The Great Social Experiment - Part 4

The social and economic contract between New Zealanders and their government has given the populace just about everything they could want from a generous and large government. They have a first-rate universal health care at virtually no direct cost to the consumer. But the elderly cannot get expensive treatment in a timely matter. The highway system is paved and carefully maintained but clogged so badly at rush hour they cannot meet their traffic needs. Ports are clean and well-staffed, but larger ships cannot dock in severe weather because of inadequate planning. Airports are able to handle huge volumes of tourists with little fuss and confusion unless they use the larger planes essential to cross the Pacific Ocean. Larger cities have suburban rail, but light rail service has been discontinued. All but the smallest towns have bus service and all are subsidized. Ridership on public transportation is very low at 2.5% despite high taxation on motor fuels and vehicles.

The government provides free broadcast television. There are four channels, two of which have part time high definition broadcasts at 720p only. Radio stations are commercially run. High speed internet is not common and most ISPs hold customers to a very small monthly 10GB limit.

So, is this beautiful country the paradise it appears to be? With high taxes, high prices and low private sector wages, they are exporting their highly motivated and highly educated workforce overseas. In our next segment we will study just where their economy got derailed.

The Great Social Experiment - Part 3

New Zealanders are eager to proclaim that they were the first in the world to create a social welfare state. They are proud of their healthcare, their environment and their record in creating social justice. Their two principle islands are clean, free from pollution and have virtually no crime. There is virtually no political dissent and town counsel meetings are likely more about what color to paint the bicycle lanes than dealing with roving gangs. Sailboats are moored everywhere, patiently waiting for their owners to take them out once again for a quick offshore barbecue after work.

It would be so easy to fly back to the US and proclaim that all we have to do here is to extend healthcare to everyone, repay native peoples for the land we stole from them, close polluting businesses and paint our bike lanes green and we too could have a perfect life like our Kiwi friends. But, if you stay a bit longer, ask a few questions and visit a supermarket or two the view changes. Yes, it is still a paradise, but there is trouble.

New Zealand has been exporting its workforce at an alarming rate, approaching 50,000 per year. If the US had that rate, we would be losing over 4 Million workers a year. Further, many more Kiwis commute to Australia for much higher wages and lower taxes. Even though the minimum wage gives the lowest paid workers a minimum of $8.75 (US equivalent), the skilled trades earn just under $20 US. Factor in $8.00 gasoline, $7 toothpaste and Diet Cola for $4 and you have an economic boat that just won't float for many workers.

So, what happened? All their social programs have driven up taxes and created new bureaucracies chock full of high-paying jobs. The average government worker earns 50% more than a private sector employee. Income tax rates are similar to the US, but they have the dreaded European style GST. This adds taxes to products each time a product works its way through the economy; we call it a Value Added Tax. Manufactured products like cars, cosmetics and processed foods are taxed beyond all reason. Meat and produce remain somewhat affordable, but everything else is just scary high.

In our next post we will look at what the economy provides for citizens.