20 December 2011

Kim Jong Il's economic legacy

Let's test two of the great theories as to why North Korea is in poverty:

1.  North Korea has really only suffered since the end of the Cold War saw it lose markets and cheap oil.
2.  North Korea has also really only suffered due to the introduction of UN sanctions on trade with the country due to its nuclear programme.

Nonsense.  The effect of the end of the Cold War was to make things worse, but the relative decline is inbuilt in the system of rigid state socialism.

Look at this, from the Washington Post:

Source: Washington Post
Stagnation has been the norm in North Korea for 40 years.  The gap between rich and poor has been a gap between South Korea and North Korea.  From 1972 to 1987 South Korea was under the rule of a military led dictatorship and subsequently transitioned to a vibrant and very open liberal democracy.  However, South Korea's dictatorship allowed far more economic and personal freedom than North Korea.  Today the average South Korean has 20 times the income of the average North Korean, with freedoms and a way of life as distant from North Koreans as New Zealand does to Haiti.  

As the Washington Post notes.  East Germany had one-third of the per capita income of West Germany at the time of reunification.  North Korea has one-twentieth.

By contrast, South Korea is a pinup example of roaring success in economic development.  From 1953 when after the Korean War it had per capita income akin to that of Bangladesh, it is today effectively a developed country. 

Do we really need any more case studies of capitalism vs. socialism?

Kim Jong Il - A life of terror

It is difficult to exaggerate the absolute vileness of what Kim Jong Il presided over since the death of his megalomaniac father Kim Il Sung, he is perhaps only exceeded by Pol Pot, Hitler, Stalin and Mao in sheer numbers of those murdered, but the whole superstructure of the regime is such a layer upon layer of fiction that is defies easy understanding.  Almost everything about him and his regime was a lie, the reality evasion was on such a scale that millions died of mass starvation, hundreds of thousands lived and died in prison camps, including young children and the rest of the population lived under an ever present terror of facing oblivion due either to failure of the totalitarian state to deliver food and shelter, or because it would take them away.   

Kim Jong Il was born in 1941 in the USSR by his father, a small scale anti-Japanese guerilla leader who fled Korea with his wife Kim Jong Suk after a number of small successes in repelling Japanese imperialism and its cruel rule of Korea.  In the USSR Kim Il Sung learned of Marxism-Leninism and was impressed by the order and discipline imposed by Stalin.   Kim Jong Il would have been an insignificant small boy if his father hadn't been hand picked by the Red Army and Stalin's regime to be Moscow's plant in Korea.  He was brought along whilst the Red Army marched into the northern half of Korea at the end of World War 2.  Kim Il Sung had Soviet advisors and military assistance, as he set up a Korean communist party with Soviet alignment, which initially worked with and then purged and destroyed the indigenous Korean communist movement.  His ruthlessness, friendliness to Moscow and youthful charisma saw Kim Il Sung picked to lead the new state set up by Moscow to rival the UN/US backed Republic of Korea established in the south.  The Democratic People's Republic of Korea was born, and Kim Jong Il was 7 years old.

Kim Jong Il faced several childhood issues.  One was death of his younger brother to drowning, another was death of his mother in 1949 - allegedly exacerbated when she found out about Kim Il Sung's serial adultery (the "Great Leader" title not quite appearing yet though), and then the Korean War causing Kim Il Sung to evacuate with his children and new wife to be Kim Song Ae.

The world heard absolutely nothing of Kim Jong Il till 1973.  By then he had completed school and university, and was being groomed to be the successor.  Kim Jong Il had by then gained a penchant for expensive liquor, fast cars, young pretty women (he used his father's pleasure troops to recruit pretty young girls from age 13 to be trained to please him once they reached around age 15-16, in large numbers), guns and movies.   He lived the high life, drinking heavily (Hennessy especially), smoking and partying.  He never flew, and would happily arrange execution of those who displeased him.  His movie fetish became legendary.  He led establishment of a major film studio in Pyongyang, with multiple sets for different eras and countries.  He arranged kidnapping of actors, chefs and directors of Korean descent from south Korea and Japan, he also arranged for prostitutes to be brought in from various countries including Sweden.   It is notable his father died at age 82, but he couldn't manage past 70.

