Wednesday, 7 December 2011

Inequality, according to the OECD [updated]

SPEAKING FROM PARIS, PROBABLY between bites of foie gras, the OECD has sniffily suggested that the rich-poor gap widened in the period between the mid-eighties and the mid-nineties, and have stayed that way ever since.

People’s incomes became less equal. That should be no surprise.

It should be no surprise because as folk get wealthier, the gap between higher incomes and lower incomes do become larger. Transplant Bill Gates and Warren Buffet and J.K Rowling to New Zealand, and overnight you raise the “income gap.”  That’s just the nature of arithmetic, I’m afraid. As the income “spread” gets wider, so-called “inequality” increases.

imageBut the news should also be no surprise to New Zealanders in any case, because from the mid-seventies to the mid-eighties Sir Robert Arsehole Muldoon treated everyone equally.

That is to say, he treated everyone like shit.

And so-called “richer” folk got treated more like shit than most, paying capital gains taxes, taxes on higher incomes at around 66%, and “ad hoc” taxes everything from caravans, to lawnmowers to backyard boats—paying and paying just to keep bankrolling Muldoon’s accelerating borrowings, by which means he pretended he was keeping the country above water.

So when Muldoon was removed and the process was begun of removing the shackles he placed on the country, it’s no wonder “income inequality” increased. Because people were finally allowed to get rich. Or at least, not so poor.

That was a good thing. Folk on lower incomes found it somewhat easier to move up to earn higher incomes; folk with good ideas found it easier to get out and make money from them; and folk with capital to invest found it easier to invest and earn money from their investments. It’s called “mobility,” a concept that describes the dynamic situation in which the folk who make up the various income “classes” are constantly churning, constantly changing, constantly being refilled—and the freer the place is, the more easy it is to take advantage of this and move yourself up the pay scales.

It’s one reason so many of this country’s richest folk got there not by breeding but but hard work, why so many are self-made men and women—with the very richest beginning his days as a panel-beater, and now able to buy and sell some of the world’s largest companies.

It’s called mobility, and it’s one-hundred times more important that an enforced equality.

SO THAT WAS WHAT happened from 1985 to 1996, the period the OECD deplores. People got freer, and were allowed to get richer. The OECD’s report writers obviously hate that sort of thing.

The bad thing was what happened afterwards.  What happened afterwards was nothing, for most of the late nineties—which was bad enough since there were still many shackles that remained—and then as the new century dawned new ones were put in place.  And those shackles have stopped the mobility.

By putting even moderate earners on an effective marginal tax rate of 95%, Working for Families has made it harder to increase your take-home income.  By regulating businesses into the ground, governments made it harder and harder to start and run a business.  By telling employers they had to pay youngsters more than they were worth, they made it harder for those youngsters to get their first foothold on the economic ladder.  And by educating youngsters that not offending people is more important than being able to read and write, schools made it harder for youngsters from poorly-educated homes to make themselves employable at all.

Things got worse, not better. This was the decade in which things stood still again. People were made neither more “equal” nor less. It was just made harder to do either.

imageBUT HERE’S A SIMPLE fact to contemplate, and some of you might have to sit down to take it in: people are not equal.

There, I said it. People are not equal, and their “outcomes” will not be the same. People who run faster will win more gold medals. People who think more acutely will write better software. And people who look hotter will get more sex.

That’s not “injustice.” That’s just reality. And nothing any politician or report writer can do can change that. As Ayn Rand used to say,

If there were such a thing as a passion for equality (not equality de jure, but de facto), it would be obvious to its exponents that there are only two ways to achieve it: either by raising all men to the mountaintop—or by razing the mountains.

Naturally, the exponents of forced equality always end up advocating the latter. In Pol Pot’s Cambodia that translated as emptying the cities of people and killing everyone with the spark of intelligence in their eyes. In today’s political environment, it translates simply as “soak the rich.” And voices are already out there this morning calling for “the rich” to be variously soaked, stolen from and boiled in oil. (Isn’t it amazing how simple envy can make folk lose their marbles.)

imageAND OTHER VOICES WILL be out there soon, if they’re not out there already, talking perfumed nonsense about how they aren’t for the Procrustean Bed of enforcing equality of outcomethey, these enlightened folk, are interested only on equality of opportunity, by which they mean further violation of individual’s freedom to pursue the many opportunities that reality offers them.

Because reality has no short supply of opportunities, just as long as one is left free to follow them.  Opportunities are everywhere.

  "An opportunity is merely an occasion on which successful action is possible. It is a situation that an individual can take advantage of to his gain.
What needs to be realized about opportunities is, first of all, that there is no scarcity of them; they arise again and again. The second thing that needs to be understood is that what is important in connection with them and deserves to be fought for, as a matter both of justice and universal self-interest, is not that vicious absurdity “the equality of opportunity” but the freedom of opportunity.

Opportunities are everywhere.  It's not the abundance of opportunities that is a problem, but the paucity of vision that is unable to see them.

So it’s not some bogus “equality of opportunity” that folk should think about and promote, it’s freedom of opportunity, by which we mean the ability to exploit the opportunities afforded by reality, without being stopped by government.

That’s what mobility is really all about.

Let’s raise everyone to the mountains.


  1. The whole notion of "Equality" comes straight out of the Paris commune and the French Revolution.

    It's communist.

    The biggest lie is We hold these truths to be self-evident, that all men are created equal

    Most people - especially in NZ - are bludgers.

    in a free society, they wouldn't be able to eat.

  2. No, even though the system encourages that most people aren't bludgers--most people are still producers.

    And in truth, in a free society, it wouldn't cost anywhere near so much to eat.

  3. You hit it right on the button with the word "mobility". The more economically free a society is, the higher its income mobility (i.e. the more likely poor people will not stay poor all their lives). The more controlled an economy is, the lower its income mobility. There is strong economic and social research that backs this up although, as with climate research that doesn't support the mainstream political position, you won't see mention of it in the media.

  4. An excellent post.
    Whining about "inequality" is complete bollocks.
    There WILL ALWAYS be a group of people who just "cannot be a**ed" to work. There will always be winners, and always be losers.
    That is the real world. Lefties can suck it up.

    As others have said before - you cannot "legislate-away" poverty.

    There is no mystery as to how to get ahead.
    Education and hard work. Some people will also have entrepreneurial ability. That will get them even further ahead, and good luck to them.

  5. I was going to make a post, Peter, but then I started listening to Hickey on the radio about the need to tax the rich - that ruddy great communist clod. I can't believe how bad he is: and not an economic clue in his head. The contradictions he makes are as absurd as his envy ridden bullshit is infuriating.

    Too mad to write now. I did put a piece up earlier though about the new, corollary, OECR report.

    Going for a walk ...

  6. Bill Gapes?

    Don't you mean Bill Gates?

    Anyhow, isn't he trying to give all his money away to Africa?

  7. You bastard.

    You always do it don't you? Just when I'm thinking "bloody Libertarians, with their hopelessly unrealistic exaggerations will never get anywhere", you come up with a fantastic article like this, beautifully written and presented with faultless logic.



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