All Commentary
Saturday, October 1, 1960

Lessons from New Zealand

The following items, as instructive for Americans as for New Zealanders, are from the April 1960 issue of Liberator, the official journal of The Constitutional Society for the Promotion of Eco­nomic Freedom and Justice in New Zealand, Inc.


Bigger Pay Margins Among Communists

The process of equalizing incomes irrespective of the capacity or will to work has probably gone further in New Zealand than anywhere else in the world. It is very questionable whether this should be a matter of national pride.

Complete equality should be the objective in the communist coun­tries, but they are nowhere near as close to achieving it as is New Zealand.

In the Soviet army, the pay scales vary vastly between pri­vates and generals, the disparity being much greater than in the western forces. Russian scientists are paid enormously more than laborers. In this way, the Com­munists encourage ability and ap­plication.

New Zealand, on the other hand, has come dangerously near to dis­couraging the use of brains. In­stead of providing incentives for ability and application, this coun­try has so leveled real earnings that it is more difficult to counter the view that it is comfortable to forget ambition and settle into a menial job for which the rewards are reasonably satisfactory.

At a recent meeting at New Plymouth, the Minister of Finance made some interesting admissions. He was asked if the government party’s policy was still towards the equalization of incomes.

He said the party was “well be­yond the stage” of wanting that. But he added, “We have got to face facts. Some people, such as scientists and technicians, have to be paid a greater reward than others, or we lose their services.”

The inference is that salary scales are based on the availability of workers in certain professions, not on the worth of their services to the community. This might well be considered thoughtfully by uni­versity staffers who have recently gained substantial increases in salaries.

If there were more of them of­fering, or if those already here were less liable to go overseas for better rewards, they might not have received the increase.

But apart from the practice of reducing margins for skill and ability, to which all recent New Zealand governments have con­tributed, the policy of steeply grading income tax has been effec­tive in still further reducing mar­gins.

The chief result is to bring ever closer the millennium of mediocrity to which New Zealand politicians are evidently devoted.

Social Security Gone Mad

In a recent broadcast, the Minister of Social Security said cash bene­fits were now paid to 1,037,000 people, which meant that almost one in every two New Zealanders was now receiving a cash benefit, quite apart from health benefits.

According to the last Budget, the cost of social security in the financial year just ended was esti­mated at £104,000,000—an increase of £15,000,000 in one year. New benefits already announced for this year promise to put up the cost at least as much again, so the taxpayers will probably have to find at least £120,000,000 to fi­nance the scheme.

Where does this money come from? From the pockets of the people, of course. A fair propor­tion comes from taxation on com­panies which cannot benefit in any way. This means that the products of those companies cost more than they would otherwise, and it is ul­timately the customers who pay the company taxes.

Social security undoubtedly has an inflationary effect in forcing up prices. Judging from the com­plaints by aged beneficiaries pub­lished in letters to newspapers that the present benefit provides only a subsistence, those benefi­ciaries are little better off today on £4/5/—a week than they were on £ 1/10/—a week when social security began in 1939. Inflation has eaten up two-thirds of the value.

The war cannot be blamed for more than a small portion of the decline in the value of money. In the war years, in fact, inflation was held in check much more suc­cessfully than it has been since.

Unless inflation is checked, age beneficiaries may need 10 a week before many more years pass. But how can inflation be checked while taxes amount to more than 30 per cent of the national income?

These are factors which threaten New Zealand‘s economy. While New Zealand must compete on world markets which owe their prosperity to free enterprise and which are successfully holding their price level, continued infla­tion in this country must make it difficult to sell overseas success­fully.

Instead of boasting of the achievements of social security, New Zealand might better count the cost and the threat to the na­tional economy.




Ideas on Liberty

Ralph Waldo Emerson

Give no bounties, make equal laws, secure life and property, and you will not need to give alms. Open the doors of oppor­tunity to talent and virtue, and they will do themselves justice and property will not be in bad hands. In a free and just com­monwealth, property rushes from the idle and the imbecile to the industrious, brave, and persevering.