Yes, 70.  He is 70, not 69.

Between 1973 and 1980 he was referred to publicly in all media and books as "the Party Center" as he led day to day administrative business for his father.  In that exercise he successfully led various purges and ensured only loyal followers progressed to support him and his father, he also helped spear the unprecedented personality cult around his father, which after 1980 was duplicated for him personally.   The personality cult saw the glorification of a vacuous national ideology called "Juche", the constructions of statues and monuments across the country, and the completion of the cultural revolution that meant virtually all songs, films, books and art were focused on glorifying Kim Il Sung, the party, the state, Juche and all that was done by them.   Everything good was because of his father and later himself.  Everything that went wrong was due to the US imperialists, the south Korean puppet clique and the Japanese.

By the 1980s, Kim Jong Il had become the Dear Leader to his father the Great Leader and both operated as a pair.  Yet Kim Jong Il's high squeaky voice meant he was largely a recluse, living the high life, whilst ordering stories and tales to be written about his exploits.   Like his father it is claimed he gave "on the spot guidance" to hundreds of sites across the country.   What he did was perpetuate a system that create possibly the biggest and longest lasting prison state in history.

North Koreans have largely lived planned lives.   There is no private ownership of land, or indeed anything other than personal possessions.  Regular re-issuing of currency destroys savings.

Overseas travel was strictly prohibited, as was travel from one's own town or village.  Internal passports strictly regulated where anyone could travel, and life beyond one's home town was available only to few.  

News media was strictly under total state control.  All media reported to the people how lucky they were to live in the country and that people worldwide envied them.  They were told that South Korea was a state of slaves where Americans raped girls and kept Koreans as servants and mistreated them, starving them.  They were told everywhere else in the world was full of crime, starvation, war and deprivation.  Satellite TV was unavailable.  Foreign broadcasts were unavailable.   Radios were banned except for locally made devices with no tuning dial so that only local signals could be picked up.   The life in North Korea in the 1980s was hermetically sealed from the world.  Foreign popular culture was unknown.  Elvis Presley, Mickey Mouse, the Beatles and almost any movies, songs, fashions and brand from elsewhere were unknown, except to the elite.

Every day was planned.  Jobs included political education every day, people were constantly told to work harder and longer and never complain, be grateful and be frugal.   Every week every adult would go to criticism sessions where they must confess their own limitations and then accuse others of the same.  Every week one would fear being made a scapegoat.  Photos of both Kims were mandatory in every home, office, school classroom and public transport vehicle.  They had to be kept in perfect clean condition or punishment would be meted out.  Destroying newspapers with their images on them was forbidden.   All children were taken from their parents several hours a day into creches to learn their first words "Kim Il Sung (and latterly Kim Jong Il) is your father".  Children taught to owe everything to the Kims, and to put loyalty to them above their parents and friends.  Taught to be snitches for the leaders.  Taught to be part of the Police State.   Red Guards from their young teens, loyalty to leader and party first, and they would be rewarded if they reported on relatives and friends who were disloyal.

Kim Jong Il was a part of that and changed nothing when his father died.   When Soviet oil and aid ceased to flow, the economy was not reformed.   It remained centrally controlled and managed, entrepreneurship remained illegal, no freedoms were granted.   As a result, he continued to maintain a policy of terror.   Individuals feared that if they were found to be disloyal, they and all their relatives would be imprisoned in gulags - slave labour camps where they would work 16 hour days, 7 days a week, eating next to nothing.   Children from babies up would be included.  Abuse, sadism and torture are rife - reports have also come out of chemical and biological weapons tests being applied to some inmates.  

Even outside the gulag system the mass starvation of the late 1990s was due entirely to the failure of the entire economic system to be productive and let people respond to demand, supply and reason.  Adopting "non-juche" farming techniques was forbidden, so millions starved, desperately trying to eat wildlife, bark, soil, weeds, whilst propaganda signs urged them to "only eat two meals a day".   Kim Jong Il ate lobster, drank liquors and remained obese.

