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Monday, July 06, 2009

No Second Class Citizens

This was released while i was away, but is so damn good, I'll post it for those who missed it first time around.

From ACT MP Sir Roger Douglas

Many think that ACT New Zealand is a party for big business.

It is a real tragedy that ACT suffers from this stereotype. It is a tragedy because the profile is so out of whack with the reality.

I have spent most of my adult life in the Labour Party. For 21 years I represented one of the poorest electorates in New Zealand.

My brother was a Labour Member of Parliament.

My father was a Labour Member of Parliament.

My grandfather was a Labour Member of Parliament.

The goals I have today are the same as those I had when I was in Labour. I am just as concerned today as I was then about poverty. I am just as concerned today as I was then about opportunity. I am just as concerned today as I was then about second class citizens.

But where I have changed is what I see as the cause of second class citizenship.

Let’s look at the facts.

For almost 80 years, New Zealanders have experimented with the welfare state. What have the consequences been?

Do all children receive decent education? No.

Do most people retire with enough money to live in comfort? No.

Does everyone receive health treatment when they need it? No.

Have we eradicated poverty? No.

On the very goals that the welfare state has sought to achieve, no one could genuinely argue that it has succeeded. Even the modern day proponents of the welfare state, be they in National, the Greens, or Labour, all know it has failed.

But they think they have the solution. They think the solution is more money. I have never heard a politician from those parties come across a problem that they believe could not be solved with just more money.
That is why, regardless of who has been in power, the budgets for welfare, education, and health have all shown an almost inexorable growth.

Two Classes of Citizenship

New Zealand has two classes of citizens. And we have two classes not because the Government isn’t doing enough for the poor, but because what the Government does for the poor denies them choices, destroys the incentives they have to get ahead, and subjects them to political abuse.

In New Zealand, we have the haves and the have nots.

The haves are the people who do not live from payday to payday, but earn enough to set some aside - to save, or buy healthcare when they need it, or buy education for their kids. The have nots are those who scrape by, and rely on the state for all their social services.

In New Zealand, we have the privileged and the unprivileged.

The privileged are those who get others to pay for their whims and fancies. The unprivileged are those who face the vicissitudes of the market economy, while being taxed to pay, for example, for the tertiary education of the children of the affluent.

In New Zealand, we have the fortunate and the unfortunate.

The fortunate are those born in a school zone which happens to have a good school. The unfortunate are those born in an area with a poor local school. Zoning locks them in, and if they want to escape, they need to pay twice. They either need to move house, or they need to go private. Only the wealthy can afford to do that.

We have those who receive handouts, and those who pay for the handouts.

And the tragedy is that handouts are often not delivered to those who need them. Working for Families delivers money to many who are comparatively well off. Government subsidies for business force relatively poorer taxpayers to pay for those lucky enough to get a Government grant.

I hold the same ideals I always have. In fact, every party in Parliament claims to share essentially the same goals when it comes to welfare. National, Labour, and the Greens are all wedded to the current system. Only ACT has an alternative to the failing status quo.

The problem with the status quo is that it all about power. Politicians control who gets an operation, where kids get educated, and how much superannuation you receive.

I can share the goal of equal opportunity for all, and have a different way of achieving it.

There are few things we have got as backward as we have with the way we try to help Maori.

There is no doubt that Maori suffer disproportionately from poverty. But if we continue to encourage Maori to look to the past, we will continue to create the system that locks them into poverty.

Only if we are willing to look forward and devolve control of the money to individuals, will we deliver solutions to the problems they face.

It is a great irony that the same kind of paternalism that once stripped Maori of individual autonomy and self-determination is today seen as the solution to the problem of poverty.

We have become a nation rife with bureaucracy, recklessly determined to re-use the ideas that have failed to solve poverty for over 80 years.

But if we always do what we’ve always done, then we’ll always get what we’ve always got.

