Western Riches

Who Owns What?

If We Don't Know And Can't Tell, Poverty Beckons

One of the more challenging aspects for the Western reader of Hernando De Soto's book, The Mystery of Capital is to be confronted with how much we all take for granted.   We are privileged to have inherited a system of title to property, the end result of which is to set us free from serfdom.

There are few serfs left in Western countries.  In New Zealand, those that are serfs are kept in that position by oppressors, acting criminally.  We have had instances of migrant labourers being kept in a state of slavery as their "owners" seize their passports, pay them a pittance in cash under the counter, and work them to exhaustion.  We have foreign fishing vessels working in our national waters being crewed by slaves.  So serfdom continues, in a few extreme cases, but it requires criminal intent and action to exist.

How did we escape the life of a serf?

Serfdom or Oz?

The Plight of the Welfare Beneficiary

New Zealand has tentatively introduced a "responsibility" policy with respect to (some) state beneficiaries.

A tough new policy that chops off welfare benefits for people with outstanding arrest warrants has netted more than 2400 cases since it came into force in July 2013.  The Ministry of Social Development says it suspended 22 NZ superannuation and veterans' pensions, and 2411 other benefits, in the first two and a half years of the new policy up to the end of last December. Suspensions have jumped from 75 a month in the first year of the new policy to 95 a month in the latest half-year. [NZ Herald]

Incidentally, we admire the reporter being right on the cutting edge of social commentary when he or she pronounces that this policy is tough.   One has an arrest warrant; one does not turn up and surrender to the police; state payments get cut until you do.  That's really, really tough.

The policy was part of a broader tightening of beneficiary obligations in July 2013 which also included drug tests for jobseekers and requirements for beneficiaries to enrol their children in preschool from age 3, ensure they attend school from age 5 or 6, enrol them with doctors and keep up with core health checks.

The approach being taken now is that welfare payments are part of a social contract.

Tenants in Our Own Country, Part II

We Became Serfs A Long Time Ago

Prime Minister, John Key has said that he would hate to see a day when New Zealanders were little more than tenants in their own country. This remark was made in relation to the spectral prospect of large swathes of productive countryside being bought by Chinese investors. For most Kiwis, this is chilling.

But why? We view it as a rational outcome to be expected. In fact, it would be surprising were it not to happen. After all, New Zealand is a soft-despotic socialist country. For generations it has prided itself on being “progressive” in the sense of government intrusions to achieve an egalitarian materialistic paradise.A   former Prime Minister, David Lange once infamously said that he would prefer a society where the gap between rich and poor were more narrow than one in which there was a wider gap, but the poor were better off than they are today. No doubt he thought the former more “just”.

The problem with soft-despotic socialism is that eventually, like all forms of socialism, it runs out of other people's money. This is certainly the case now with New Zealand. So, naturally, since society has plundered the cupboard to the extent that it is now bare, the government needs to look elsewhere for fresh pockets to pick. We are now in phase two of terminal socialist decline. Phase two involves borrowing. There are insufficient monies raised from taxes—so, now we are borrowing $250million dollars a week to fund the socialist beast. Not wanting to stir the beast to anger, the government has been unwilling to cut spending and entitlements. But it also knows that it cannot raise taxes. So, borrow. This simply rolls the burden onto our children. It is robbing baby Peter to pay indulgent Paul, his parent.

There are other characteristics of phase two decline. One is a championing of immigration. Soft-despotic socialism reinforces a culture of self-indulgence and entitlement. Populations do not tend to grow under socialism. The more self-reliant and ambitious depart for other jurisdictions. Those that remain want their piece of cake—and having children requires self-denial in order to achieve longer term wealth and blessedness. Children are an interference to achieving the soft-despotic socialist paradise. Immigration becomes the easy answer. There is a gaggle of short-sighted economists who argue for increased immigration as the way to keep our economy expanding and growing. “Others” has long been the socialist mantra.

The government is openly acknowledging that not only do we need immigrants to keep us afloat, we also need foreigners to invest in New Zealand. We need a new phalanx of “other people's money” to fund our way. Ah, but we must be careful, says our Prime Minister. This could be a double edged sword—we do not want to end up as tenants in our own country.

