital to grow their business and create more jobs and wealth for workers. ”

    If you can show me ONE documented example (in NZ) where this has EVER led to better pay and conditions for workers without the involvement of government regulation and/or unions I would be very, very surprised?

    Feel free to trickle down your own leg, mate, but keep your crackpot theories to yourself!

  8. trickle down your own leg. puntastic

  9. randal 9

    new zealand is still an area of recent settlement where we grow stuff and nobody will invest unless they absolutely have to
    (mainly because they cant trust kiwis)
    trying to make a silk purse out of a sows ear in these conditions is akin to a severe delusion bordering on psychosis but eternally useful for beating political opponents with
    better for kiwis to learn to live within our limitations instead of the never ending promises of more stuff
    just look at the highways on sunday afternoons and you will see that kiwis have more stuff than they know what to do with
    I mean all they do is drive round and go home again
    they cant actually do anything useful
    that is the next big thing
    show kiwis how to do something useful
    not promise them more trade goods

  10. sorry about not getting the typos before I published, that’s what you get when I don’t sleep mroe than 6 hours for nights on end. Corrected now.

  11. John Christian 11

    A little knowledge is a dangerous thing. See http://www.stats.govt.nz/NR/rdonlyres/61D5633A-FC9C-4794-BFA9-23578BE9EC5A/35293/nayemar07revgdpbreakdown1.xls for the data. All this shows is that the New Zealand economy is becoming more capital intensive (a good thing because it is probably a means to increased productivity). As to how many on each side – I’d hazard a guess that there are more on the capital side since a glance at Table 2.2 shows imputed returns from owner occupied accommodation represents 12% of the total “surplus to capital”.

    [more capital is good (as long as its environmentally sustainable), that doesn’t mean though that the owners of capital should get a larger share of the wealth. SP]

  12. Matthew Pilott 12

    randal – can you do haiku? Your posts have a vaguely lyrical quality to them.

  13. Vinsin 13

    john, what program does your link open with, can’t seem to open it.

  14. Matthew Pilott 14

    vinsin – MS Excel. Or openoffice…

  15. Vinsin 15

    bummer don’t have either of those and don’t have time to read it, must go and do my special vote and get back out on the streets. Get out there people! There isn’t long to go.

  16. Ianmac 16

    Not sure if supposed to do this but Russell Brown has a great summary of the Clark years at Public Address; heartwarming:

  17. Quoth the Raven 17

    United Future does what’s best for Peter Dunne’s pay packet.

    It costs a lot to keep a man like that in hairspray.

  18. tsmithfield 18

    Deedub “If you can show me ONE documented example (in NZ) where this has EVER led to better pay and conditions for workers without the involvement of government regulation and/or unions I would be very, very surprised?”

    Deedub, you obviously have little experience in the real world. I run a small business. I also employ a number of people. My house is mortgaged up to the hilt for the business. Despite the fact that I am taking all the risks, I actually pay my workers better than myself and pay them at the top of the pay bracket in order to retain them. None of our people see the need to belong to a union and are very happy with their working conditions.

    There are lots of small businesses out there like mine.

    In contrast, from what I have seen, unions very often cost their workers money. For instance, it is common for them to sacrifice the wages of their members to strike for an extra 1% although the amount sacrificed in wages will never be recovered even if they are successful in getting the increase.

    Tell me, have you ever tried to run your own business? I would be interested to know.

  19. tsmithfield 19

    SP “Labour has grown the eocnomy faster than National did in the 1990s. So a fairer divide and a parger pie – 2-0 for Labour? SP”

    Na. The pie for the whole world was growing over the same time. The pie couldn’t help but grow, despite Labour. If Labour is to take credit for the growth in the pie, it also needs to take credit for the recent crash in the world markets. You can’t have it both ways.

