A compulsory Kiwisaver works against prosperity for all of us, because it leads to a less innovative, less vigourous and less diverse economy. Thus David Parker’s announcement of Labour’s monetary policy this morning predicated on a compulsory Kiwisaver will be a needless drag on an economy which is currently growing faster than most world economies (including the economies of Europe and the US). In trying to fix something that is not broken in the way they think it is, Labour risks jeopardising our economic wellbeing.
Prob with compulsory Kiwisaver - other than the 'compulsory' - is every small/medium employer is forced to contribute their investment 1/x
— Mark Hubbard (@MarkHubbard33) April 28, 2014
@MarkHubbard33 ... capital 4 the largesse of 10 to 20 crony NZX firms. It's elitist policy from Labour, & a disaster 4 innovation in economy
— Mark Hubbard (@MarkHubbard33) April 28, 2014
To expand on my Tweets, I simply quote below the salient parts of an earlier post – the sixth most read post on this blog - which was in reaction to then CEO of The Financial Services Council, Peter Neilson’s calling for – with no conflict of interest I’m sure – a compulsory Kiwisaver (some may want to gloss over first paragraph because it’s … well, philosophy):
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. 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.
Thus, I end this post exhorting David Parker, as I did Mr Neilson:
… please leave businesspeople, many of them struggling, brave entrepreneurs, alone – don’t make your career one of … forcibly taking the money, and hence the choices and opportunities, of these people who are our economy.