He could have reformed his country, what he did was next to nothing.  The biggest revolution has been the introduction of a mobile phone network that pre-selected elite can use, but which is effectively allowing people to network without easy state surveillance.  He has also seen, informally, the borders become more porous, as corruption and awareness of the outside world has spread among the more privileged classes, especially as technology has slipped into the country, with very cheap CD and DVD players, and CDs, DVDs from south Korea via Chinese sources.  He stopped a military coup by raising the status of the military into the most powerful force in the country, essentially usurping the party.   

North Korea today is a military state led by a personality cult family.  Its main businesses are arms, narcotics, counterfeit currency and minerals.   Kim Jong Il visited China several times and China showed him the results of its dramatic reforms, but he was unmoved - believing that it was too risky to allow Koreans to set up their own businesses and interact freely.  The result is a dark, polluted, cold, state of terror, horror, starvation and fear.

Unlike official propaganda, and the parroted propaganda from Pyongyang's useful idiots in the Korean Friendship Association, who stick their deluded evil tongues up their figurative fundament of Kim Jong Il, he will be remembered as a short inadequate playboy murdering tyrant whose policies and approaches resulted in the deaths of millions, and suffering of tens of millions.

What is left is a country with exhausted broken infrastructure, an enormous military armed with weapons of mass destruction, unproductive agriculture, massive untapped mineral resources, a police state and a people whose lives have been wasted through ideological education and decades of lies and terror.

Reforming, modernising, freeing and re-educating this country is a monumental task.  Consider fixing East Germany to be like helping an overweight smoker to become fit and normal size, fixing North Korea is like helping a senile centenarian become an Olympic athlete with a Ph. D.

19 December 2011

Kim Jong Il's death facts and sources UPDATES

I was driving near Taupo when I heard the news about Kim Jong Il's sudden death, and missed turning off.  Perversely you might think, I have a relationship with the DPRK, given it is the most totalitarian regime the world has ever seen - and know people there.  I studied it extensively in the 1990s and travelled there.   I am overwhelmingly joyous about his passing, but am thinking a lot about those who I know are there and who are looking for reform to come, knowing there must be change.  However, I am going to be driven nuts by reporters who are going to get a lot wrong about the place.

Let's get some points clear:

1.  Kim Jong Il was 70 NOT 69.  He was actually born in 1941 in the Soviet Union, not 1942 on "sacred" Mt. Paektu whilst his father was leading the liberation from the Japanese.  The 1942 birth year is a fabrication which appeared in the 1970s in publications.  The sole reason was to match his father, Kim Il Sung's, birth year of 1912.  So when Kim Il Sung turned 60, Kim Jong Il turned 30 etc etc.  The point of his birth in the USSR (near Khabarovsk I believe) is that Kim Il Sung had fled to the country due to the Japanese takeover, along with his mother Kim Jong Suk (who died in 1949 under circumstances that have multiple versions).

2. Kim Jong Un is expected to succeed him, but reality is likely to be quite different.  There is a significant power struggle about to happen (there was one when Kim Il Sung died as his second wife, Kim Song Ae sought to overthrow Kim Jong Il), and the list of members of the National Funeral Committee is very significant (see article here).  Kim Jong Un leads the list, number two is the rather  elderly Chairman of the Supreme People's Assembly Kim Yong Nam, Choe Yong Rim is third, and is Prime Minister and an ally of Kim Jong Il and Kim Jong Un.  Those two are close allies and expected to ensure Kim Jong Un leads.  Ri Yong Ho is number four, and is effectively now de-jure head of the military as a whole, and his ability to ensure loyalty to Kim Jong Un is likely to be critical.  At 69 he is not too old to achieve that, but his name will be one to watch.  Kim Yong-Chun is alongside him and may be expected to be a challenger as head of the army.