    [NZ out grew Aussie, the Uk, Japan, and US under Labour, it was behind them under National see this link http://www.thestandard.org.nz/nz-growing-faster-than-aussie-us-japan-and-uk/ .SP]

  20. tsmithfield. your ilk has tried these arguments a hundred times on this blog and i’ve provided the data to counter them – you’ll notice righties that hav been arond a while, like HS, don’t bother running these disproven lines anymore. go to our archives and look at the posts on economy and wages to learn more

  21. bobo 21

    Ianmac – Russell Brown sums up Labours term in government well, but his comment to liking Chris Finlayson because hes an academic was strange, watching some of his speeches in the debating chamber he came over one of the nastier tories reminding me of Tim Stamper out of house of cards for some reason..

  22. tsmithfield 22

    SP “NZ out grew Aussie, the Uk, Japan, and US under Labour, it was behind them under National see this link”

    Considering that we produce mainly milk and food, it is scarcely surprising that we would grow quickly given the high world demand for these things over the last decade. Look at how milk prices have gone for goodness sake.

    Rather than just point to the figures, SP, how about making some sort of linkage between what Labour has done and what has happened; i.e. show me cause and effect. All you have done is talk about the effect that happened while Labour was lucky enough to be in charge.

  23. well, tsmithfeild. if it’s all about luck, why would National be better? I don’t have time to give you the same facts I’ve given out a hundred times, read the workers rights posts to see how National’s policy made the recessions in the 1990s worse by letting unemplyoment rise, cutting spending, and cutting benefits.

  24. Ben R 24

    Wake Up Aotearoa,

    “Western Society has been structured so that we are self-destructive as a species, so crime and other bad things will get progressively worse as the population grows.”

    Can you point to a society where crime and bad things did not get progressively worse as the population grew? My understanding was that western society is actually relatively peaceful:


  25. tsmithfield 25

    SP “well, tsmithfeild. if it’s all about luck, why would National be better?”

    SP, from my perspective as a small business person, the amount of compliance we are required to fund is ridiculous. I spend at least 20k per year on compliance (GST, tax etc). That is a good part of another salary. From what I have seen, Labour is going to make this worse for small business people (compulsary redundancy etc). These types of things are total disincentives for employing more people and growing a business. If National can reduce the compliance cost side of things it will make it a lot easier for me.

  26. randal 26

    but you have to pay!

  27. randal 27

    dont you read the newspapers
    New Zealand has some of the lowest compliance costs in the whole world
    if you cant keep up with them then you should not be in business
    the requirements are not that dificult or onerous and are free of the corrup[tion found elsewhere in the world
    count your blessings
    relying on natoinal isa false hope too
    they want more tax from you
    this is not the USA but a finely tuned micro economy with very little room to move and JOhnKeys and the rest of the nats are salivating at the thought of getting their hands on the controls
    you just might get what you wish for!

  28. Ianmac 28

    The story of the Nats using their Research Unit to look for dirt on Peter Davies at the same time Key was despising Labour for using the Research unit to check John Key’s credibility is published on-line on the NBReview

    And to be aired on Alt Tv tonight but too late of course.

  29. tsmithfield 29

    Randal: “if you cant keep up with them then you should not be in business
    the requirements are not that dificult or onerous and are free of the corrup[tion”

    So you have actually tried being in business, Randal?

    Actually, I could tolerate a Labour government if they were governing alone, although I would never actually vote for one. What really scares me is your prospective bedfellows and the influence they are likely to have. It will be compliance on steriods IMO.

  30. gomango 30

    On the last day before the election, you could do a much better job of presenting those graphs. I look at them and its not obvious what the trends are that are so good or bad. Might I suggest you get a copy of “How to Lie with Statistics” by Darrell Huff – the best book ever written about the statistics.

    Try doing those graphs as a histogram, percentages up the side, y scale starts at 40% – and you’ll be sweet. Throw in fatness of the bars to illustrate size of the economy and you’re laughing.

    The book also talks a lot about confusing correlation with causation or with outcomes – if you control GDP growth for factors beyond Govt control the growth isnt that remarkable – (we just happened to be concentrated in one of the highest performing commodity sectors over the last 10 years) with a huge comparative advantage (pasture versus corn) and got lucky. Adjust the data for luck and the story is very different (think productivity of capital – got worse under Labour. Think value of commodity exports versus value of services and value added goods exported etc).

