Last Updated: Nov 19th, 2009 - 11:07:39 Newsletters : 2006 Newsletters : 25 August 2006 Big Thought for the Day It is very interesting to see what happens when ideology and the power imperative impinge on our economy. Ideology makes it more difficult and more expensive to employ workers and so goods made in New Zealand cost more than imports. So the average citizen just buys the best and cheapest she can find which is usually made in China and found in the Warehouse or some such. To combat this trend the government takes money from the tax-payer to fund an advertising campaign telling Kiwis to buy New Zealand made goods. Not because they are better or cheaper but just because this will hopefully keep Kiwi factories going. Will this campaign work? Does it work on you? So because of the power imperative with the Greens, the tax-payer pays more and the average punter still buys imports. What a waste of $11.5m. But companies like Icebreaker have no option when it comes to survival and so they will continue moving off-shore. It will soon occur to these companies that they could be doing all their clever design work at a nice beach place in a nice climate like the Bahamas. And, oops, no tax. What a good idea. Small team of designers, living in a tax haven and getting the goods made in China and distributed direct to agents and retailers around the world. Why live where you have to pay tax? All the design staff earn a lot more and the company has a third more cash to finance their expension. We have chased the factories off-shore. We are chasing the thinkers off-shore! IN LEWIS CARROLL'S "Through the Looking-Glass," there is an incident involving the Red Queen, a representation of a queen in chess, and Alice constantly running but remaining in the same spot. The scene is often referred to as The Red Queen's Race. "The Queen kept crying 'Faster!' but Alice felt she could not go faster, though she had no breath to say so. The most curious part of the thing was, that the trees and the other things round them never changed their places at all: however fast they went, they never seemed to pass anything. 'I wonder if all the things move along with us?' thought poor puzzled Alice. And the Queen seemed to guess her thoughts, for she cried, 'Faster! Don't try to talk!' "Not that Alice had any idea of doing that. She felt as if she would never be able to talk again, she was getting so out of breath: and still the Queen cried, 'Faster! Faster!' and dragged her along. 'Are we nearly there?' Alice managed to pant out at last. "'Nearly there!' the Queen repeated. 'Why, we passed it 10 minutes ago! Faster!' And they ran on for a time in silence, with the wind whistling in Alice's ears, and almost blowing her hair off her head, she fancied. 'Now! Now!' cried the Queen. 'Faster! Faster!' And they went so fast that at last they seemed to skim through the air, hardly touching the ground with their feet, till suddenly, just as Alice was getting quite exhausted, they stopped, and she found herself sitting on the ground, breathless and giddy. The Queen propped her against a tree, and said kindly, 'You may rest a little now.' "Alice looked round her in great surprise. 'Why, I do believe we've been under this tree all the time! Everything's just as it was!' "'Of course it is,' said the Queen: 'what would you have it?' "'Well, in our country,' said Alice, still panting a little, 'you'd generally get to somewhere else - if you ran very fast for a long time, as we've been doing.' "'A slow sort of country!' said the Queen. 'Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!'" ********* ******** ********** So - how is life in Wonderland treating you? Aug 24, 2006, 12:02 Newsletters : 2006 Newsletters : 25 August 2006 Russia Frees Itself of Debt Years Ahead of Schedule When a country reduces its tax rate then people have much more incentive to work since most of the result of that work is going to themselves. With high tax rates the people work as little as necessary in the main high tax job and spend their energies doing "perk" jobs on the side where they pay no tax at all. This "Black" economy can be very large and produces no tax for the government. As an ex-socialist country the Russian part of the USSR had a real problem in creating incentives for people to work. They took sound advice and instituted a low tax regime. Workers in Russia pay only 13% tax. Yes that's right - 13%. The result is that tax income has flooded into the government coffers and when combined with the oil bonanza created with the recent price rises the economy is booming. If only the socialists controlling our tax regime could undestand this point. We too could have a booming economy! Aug 24, 2006, 10:53 Newsletters : 2006 Newsletters : 25 August 2006 Global Warming If we are ever to become a rich country again (remember we were 2nd in 1900 and 3rd in 1950 - now 38th) then we need to concentrate our minds on how to achieve economic growth. Many things help growth and many things inhibit growth. Not only do many politicians not know which do and which don't, they simply don't care and follow the latest "do-gooder" fashion. The current New Zealand government has discovered that instead of brilliantly making $500,000,000 out of the global warming fever currently sweeping do-gooder circles they are unfortunately going to make a $500,000,000 loss. This result will not help New Zealanders back up the wealthy list. Our average worker is already running 35% behind her Australian counterpart. This muddled thinking will put us further behind! Have a look at this web site for some realism in global warming (used to be global cooling and now climate change). It contains some interesting information. [ Visit Website ] Aug 23, 2006, 12:01 Newsletters : 2006 Newsletters : 25 August 2006 Are Capitalists Bamboozling the Poor? I have noted that government actions invariably hurt the very people that the politicians are claiming to save. This is not just a New Zealand phenomenon. It occurs in all democracies. The more that governments try to boost the economy the more the governments grow and tax the economy so that it ends up worse than it would otherwise be if the government did nothing. Frederic Sautet gave a very good exposition of this phenomenon at our last Foundation Forum when he advocated small governments which would just let the entrepreneurs get on with it. The best of them would do extremely well and in boosting their own wealth they would raise the standard of living for all and sundry. The whole economy would boom and we would all become wealthier. But governments must interfere, albeit with the best of intentions, and the economy sputters along just like ours is doing. And we are all the poorer. Here is an article which illustrates this very nicely and in so doing develops two new "Laws": Woods's Law Whenever the private sector introduces an innovation that makes the poor better off than they would have been without it, or that offers benefits or terms that no one else is prepared to offer them, someone — in the name of helping the poor — will call for curbing or abolishing it. Westley's Law The public sector is always held to account with lower standards than the private sector. Aug 17, 2006, 10:16