3.  Kim Jong Il's closest living relative is his sister Kim Kyong Hui, the most powerful woman in the country.  She may well seek to shadow Kim Jong Un because she is sole remaining issue of Kim Il Sung and Kim Jong Suk.  Kim Jong Il's half sibling Kim Pyong Il is not listed in the funeral committee, and was reportedly in Pyongyang earlier year because his mother- Kim Il Sung's second wife Kim Son Ae, is terminally ill.  He may seek to challenge Kim Jong Un, but has not be around in the country sufficiently to do so.   Kim Pyong Il and Kim Kyong Hui are the two people best placed to mount a civilian challenge of the leadership.

4.  North Korea is not as isolated as it once was.  The elite have mobile phones and are extensively aware of life in the outside world, with DVDs, CDs and other material circulating among the ruling classes.  Yet, the mass of the population do not have a clue, and may think the world is mourning with them.  They haven't the slightest clue of the wealth prosperity and freedom of South Korea.  Internet access is not available to anyone except a tiny elite, satellite TV is only available to that elite and in three hotels in Pyongyang, and it is a crime to own a radio that can receive foreign broadcasts.

5.  He died TWO DAYS AGO, which is astonishing.  It is telling that so much time passed compared to news of the death of his father.  Kim Jong Un will have sought to ensure he was not directly threatened.  However, it will be far more interesting in coming months.

The latest report is that the country is under curfew, under actual visible martial law.

If you want the most useful coverage of events then you will find it hard to beat the following sites:

- Daily NK - Providing the most regular, up to date and informed coverage of events.  In English, but originally Korean.   If you use any single source to follow events in coming weeks, use this.

- North Korea Econ Watch - Russian academic Andrei Lankov's excellent blog on events in the DPRK, with many sources of those who do business, travel and visit there.  Lankov is one of the world's leading DPRK watchers, with some fluency in Korean, as well as English and Russian, and a long history of visiting the place over many years.

- North Korea Leadership Watch - Self explanatory blog by Michael Madden, includes a great Kim Jong Il family tree

North Korea's own state monopoly news agency (no others allowed, absolutely no free speech or independent media or publishing of any kind) the Korean Central News Agency is here in English.

North Korea's international radio station, Voice of Korea in English
More will be added in coming days

UPDATE 1:  No foreign delegations allowed to Kim Jong Il funeral or for mourning.   Big questions regarding existing Western tour groups in the country.

UPDATE 2: TV3's Nightline coverage (New Zealand) is sloppy.  First, Kim Jong Il has NOT been the "Dear Leader" for over 10 years, but rather "Leader".  Secondly, the "military first" policy (Songun) is not "60 years old".  It dates from 1995 although is claimed to have arisen in 1961.

UPDATE 3: Daily NK is clearly managing to get unofficial reports from the DPRK presumably through a mix of sources.  Markets closed, night curfews, people prohibited for being outside.  Particular issues in the town of Musan.

14 December 2011

Norway's butter shortage and "food security"

This SHOULD be a no-brainer.

Norway has adopted the similar kind of nationalist/socialist environmentalist claptrap supported by the Greens.  The idea that trade and agricultural policy should be focused on local supply and "food sovereignty", which of course is just another word for protectionism and rent seeking by farmers.

Norwegian farmers get a lot of that.  Around NZ$400 million a year to Norwegian dairy farmers in price, income and other subsidies.  For that they can't even produce enough to meet domestic demand.  To top that off there is a 29% tariff on imported butter, so Norway already prices imported butter away from its market. 

Yet that's not all.  You might fairly assume subsidising dairy farmers might mean there is more production than would otherwise be the case, and that the lack of demand shouldn't mean that tariffs get in the way of imports.  You're right.  Norway also restricts imports to a quota.  Only 575 tonnes of butter can be imported under its quota with a tariff of 60% on that.

You see the 29% tariff is actually the general tariff it applies, which is meaningless because of the quota.  If there was no quota, the tariff would be 29%, but in actual fact Norway restricts imports of butter and then taxes it.

If there were New Zealand journalists worth their oxygen they would be off to Norway with the Minister of Foreign Trade suggesting a free trade agreement between NZ and Norway to include dairy products (which Norway wont accept, but the media there might raise questions about its ridiculous agricultural trade policies).

