Monday, 28 April 2008

Making us poorer

Does anyone else find it ironic that in the same month that John Key has pledged to borrow $1.5 billion to install broadband in their homes (that's a cost of about $2000 per home, the cost to be borne by the taxpayers who live in those homes), the government has told Canadian investors who wanted to voluntarily give shareholders a similar amount that they won't be allowed to?

In other words, Key wants to take $1.5 billion out of capital markets to build a network that in the current regulatory environment is going to lose money (and if it weren't going to lose money, private investors would already be doing it), while shareholders and those capital markets from which those funds will be taken have just been denuded by a similar amount because of government regulation.

In other words -- and given that greater productivity comes about from ever greater application of capital to the job of producing wealth -- government regulation is making us poorer twice over.

UPDATE: Just to restate the point: 

The more capital invested, the better equipped are our places of work;  the better equipped a plant is, the more the individual worker can produce within a unit of time; and the more the individual worker can produce within a unit of time, the higher is what the economists call the marginal productivity of his labor and, thereby, the higher real wages he gets. [ref Mises: 'Wage Earners & Employers']

Or to restate the point in even simpler terms: The more capital a country invests productively, the higher are the real wages in that country. If you want higher real wages, then you need more and more capital invested productively, not consumed destructively.

And since these two measures between them take around $3 billion directly out of NZ's capital markets, and indirectly suggest to offshore investors that their money is unwelcome here and their investments are insecure, I'll leave it as an exercise for the reader to suggest what effect this has on real wages.


  1. Yes, Peter, quite.

    This Broadband thing by Key is just a blatant election bribe. I mean, just about everybody would love the opportunity to have blazing fast broadband, so why hasn't everybody got it? Simple. We're a tiny little economy and thus far it has not been economical (ie profitable enough) for anyone to supply it.

    So along comes the National Party with a huge election bribe and, amazingly, everybody seems to be falling for it! Incredible.

    They'll probably use our money to install a world-beating broadband system throughout the country and then, a few years down the track, after the costs and deadlines have tripled or quadrupled over budget, they'll sell it off at bargain rates to one of New Zealand's richest men, who will milk it for what its worth while he can get away with undermaintaining it. Then it'll be split up, destroyed and the skeleton picked clean by the Chinese (who will by then be our de facto government).

    Its all so predictable - and made possible by an avaricious and stupid electorate who would buy just about any con story as long as they don't have to look too deeply into it.

    Hahaha... this is the party that is supposed to be AGAINST socialism and FOR free enterprise!

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  3. Regarding the airport sale.

    As incredible as it may seem, the government is doing the right thing in blocking the airport sale from the Arabs. The Canadians are just a smoke screen, this is noted on Shariah Finance Watch website, with “Kudos” on the front page headline
    “Auckland Airport rebukes DUBAI bid to take it over! Kudos!”

    Dubai is an islamic country run and owned by a monarchy. Shar'ia is the law of the land and Da'wa is a primary goal of all muslims,
    (The sixth column against jihad - Reality, Reason, Rational Individualism, Capitalism).

    Check out this situation in the States where a Baltimore couple buys into a USA southern fried chicken company franchise for a foodcourt in a new terminal at Baltimore Airport. The concessionaire/developer required that the menu included a breakfast menu and was to be submitted as part of the approval for sublease. In a nutshell the Southern Chicken franchise gets bought out by an islamic company “Arcapita” which then declares the business to be Shariah compliant. The couple are prevented from selling ham and bacon because they are declared to be UNCLEAN products by their Arab franchise owners. As they can not compete for the breakfast business they subsequently go bankrupt and lose everything.

    This is just a rough outline - read it all here.

    For those screaming that I am anti-capitalist, I say to you what is a free-market when dealing with a state owned company with fascist core values such as (Da'wa) “perpetual proselytising of non-Muslims”?

    Furthermore, the USA is fighting a war against jihad (a weapon used for Da’wa).

    I for one will not fraternise with an enemy of the USA nor would I sell to any entity that has the potential to threaten my personal freedom.

    All well and good to promote capitalism but without the freedom to compete with those who are also free to compete, Laissez-faire is nothing but a pipe dream.

  4. Rebel Radius : As incredible as it may seem, the government is doing the right thing in blocking the airport sale from the Arabs.

    RR, get over your fucking racist obsession with Muslims & Dubai based companies.

    I am so surprised that LGM (nor PC) hasn't noted your bigotry yet, perhaps because you're a libertarianz.

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  6. Michelle

    Yes. I've commented on it previously.


  7. Michelle,


    No one gets a free pass here ... except Frank Lloyd Wright. ;^)


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