This is truly a “wake up and smell the roses” moment—or more aptly, a “wake up and smell the rotting garbage” moment. We in New Zealand have been tenants in our own country for a long, long time. It is the inevitable outcome of soft-despotic socialism. Consider the matter of land and land ownership. The vast majority of New Zealand land is owned (via one agency or another) by the State. This places the people in a comparable situation to serfs in the Middle Ages. In addition, Maori complain about their relative impoverishment—yet vast swathes of land in New Zealand are owned by Maori tribes and individual Maori are unable to get fee simple titles over the land. It is owned by the collective, which means that individual Maori are nothing more than tenants—and never will be anything more--at least as long as they look to "their" land as a way to earn a personal living. (Once again, the more ambitious and energetic Maori have tended to migrate offshore to get ahead.) Maori concepts of land ownership are a primitive form of socialism, but socialism nonetheless. It has reduced Maoridom to a state of perpetual tenancy—as socialism always does.

Then, consider how an economy of perpetual tenancy has gradually extended by means of a gradual erosion of private property rights. The State has expropriated title to all minerals beneath the surface of all land. By means of the Resource Management Act and its notification and consent processes, it has land owners more like serfs and tenants than owners. The amount of economic development stifled and stymied by self-righteous greenists and nosy neighbours under the aegis of the Resource Management Act and its application by local body governments is incalculable.

In the light of this, what's the problem with a few foreigners coming in to buy up some dairy farms? We have already all been reduced to a state of semi-serfdom in our own country. It is not that this can be reversed. Not without repudiating the soft-despotic socialist doctrines which have produced it. But socialism will not be repudiated without a religious change—a change that begins in the hearts of men and women as they turn away from the idolatry of regarding the government as their god—and look, once again, to the God of their fathers.

In the days of our Lord, the people were under the oppressive burden of pharisaism. It was a kind of “enserfment” of Israel, where people were constrained by a thousand endless rules and regulations telling them how to live and what could not be done with their property and lives. It was in this context that Jesus said, “Come unto me all you who are weary and heavy laden, and I will give you rest. Take my yoke upon you and learn of Me, for I am gentle and humble in heart; and you shall find rest for your souls. For My yoke is easy, and My load is light.” (Matthew 11: 28—30)

New Zealanders will increasingly become enslaved tenants in their own country until it dawns upon us that the yoke of soft-despotic socialism is an unbearable burden. Then, if it pleases the Lord, we will be made to understand that the yoke of our Lord in comparison is easy, light, and life-giving. Then, if the Lord has mercy, we may hear afresh His gracious invitation to come to Him, that we might be released from our serfdom and slavery. In that day it will be as if, once again, we have come out of Egypt. And we will sing, as one awakened out of a dark dream into the sunlight, “I greet Thee, Who my sure Redeemer art”.

Tenants in Our Own Country, Part I

Foreigners and Serfs

A populist debate has burst forth again on the dangers of selling our assets to “furrigners”—by which, it would seem, we mean Asians, and particularly Chinese, who seem to have more money than most these days. At least they have more money than high consumption, high spending, high indebted Kiwis.

Our Prime Minister, John Key, whilst acknowledging that our economy is dead in the water if fails to attract and welcome overseas investment into this country, has hit a very responsive nerve when he expressed discomfort with the notion that we New Zealand citizens risk ending up as little more than “tenants in our own country”. The spectre is that Chinese investors will buy up the majority of our dairy farms, and we, citizens in our own country, will be consigned to working for foreign landlords. Moreover, the earnings from those dairy farms will merrily trot off overseas and the New Zealand will devolve into a peasant economy and its citizens into serfs.

This is a spectral prospect indeed. It is not hard to understand why New Zealanders recoil from it. Nor is it hard to understand the Prime Minister's concern. But before we race off to Wellington to pass a few more ad hoc restrictions and regulations, let's pause to think through the wider issues.

Firstly, what we are seeing here is but a symptom of a wider and deeper problem. Beware the snake-oiler treating symptoms but ignoring causes. Why is there not enough capital owned by Kiwi citizens available to invest in dairy farms and milk-processing businesses? There are at least two possible reasons.