There is no need for any country to have a "butter shortage".  After all there isn't a sock shortage or a TV shortage or a light bulb shortage is there?

What the lobbyists wont tell you about the Kyoto Protocol

There are three types of countries that signed up to the Kyoto Protocol (the US is outside and now Canada is too):

-  Annex 1 countries:  Those that commit to reducing their emissions, covering both "industrialised countries" and "countries in transition".  New Zealand and the UK are in this category, along with all other EU Member States, Russia, Japan and others.  Total of 41.  So they all bear the costs of reducing activities that reduce emissions, or must buy emissions allowances, or mitigate their emissions.

- Annex 2 countries:  A subset of Annex 1 countries that also include New Zealand and the UK.  They not only are obliged to reduce emissions, but their taxpayers are required to subsidise the likes of others to reduce emissions.  This includes the "rich" EU Member States, i.e. Greece and Portugal, not Poland and Slovenia. 

- Developing countries: That is everyone else.  They are not obliged to reduce emissions at all, unless Annex 2 countries pay for them to adopt new technologies to allow it.  They can "volunteer" to become Annex 1 countries when they have developed.

The environmental movements don't challenge this.  Yet let's look at who is in the category of developing countries.  These are countries the New Zealand government, both the Clark and now the Key governments, have committed to helping subsidise to gain new technologies.

Qatar - Which has 6.8 times the per capita emissions of New Zealand and 6.2 times that of the UK, with per capita GDP (Purchasing Power Parity basis) 2.5 times that of the UK and 3.3 times that of New Zealand.  Bear in mind Qatar basically earns virtually all of its income from exporting oil, so it can earn money from "selling CO2 emission" then emit as much as it likes, and get money from poorer countries to buy new technologies. Nice.

UAE - Has 4.4 times the per capita emissions of the UK, 4.5 times the per capita emission of New Zealand, with per capita GDP 1.4 times that of the UK and 1.8 times that of New Zealand.  A similar economy to Qatar.

Bahrain, Brunei, Kuwait all have higher per capita emissions that the UK and NZ, and all but Bahrain have higher per capita GDP.   All richer more polluting economies, all making money from selling CO2 emitting energy, all expected to do nothing, all entitled to get taxes from NZ and British taxpayers to dabble in being more environmentally friendly.  Nice that.

China, Brazil and India of course are all classed as developing countries being poorer per capita, despite having significant foreign exchange surpluses and rapidly growing emissions.  You might ask quite why China is owed subsidies from Western taxpayers when it sits on a growing mountain of money it earns from exporting to those people.
A few other countries are classed as "developing" and deserving of subsidies, and able to emit all they wish, yet have HIGHER per capita incomes than New Zealand, such as Singapore, the Bahamas and Israel.

You might ask yourself quite why these little details are seen as acceptable by a government claiming to be looking after your interests.  Why you might have to pay more, whilst the descendants of oil sheikhs and Chinese millionaires need not face anything, and your taxes might even subsidise their dabbling in green technologies.

You might even wonder why nobody asked any of the major political parties those questions.

11 December 2011

What's going on in the EU? Part One - What's good

Finally, the UK government's rejection of a pan-EU treaty to create effectively an EU megastate, has started debate, albeit with many European politicians pointing fingers at British PM David Cameron for not playing ball.

Quite right, it is about time.

The tensions and politics around the EU are complex, so do try to resist the inevitable efforts of journalists across the political spectrum to over-generalise about what is right and wrong about the EU.  It isn't all bad and certainly isn't all good.  The Euro is not the key source of the problems facing the southern European states, but the EU is also not the source of peace in Europe since World War 2.  The EU does have several very good features that have promoted freedom and prosperity in Europe since the 1950s, but it also has carried some that have done the opposite.

What the terrible twosome of Angela Merkel and Nicholas Sarkozy are trying to do is paper over the tensions created by a union and project that has positively protected those governments which have embarked on decades of deficit spending.  It is seeking to combine the political goals of both Germany and France in a new EU - one that does not fundamentally accommodate the economic policies of many EU Member States and which replaces the flawed, limited but still real democratic accountability of Member States with an EU/EC/Council of Ministers led accountability.

