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. 

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

See here. 

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.

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.

Pay for our pensions, but don't expect to afford your own

That's the fundamental cry of the public sector unions which are going on strike today in the UK.  Around 2 million are going on strike, which most attention given to border control staff who by going on industrial action will see massive queues at airports as people arrive from international flights.  

The people going on strike are opposing having the age at which they receive their employer (read state, read taxpayer funded) pension increased to match the actual age at which people get the state pension, they are opposing having to contribute more and opposing a shift from final salary pensions (you know, the type you could only dream of in the private sector) to average wage pensions.

I like Old Holborn's proposed message to the strikers seen below:

People whose incomes and employment are dependent on the private sector generating wealth, hiring employees and paying taxes to pay for them, are wanting these same people to continue to carry the burden of paying the ungrateful sods pensions that none of the rest of us could ever dream of.   Yes, some are upset that they perform useful jobs (in schools and hospitals) and were "promised" final salary pensions when given them by previous governments.  Well here's the news, government promises are worthless - they are promising to spend money that isn't theirs, that they don't have and to pass on the bill to someone else and blame them when they can't deliver (let's call that the Labour Party).   Make your own plans for retirement, don't trust politicians to make them for you.

Sadly it was the unions' lackeys in power - the Labour Party - that sold their members this unaffordable, unfunded pup, that they relied upon for their careers, and now face losing because it can't be afforded.  

So the anger from the strikers shouldn't be directed at the government, it should be directed at their unions and the Labour Party - they were promised something that couldn't be delivered or afforded, and which demanded taxpayers pay for something they themselves could never get.  

The enormous lie perpetuated by the unions is to pretend the UK didn't have a budget deficit or substantial public debt before the financial crisis - it did.  The unions pretend the spending cuts are to "pay for the banks".  They are not, they are to get current spending balanced, and the banks haven't been funded by the state since Gordon Brown bailed out three of them only, two years ago.  Bank bailouts aren't happening every year.

The public finances in the UK are dire.  The UK's public debt is set to reach 94% of GDP in 2014-15, worse than Germany, France or the Eurozone average, only being better than Italy and Greece - no great achievement.  Public debt is set to increase by a total of £520 billion in the life of this government.   Debt isn't being cut, the growth of it is being slowed.  The total extent of government spending cuts in the life of the Conservative/Liberal Democrat coalition will only be 3.4% in real terms (after inflation) between 2010 and 2015.  Another 1.9% of cuts are forecast for the two subsequent years.  Hardly brutal, hardly radical.  Only then will be UK budget actually be in balance.  

Those striking are following the propaganda of those who want government to borrow more and more, and hope they aren't around when Britain has a sovereign debt crisis ala Greece or Italy, either that or they want to tax the "rich", which presumes they'll hang around for the privilege.   I doubt most would, and they would take their businesses and the jobs with them.

If the private sector said "sod it" and went on strike, and stopped working, stopped running businesses and stopped paying taxes, then this lot would truly be stuffed.  That's why the government should sit quietly, make sure people know that to give them what they want, there would have to be more borrowing (raising interest rates), more taxes or less spending elsewhere.  The unions don't say what option they want - let's call them out on this, and say no. 

Piggies in the trough

Stuff reports "Goodie bags containing iPads and smartphones and instructions on how to maximise your free air travel and accommodation perks – it must be induction day for Parliament's new MPs. Goodie bags containing iPads and smartphones and instructions on how to maximise your free air travel and accommodation perks – it must be induction day for Parliament's new MPs... Posters hanging in booths outlined their new perks – "unlimited domestic travel", exclaimed one".

All of the new MPs, National, Labour, Greens, NZ First, to a man and woman, soaked it up, took what they were "entitled to", at your expense.   I bet John Banks will too.

None of those talked to expressed disgust and remorse, including those who claim to speak on behalf of the poor. None showed interest in limiting their domestic air travel to trips to and from their constituency. 

Yet most of you voted for them, so really you only have yourselves to blame right?