In the first place, the price of dairy farms may be way-too-high. If this is the case, overseas investors are coming in as “bigger fools” to purchase inflated assets. Unable to pack up the land into wheel barrows and repatriate it, they will end up on-selling it when it dawns on them that their capital is unproductive because they overpaid. In the meantime, the Kiwi-money is the smart-money, not willing to pay inflated prices for dairy farms.

There is a lot of historical evidence for this being close to the truth. Most dairy farms in New Zealand have returned far less on invested capital than could be earned in relatively risk-free ten year government bonds. Yet, this has not troubled aspiring and expanding dairy farmers in the past. Many enjoy the rural lifestyle and thus receive intangible value way and above their after-tax return on invested capital. (Ironically, they would still enjoy this as tenants on a foreign owned dairy farm, for far less capital outlay.) Moreover, dairy farmers have always born in mind the terminal value of their business—the amount of capital they will receive when they on-sell their farms and retire. Here, they rely upon the existence of an even “bigger fool” to come and pay them an even more inflated price for their farm.

To the extent that current dairy farm prices are based upon expected terminal values, which in turn rely upon the bigger fool coming forth, the sector itself is arguably a speculative pyramid which will eventually collapse back down to more realistic economic values. The appropriate response would be--if this were the reason Kiwis are unwilling to buy up farms like the Crafar conglomerate--would be to take the foreign money and run.

The second possibility is we do not have enough Kiwi capital investing in dairy farms because we do not have enough capital, period. Let us assume that the prices being sought by vendors are economically rational and are at fair market. New Zealanders are maxed out on debt, having spent up large on consumption extravaganzas and there just aren't sufficient capitalized people left able to invest in dairy.

This explanation quickly morphs into concerns about our lack of savings—and, inevitably, to considerations about how to increase our savings levels. On cue, and inevitably, the eyes of Unbelievers begin to lift in supplication to Wellington. The Government must do something. Compelling people to save is once again upon the table. Something must be done to lift our woeful saving rate! Government must do it! Government is our god, and by that god, the government must be what it is.

We acknowledge that there is a certain perverse logic to this. After all, why would any intelligent, rational Kiwi save for the long term? The government hands out, ostensibly free of charge, one of the most generous taxpayer funded retirement incomes to everyone over 65 in the world. On top of that, the state funds healthcare. In addition, all kinds of emergency grants from the state are available to anyone caught in a spot of impecuniousness. Why bother saving? Eat, drink and be merry for tomorrow our government will take care of us is the credo of our age.

Of course, when you actually “get there” you find that the great socialist paradise is hardly that. Socialised health care is strictly rationed; waiting lists are long; less-terminal ailments can reduce someone to a life of constant pain—even agony. Moreover, unless you have a mortgage free house and are prepared to live very simply, New Zealand tax payer funded superannuation is hardly adequate. But the widespread perception is that the socialist paradise for the aged really does exist. And it is a myth which successive governments are more than willing to perpetuate. So, why bother denying oneself now, in order to save for the future?

One obvious solution to increase our savings rate would be to cut current and future government entitlements. It is abundantly clear that those developing countries in Asia which have low social welfare entitlements are also those with rapid and growing capital formation due to high savings rates. Whilst there are doubtless other factors involved, the brute reality that it is family-or-nothing provides a powerful motivation to save.

But such a solution in New Zealand would be electoral suicide—as we have seen repeatedly. Any government that has moved to cut entitlements has unleashed a torrent of anger and vituperation that has consigned the guilty politicians and parties to a wasteland of ignominy for a very long time. Thus, the next solution, is to keep the entitlements in place, but increase government's control and intrusion by making personal long-term saving compulsory. Of course this will inevitably come in New Zealand, as long as men continue to look to government as their providential provider and their god. Without a revival of true Christian faith in the hearts of the people, there is only one direction to our drift into soft-despotism. That lady is definitely not for turning.

But here is the rub. The Prime Minister has said he would not like to see the day New Zealanders are reduced to being tenants in their own country. But, in fact, that happened a long time ago, as our next piece will argue. With respect to foreigners buying dairy farms, we are only facing just one more manifestation of New Zealanders being reduced to the status of being tenants in their own country.