In the next few articles I hope to present a step by step explanation of the EU - the good, the bad and the ugly, and present an alternative for the UK, and any other EU Member State that doesn't want to be part of a pact of central control, with socialism running right through it.

To outsiders the EU can look quite marvellous.  After all, if you produce goods in one part of the EU you can sell it anywhere else, with no customs barriers, tariffs or import restrictions.  Well, except for alcohol, tobacco, audio-visual services, literature subject to censorship, oh and quite a few services.  Free trade within Europe has promoted prosperity since the internal barriers to trade started tumbling down in the 1960s, and most recently the massive expansion from 15 to 27 Member by incorporating all of the former Eastern Bloc states, plus Slovenia and three former occupied Soviet Republics, has done wonders to improve competitiveness, create new markets and spur growth.   No Eurosceptics I know of want that to change, except the far left in the union movement and the British National Party.

Free movement of people has produced similar benefits, albeit with greater controversy.  Citizens of any one EU Member State can live and work in any other, creating a massive labour market and massive education market as people live, work, learn wherever they choose.  The controversy has been that this has allowed many from lower income Member States to work in higher income ones undercutting local labour.  For overpriced builders and plumbers in the UK, the arrival of hard working enthusiastic Poles has not been good for them, but it has been good for the Poles and their customers.   

Thirdly, with these measures have come the means for the European Commission to force countries to abide by rules to ensure open borders and competition between countries remains so.  Domestic markets in services such as telecommunications, bus services, banking, electricity, insurance, supermarkets, postal services, airlines and the like have been required to be opened up to create a single European market.   Low cost airlines would not have succeeded in Europe had the likes of Ryanair and Air Berlin not been able to open bases in other countries and fly from wherever to wherever in the EU in competition with national carriers.  Attempts to subsidise, regulate or otherwise interfere with some sectors have faced European Court action.  

If it all stopped there, then I'd be very happy with the EU.  Breaking down barriers and markets, enforcing deregulation and even stopping national governments from offering subsidies to protect domestic businesses (but not if the subsidies are available to any EU businesses) is a good thing.  To be fair, efforts in some of the newer Member States to tackle corruption, organised crime and the like in those countries at government levels have also been positive (although Bulgaria is hardly a model of government without links to organised crime). 

The thing is that you don't have to be in the EU to get most of that. Three European countries are not in the EU, but have free trade and free movement of people with it.  Iceland, Norway and Switzerland all have almost the same freedoms with the EU and each other, as Member States of the EU.  Their own domestic reasons for rejecting EU Membership are unimportant (protect fisheries from subsidised EU competition, protect oil incomes from funding EU transfers to poor countries, protect national sovereignty and independence), but notable for being inconvenient to EUphiles.  The European Free Trade Agreement (EFTA) which paralleled the EU, has provided a treaty bound mechanism to enjoy freedoms within Europe without the bureaucracy or the commitment to fund he EU.  Remember that, because it is important.  There is an alternative to the EU to get most of the benefits of the EU.