  31. Daveski 31

    The compliance cost issue is interesting.

    I suspect that NZ does have relatively low compliance costs. No problem with that.

    I also suspect that NZ’s economy is quite different to the other economies so that there are a lot more small businesses/owner operated types than other economies. To these types of business, compliance costs do matter. To larger corporates, it matters little as they have the staff, expertise and grunt.

    Unfortunately, we repeatedly see anti-employer and business sentiment all in aid of doing the best for the worker. That’s great when you are a unionist, student or academic. When it comes to paying bills, people actually want jobs. The reality is that unionists, students and academics don’t actually create a lot of jobs.

    Yes there needs to be a balance. But unless the “workers” work with the “capitalists”, we will all be worse off, particularly the workers.

    One of the reason the righties don’t argue back is that your positions are fixed and based on graphs that will be constructed to prove your point. You valid criticisms of poor policies in the past aside, I suspect you haven’t been in the position of creating a productive enterprise or directly paying staff yourself which is why your opinions are rather prescriptive.

  32. Draco T Bastard 32

    Businesses will use the capital to grow their business and create more jobs and wealth for workers.

    How do you know that the workers won’t? The extra income may be enough for them to start their own business (Not that workers aren’t already in business).

    But we also need productivity, innovation, reward and growth.

    Yes, we do need all of those but our present socio-political system actually prevents a hell of a lot of them. A couple of examples to make the point:
    Example 1:
    The IBM PC: Launched in 1981 by IBM using off the shelf parts it became the default standard because it was easily reproducible. Other machines such as the Amiga and the Mac were much better but, due to being proprietary, couldn’t be copied by other firms. This led to all the innovation going into the PC and is a good example of the market actually working.

    Example 2:
    MS Windows: Bound by copyright and patents it’s almost impossible to produce a Windows compatible OS. Even if you managed to produce an OS that was compatible and didn’t infringe upon those patents and copyright you would find yourself dragged through court to prove it. So, unless you’ve got a few million $$$ to spare for frivolous court cases you won’t be getting to market. All innovation is controlled by MS. This is an example of market failure brought about by the capitalistic system we exist in. If the governments of the world really wanted to break MS’s monopoly then they would be legislating for Windows (and all other OS’s) to become an open standard.

    If National can reduce the compliance cost side of things it will make it a lot easier for me.

    Labour and their coalition partners are already working on it and will probably do a better job of it than National will. This is proven by history.

  33. Daveski 33


    Example 3: Any state controlled economy – North Korea, Cuba, NZ under Muldoon!

    Example 2 is riddled with holes. What about Apple? I assume you are using Firefox? What about Google and Google Apps? OpenOffice? MySQL?

    What about TCO? The biggest issue with migrating away from MS is not licensing – there are plenty of products equal to MS. The biggest cost is the training followed by compatibility (which is where there are some valid grounds).

    Organisations stay with MS not because they are forced to by MS but because it is convenient, easier, and while licensing costs are higher, total costs (at least in the medium term) are lower.

  34. Jimbo 34

    Steve –

    In my view, this analysis is all a bit simplistic. I’m not convinced the modern world is an ongoing struggle between workers/captialists along the starkly-drawn lines you propose.

    If you are correct, though, you’ve ignored one important question – How do you compensate people for taking risks…?

    The owners of capital take greater risks than people who sell their labour only. They take on bank loans, they employ other people, they risk their own accumulated weath in opening new businesses.

    Someone who works for a wage would never have to actually pay out money in order to work. New business owners, on the other hand, might go years without drawing money out. Some businesses might totally fail, forcing their owners to sell up their own homes.

    I am not saying one is better than the other. We need both types of people to have a functioning economy.

    However, the greater risk-taking means that the rewards of being a capitalists must be, on average, higher.

    Why risk your own house, why work for nothing, if on average you ended up exactly the same as the bloke down the road who never took any of those risks?