What 80 years of political control has achieved is a larger welfare budget, more people on welfare, and barriers for those at the bottom to actually get ahead.


54 percent of your and every one else’s personal tax goes towards healthcare. The growth is scary, when just two years ago the figure was 41 percent of your personal tax.

Saying 54 percent can hide what this means. If you earn minimum wage, you will pay about $2500 every year for healthcare. If you earn the average wage, you will pay over $6000 for healthcare.

People say that we have a free healthcare system. To me, it seems that free healthcare has never been so expensive!

Healthcare is not free. It costs you.

And when healthcare costs the average person $6,000 every year, you’d hope that it really delivered.

And yet it doesn’t. Despite the enormous cost, we ration healthcare. People who are sick get placed on waiting list. On that waiting list people get worse, not better. Some die.

And the suffering that takes place on health waiting lists are rationalised away, as if the goal of equality justifies denying healthcare to people who desperately need it.

If the health system treated every one like this, then at least it would treat us all equally. But the most pernicious effect of socialised medicine is how it creates second class citizens.

The first way it does this is through a bizarre mixture of subsidies. Some medicines are fully subsidised, some are partially subsidised, and others are not subsidised at all.

Decisions over what medicines you can take are actually determined not by the patient, not by the doctor, but by a bureaucrat in Wellington.

The second way it creates second class citizens is through the way pressure can be applied to get treatments performed. Doctors, patients, politicians, can all pressure the system to get certain operations performed at the expense of others.

If you can get your story on Campbell Live you can be sure you’ll get your treatment.

If you can form a pressure group to get Herceptin subsidised, you’ll get your treatment.

But in socialised health, your treatment comes at the expense of someone else’s. And because the affluent tend to be the more politically connected, the more influential, the more organised, treatments for the rich come at the expense of the poor.

The third way it creates second class citizens is the fact that wealthy people can afford to pay twice. They can afford to pay tax for healthcare, and then buy health insurance on top.

The very people who are denied this opportunity are the very people that universal healthcare was meant to help. While the poor die on waiting lists, the rich pop down to the private hospital. No one would seriously contend that the system treats people equally.

And the solution to this problem is the same kind of pathetic snake oil we hear from all the other parties in Parliament. All the problems could be solved if only there was more money.

When will we wake up to the lie?

Under Labour, health spending increased in real terms by 50 percent. We still have waiting lists. We still have a system that creates second class citizens.

Despite the huge increases of resources at their disposal, the productivity of doctors actually reduced by 15 percent. Nurse productivity dropped 11 percent. Overall, the drop was only eight percent.

Why eight percent? Because the productivity of cleaning and orderly staff surged. And those services were outsourced to the private market. This just gives a hint of the kind of benefits that could be achieved if we dropped the pretence and lived up the reality: socialised healthcare has failed.

If we simply gave the person on the average wage the $6,000 back they currently pay, this would enable them to buy catastrophic insurance, put money aside for their healthcare in retirement, and pay for their day to day healthcare needs such as doctor visits.


Superannuation today locks you into poverty in your retirement. And the low levels of superannuation occur despite the high cost to taxpayers.

Superannuation costs you one third of your personal tax. If you earn the average wage, that’s $4000 a year.
Superannuation is not free. It costs you.

But, of course, our super scheme is designed so that people pay today for the retirement of their parents. If we simply adjusted the system so that that money went to pay for your own retirement, most would have a cushy retirement.

If that money was put in the bank, earning seven percent nominal interest (five percent real), then the average worker would retire with $1,804,300 in the bank.

It would be like you’d just won lotto and then retired.
And let’s say you put that money in the bank at one percent interest - a pathetic one percent. The interest on that money would return more to you than current superannuation does.

A single pensioner currently gets $311 a week, while a married pensioner gets $239.

With just one percent interest on the capital, they’d earn $347. If we used the more realistic five percent figure, then the average income of a pensioner would be $1735 a week.