The downside of all of this comes with certain obligations which I will write about later.  These are:
- Welfare tourism.  Don't like the housing, health care, education or welfare benefits in your own country within the EU?  Move to another EU Member State and enjoy all it has to offer, without having had to pay for it.
- Fortress Europe.  Try getting goods or services into the EU from outside the EU/EFTA area.  Tariffs, import controls and other mechanisms means the EU has raised walls around itself as much as it has destroyed them internally.
- Common Agricultural and Fisheries Policies.  Call it, how to sustain the grossly inefficient farming practices of France and Spain (and fishing practices of Spain) using British, Dutch and German taxes, whilst impoverishing farmers from poorer countries in Latin America, Africa, Asia and Australia/NZ.   Nothing quite like having European taxpayers subsidising the properties of the British Royal Family though, especially when it is so unaffordable that farmers in the newer Member States are only offered one-third of the equivalent subsidies of those in the West.  There ARE walls within Europe, including the one that means a Greek farmer doing the same as a Bulgarian farmer gets three times the subsidies of the Bulgarian one.
- EU common regulatory framework.  The number of laws Member States must pass to meet EU wide obligations on everything from labour laws to protecting "human rights" (which are not all bad to be fair).  Micro-managing domestic legislation to iron everyone flat.
- Joining the EURO.  Other than Denmark and the UK, other Member States joined or are committed to joining the EURO.  That's a whole other story, for although it is much maligned, it is more a problem for being a transnational fiat currency than being a single currency.   Think of why Greece felt it could borrow endlessly from a high value low interest rate currency that was largely supported by German economic productivity.
- EU vanity megaprojects.  The EU has pursued more than a few large scale multi-billion Euro vanity projects to put Europe on a level with the US and other very large economies.  These have all proven to be wealth destroying political projects driven mostly by the Franco/Latin bloc of countries seeking to outdo the US.
- EU wealth transfers.  The massive set of subsidies, funds and loans from richer EU Member States to poorer ones, to lift them up to wider EU income levels without actually making them be more productive and to buy subservience from relatively low tax, open, ex. communist bloc countries to accept the socialism promoted by France and Germany
- EU arrogance.  Time and time again the European Commission and those pushing the EU project have implicitly recognised they could never get consent for the project from voters directly, so have resisted referenda or even making the European Commission or Council accountable to the European Parliament (which cannot actually initiate new laws itself).  If voters say no, the EU expects them to try again and give the right answer.  The entire project reeks of bureaucratic insistence of its own superiority over its subjects.  Those who reject what it wants are wrong and must be made to submit.   Worst, those who reject the EU are painted as wanting out of everything, as being nationalistic, narrow minded, parochial, even risking war and conflict.

In a later article I will also write about why things are the way they are, and what national interests and drivers motivate the biggest players, but also why it should be possible for the far more numerous others to get things to change, if they weren't all being bribed implicitly by the system that will ultimately harm their interests. 

02 December 2011

Know someone with a dog that wont leave your leg alone?

After a week or so of unbridled seriousness, some humour - except this item exists.

The perfect present has arrived. 

If you are easily offended by sexual material don't click and don't read on.  This isn't suitable for children, or those who prefer the mating habits of animals

Not a present you want in view of house guests, children, or anyone excessively sensitive.  

Not a present you want kept outside so any Tom, Dick or Rover can treat it as the town bike.

Not a present for someone who wont wash the "pink hole".

Not a present for someone who thinks such gifts for pets are a mark of the decline of civilisation.

Wait for the first owner to paint eyes and a smile on the toy, or dress it and wonder why it is no longer interesting to a real dog.

Wait for the first dog to tweet that Snoopy doesn't look how he does in cartoons.

Wait for the first comedian to  use it as a prop in stand up.  

Wait for the first animal rights activist to claim that castration of dogs should be banned, as they can be given one of these.

Wait for the first animal rights activist who will claim that anyone whose dog (not bitch) doesn't have a partner and doesn't have one of these, is having his rights infringed.  

Wait for the first A & E centre or fire brigade call from the jackass who decided to have a go himself and got stuck. 

Wait for the first images of someone actually doing that seeping its way online, as someone will somehow feel proud of what he did, in multiple positions.

Wait for the feminist animal rights activist who demands an equivalent toy for bitches.

Wait for the feminist animal rights activist who demands to know why there is only one hole.

Wait for the gay animal rights activist who demands that toys get made for gay dogs too.

Wait for the African-American rights activist who wants to know why the white poodle is humping the big black toy.  

Wait for the post-graduate thesis paper written on why the manufacturer wisely chose the smaller toy to be white and the larger one is black, and how that reflects changes in capitalism's recognition of the sensitivities created among African-American communities over structural inequalities, perceptions of subjugation, racism, sexual stereotyping, and sexist portrayals of black women.

Wait for the cat lovers who laugh that anyone thinking of making one for cats has never encountered a cat.

01 December 2011

Does tax evasion cost New Zealand?

The Press reports on research by an outfit called the International Tax Justice Network claiming that tax evasion costs the New Zealand Government more than NZ$7 billion a year in lost tax.

