There Must Never Be A Compulsory KiwiSaver

Save us all from crony capitalist government lobby groups. The Financial Services Council, led by chief executive Peter Neilson, are trying to head the government toward a compulsory KiwiSaver because it will be ‘good for New Zealand’s economy’:

An extra $52 billion could be injected into the New Zealand stock market by 2066 if 80 per cent of workers were in KiwiSaver and the contribution rate was raised to a combined 10 per cent, according to research commissioned by a financial services lobby group.

Infometrics figures provided by the Financial Services Council project that $312 billion would be channelled into KiwiSaver by 2066 if no change was made to the existing regime, of which $39 billion could potentially be invested in locally listed stocks.

[Snip]

The council wants all workers including the self-employed to start contributing to KiwiSaver from 2015, starting at 1 per cent a year and increasing by a percentage point a year to 10 per cent by 2024. Those who are already in KiwiSaver would also increase their contributions from 2024 from a combined 6 per cent a year to 10 per cent.

At present employees have to contribute a minimum of 2 per cent and employers a further 2 per cent. From April that will go up to 3 per cent each to a combined total of 6 per cent.

Last year the Government deferred a proposal to automatically enrol all workers who are not already in KiwiSaver until after 2014/15 …

I don’t deny Mr Neilson makes some attractive arguments; obviously so because, yes, savings are vital to a thriving capitalist economy: if you could put the taxes you currently have extorted from you voluntarily into savings we would all be better off in every way. However, the minute the country has forced on it a compulsory savings into KiwiSaver from the Fortress of Legislation, then its philosophically lost every gain that has been made, because a capitalist economy is defined as a voluntary one – add compulsion, then there is merely another planned, big state economy. Capitalism can only work, and works better than any centrally planned mechanism, when individuals are left free to go about the business of bettering their lives voluntarily, following their pursuit of happiness, and rational self-interest. This is also the pre-condition of a free country. Unfortunately, however, because 99 out of 100 professionals and business people, and 100 out of 100 lobbyists and politicians, no longer understand the philosophical issues underlying a capitalist system, by which I mean classical liberalism, I am forced to break this Herald piece down on its own shallow terms:

Significantly, never mentioned in Mr Neilson’s lobbying, there is a huge cost to business via the compulsory employers contribution that employers must make, matching their employees contributions, that is ignored, completely, by him. He is advocating that every small and medium sized enterprise (SME), including farms, in New Zealand, that’s every entity which employs, is forced to give over the capital they could use to grow themselves, and employ, so a very minute, elite group of ‘favoured’ firms listed on the New Zealand Stock Exchange can use those extorted funds to further their own interests. Whoops, note already how philosophy can’t be ignored: rational and fair  people will rightly see this as first, philosophically repugnant, and after that economically retrograde. This is called crony capitalism, which, mixed with an uncritical MSM such as the lack of balance in this Herald piece, simply accelerates us all down the road to our serfdom.

Secondly, not only is every SME stripped of their own capital via the employers contribution, they also necessarily have to incur a higher incidence of income tax to fund the government contribution to each KiwiSaver’s scheme, being 50 cents for each $1 invested. Yet more money taken from business owners to play favourites and skew the open market for investment monies, given SME’s investing their own money in their own businesses is the major part of the investment market of any free country, and the KiwiSaver scheme is twice attacking that important source of investment funding, namely, retained earnings … (now repeat my philosophic arguments in above paragraph).

Finally, considering the KiwiSavers themselves, for many, compulsory savings into KiwiSaver will simply not be in their rational self-interest; they may well be prudent paying down their mortgages more quickly, than being forced to invest in risky start-up ventures such as Xero, Bliss, et al, as good as investment in some of those companies may indubitably be: investment has to consider both risk and return of each individual.

Returning to philosophy, also note how when a society moves to planned lives by state coercion, we then arrive in the absurd, offensive circumstances where even free speech is curtailed, and that most certainly in the investment sector of our economy, for this very post is most likely, farcically, breaking our security laws (please note that’s a huge link to a stunning post by Stephen Franks). And that single fact alone, is appalling. I say it over and over, but there was a vital revolution for freedom in America that was waged over less than the issues in this post (and almost every post I make).

So Mr Neilson, whose self-interest in the issues discussed in the Herald article is never stated, assuming (?) he happens to work in the savings industry which is increased in size dramatically by a compulsory KiwSaver, it’s still the Christmas and New Year break: please take one, and leave businesspeople, many of them struggling, brave entrepreneurs, alone – don’t make your career one of convincing politicians their best course of action is to forcibly take the money away, and hence the choices and opportunities, of these people who are our economy. And while on businesspeople, to the real estate agent hassling me on New Year’s Day, and then chasing me up the day after, for an independent trustee’s signature on a sales document, that was rude; plain, old fashioned rude. Too many businesspeople and professionals need to gain a bit of perspective and a lot of philosophy.