So the cost of Government superannuation, in old age, is around $1000 a week.

It’s costing you.

The present system creates second class citizens.
Some go through their lives, scraping by, paying tax, but not having enough left to save. When they retire, they’ll get whatever the politicians of the day decide they deserve.

But the wealthy, well, they will have saved for their retirement. They’ll be able to live in comfort, doing the things that most want to use their retirement for.
The raw deal most get from Superannuation is only going to get worse. The flight of New Zealand’s most skilled, combined with the baby boom, will see increasing burdens shifted to the working poor. They will pay high taxes and receive a stingy pension.

But while changing the system would help us all, it would harm some politicians in Labour and National who rely on promises they cannot deliver to win votes. By making people self-reliant, they would have to change strategy from making increasing numbers of people recipients of welfare.

The power that gives them is something they will be unwilling to give up, unless we force their hand.


Apparently we have a free education system. But it is not free.

GST receipts cover the cost of education. In other words, 12.5 percent of everything you and every one else buys only just covers the cost of education.

Most people know ACT’s education policy. We call it school vouchers, or tax credits that effectively ensure education money follows the child.

The problem with our education system is a lack of choice. But there is one group of people who have choice in New Zealand.

If you want to send your child to the school of your choice, you have to move house, or pay twice - once through taxes, and once through private tuition fees.
The very people who have choice are the wealthy. They’re the people who can move house for the school zone, or can pay twice to privately education their child.

The very people who are ripped off are the poor. News reports recently indicated that police were now stationed in 10 South Auckland schools, and that this program was being expanded to the Bay of Plenty.

The real tragedy is that there will be kids in those schools whose parents desperately want them to escape, but they are not allowed. The Government won’t let them.
The Government continues to force the least well off into the worst schools, and they have managed to convince most that they do it in the name of equality.

They express concern that 30 percent of kids leave schools with poor educations, unable to read or write adequately. But when you look at schools in poor areas, this percentage is much higher. They get the rawest deal.
When it comes to enabling people to improve their lot, education is one of the best ways they can do so. And yet the very people who most need this opportunity are denied it by the Government.

But on the tertiary level, the current system creates second class citizens in an even more concerning way. At least, when it comes to most education, the rich are forced to pay twice for quality.

When it comes to tertiary education, the poor are forced to pay for the education of the wealthy. Most people receiving the costly tertiary education courses are those from the middle and upper classes.

Those who leave school and get a job pay to educate those who leave school and get a degree. The poor subsidise the wealthy.

And then many of the wealthy use their human capital in jobs overseas, leaving others to pick up the bill for all the other failing aspects of the welfare state.
25 percent of skilled workers have now fled the high taxes of New Zealand for better prospects off shore. We will not attract them back with larger welfare budgets and higher taxation.


When you look not at the goals of the welfare state, but its actual performance, the results are depressing. In the last 80 years we have grown far wealthier than we once were. Yet today, there are more who receive welfare than ever before.

I consider it a great misfortune that Michael Joseph Savage did not live to see the effects of his vision. If he did, I am sure that he, like me, would realise the error of our ways.

We have created a system that gives options to those who can afford them, while denying choices to those who most desperately need them.

We have created a system that taxes and regulates opportunities for the poor out of existence, and destines them to poverty.

We have created a system that creates two classes of citizens.

And at the very same time, the solutions put forth by the other parties in Parliament are more of the same. More health spending, more education spending, higher taxes on the wealthy. Only the ACT Party stands against the philosophy that is creating two classes of citizens.

When will we wake up? On its own terms, the welfare state has failed.


Anonymous Bevanjs said...

Thanks for the posting, I'd have missed it otherwise.

12:57 PM  
Anonymous twr said...

And yet he voted for every single cent of it, along with the other four Act flunkies. And stood up in parliament and clapped as the biggest budget in NZ history was presented.

10:32 PM  

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