Let's be clear, the Government isn't New Zealand and so the loss is not akin to everyone suffering. 

It's a very simplistic view to presume that somehow this is lost sales, stolen money or anything of the sort, or that behaviour wouldn't change if people paid tax on the transactions listed.   Indeed it is quite false.

For a start, some cash jobs simply wouldn't be done if they were subject to tax.  The value generated from it wouldn't happen, and the consumer would spend the money on something else or save it, which may or may not generate tax.   In other words, tax changes behaviour and so the so-called "black" economy would be smaller if it was subject to tax.  That NZ$20 billion "shadow" economy would be less and so there would be less wealth overall.

When PWC tax partner Geof Nightingale says "If we could tax that shadow economy, we would either have more roads or hospitals or get out of deficit faster" he's quite wrong. For a start, he presumes the shadow economy wouldn't shrink significantly if it was taxed.
Secondly, it is a bold assumption to presume government would spend the money better than the people trading the goods and services.  Even if you go beyond unlimited free air travel for MPs into buying up an unprofitable railway, funding radio stations you don't listen to, paying welfare benefits to convicted murderers and subsidising businesses, government spending is far from frugal or careful enough to presume that people are not better off because they are paying less tax.  Certainly if the businessmen doing cash jobs buys things from my shop (even if I pay tax), I am better off, as are the businesses who sold me those goods, and the employees of those businesses and so on.   How does Nightingale know what is best for them? That sets aside the detail that roads are paid for by what are effectively user charges on motorists (try getting out of paying fuel tax, although RUC is easier to evade).   He could have said more cultural advisors, more planners, more policy wonks, more NZ On Air funded TV programmes, more overseas travel for bureaucrats and politicians, more assistance for hand-picked businesses, more welfare benefits so people subscribe to Sky TV more.   Why is that good?

Yet he then says "We anecdotally hear there's quite a lot of cash business going on in Christchurch these days".  You don't say?  So after the government basically told businesses down town "it's not your property now, you can't go near it" and "oops we demolished your building, forget to tell you or ask you", do you really think people in Christchurch have respect for paying taxes whilst they engage in voluntary productive exchange of goods and services?  Leave these people alone, they haven't hurt you and they are trying to rebuild their lives and businesses, businesses that create wealth, not take wealth.

In a low tax, small government New Zealand, Geof Nightingale may have to get another job, for at the most, taxation would be very low, very simple and as such few would seek to evade it, because it wouldn't be confiscating a sizeable part of your income.  It wouldn't be worth it for most businesses to bother hiring the likes of him.

Finally, it's important to point out to the IRD spokesman who said "our hidden economy and property transaction areas were showing a return on investment of $5.70 for every dollar invested" that this isn't an economic return.  It is just that for every dollar spent on a tax snoop (consider the psychology behind someone who chooses to spy on productive peaceful people to find out if they are coughing up "their share" to the state) the snoops recover $5.70 from the people they catch - catch not actually initially force or fraud on anyone, except of course defrauding the state - a state that will happily take taxes all its life from people and if you die before the age of national superannuation, not give your estate anything for your troubles.  A state that will promise one thing, and then deliver something else.  A state which when it fails to answer your 111 call, or fails to investigate the crime you're a victim of, or fails to get you healthcare when you need it, isn't accountable and wont pay you a refund. 

No.  Every dollar IRD takes is a dollar that otherwise would have been spent on a good or service someone wanted, or invested to make more dollars, or donated to help someone or something as a charity.  Because fundamentally, the difference between the money received by those in the cash economy and the money received by the state, is that in the former case, the person getting paid ASKED and couldn't use violence to demand anyone pay for whatever goods or services he offered.

When the state is small, and tax is low, the size of the so-called "black" economy shrinks (excluding the other "black" economy of banned goods or services) as evasion isn't worth it, simply because people have more of their own money.  That money isn't a loss to New Zealand, because it is part of GDP and because it circulates between consenting adults trading value freely.  The only concern comes from the government bemoaning that it hasn't got its slice of a cake that it had little to do with baking in the first place.