  35. randal 35

    sorry tssmithfiled
    I used to vote natoinal too but they are far too scary now.
    if they could only adjust their policies to reality they might stand a chance but I cant see myself or any other sane person voting for them now
    and my original contention still stands
    if you are smart enough to run a business then you should be smart enough to fill in a few forms

  36. Swampy 36

    Labour has grown the economy by pushing housing prices out of reach of ordinary New Zealanders, including the workers you cite in your commentary.

  37. Swampy 37

    Example 2: MS Windows
    Why does “Windows compatibility” matter? Linuxheads don’t give a toss.

    I work at an MS site. We use Windows because it is streets ahead of anything else out there. It is massively well supported and is a lot simpler to install and maintain than anything in the Linux world so far.

  38. Swampy 38

    “[NZ out grew Aussie, the Uk, Japan, and US under Labour, it was behind them under National see this link ]

    Inflation in NZ under Labour has outstripped National. The cost of housing has skyrocketed, the cost of electricity, For you low income “red” slice those are big chunks of their weekly income. Meanwhile Labour takes the hundreds of millions out of Meridian, the biggest power SOE to pay for Kiwirail and other election promises.

    Also the Labour Party lied when they said doctors’ fees have been cut. Mine haven’t gone down at all.

  39. bobo 39

    Swampy electricity prices can’t have skyrocketed, Max Bradford told me they would come down under competition ??

  40. Jasper 40

    Nah, the fundamental question is why would National be so keen to repeal the EFA IF they win?
    Could it perhaps be that they will have to show the identity of all their donors thereby revealing just who actually backs them?
    Tis a crying shame that no ones really done any further investigation into why they’re incredible keen to repeal it, whereas the greens want it to go even further.

    Re the Maori Party – everything about them I fundamentally disagree with. Your point that “They argue that as well as not getting a fair share as workers, Maori don?t get a fair share because they are Maori and deserve a fairer share.” you also forgot to mention that if it weren’t for colonialism Maori would have
    Turiana Turia makes me sick with her racial and divisive politics. If Maori really want to get a fairer share, howsabout the majority actually do something

  41. randal 41

    swamp it is not labours fault that you have to se your psychonalyst 5 times a week
    get a grip man
    harden up

  42. Lampie 42

    Also the Labour Party lied when they said doctors’ fees have been cut. Mine haven’t gone down at all.

    funny mine has gone from $50 to $16 hmmmm

    perhaps you should shop around

  43. Chris 43

    tsmithfield: Your argument is kind of simple and very anecdotal. Do you think it should be easy to own and operate your own business? It completely goes against the concept of capitalism.

    Capitalism in it’s basic format relies on workers and the market can only survive if the people in it are buying goods. The people who own the factories, farms, etc want people to work for them so that the people will buy their goods and ensure there is little competition in the marketplace. This is basic Fordist philosophy and is still very much in use today.

    If it were easy to start up a business, pay staff and get rich; then everyone would do it – which means there would be a very large amount of competition and a saturated market. True capitalism is difficult for the capitalists (the people owning the business), and easier for the worker. This encourages people to work instead of creating more competition.

    This is easily highlighted in anecdotal story after anecdotal story (JK being one of them) where a poor kid with nous and intellect struggled through adversity to become a very rich person. It requires lots of luck, skill, passion and above all risk.

    So, your argument therefore is flawed! You want a growing labour-force with higher incomes for those labourers because it will ensure the market-rate for staff is kept competitive and also ensures there is less competition in the market for your business. It also will encourage more buying of products and goods, which helps keep an economy ticking well.

    Then again – if you can’t handle the jandal – get off the beach if you know what I mean.

  44. DeeDub 44

    tsmithfield “Tell me, have you ever tried to run your own business? I would be interested to know.”

    Yep, I have been involved in a few businesses over the years. I’ve also been an employee, a contractor, unemployed, and I’m currently self-employed.

    It’s irrelevant to this discussion. And my point has been eloquently made by many people above.

    You’re dreaming if you think a National government will do a THING for small business, mate. They’re all about their big, multi-national mates.

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