Thursday, February 02, 2017

Thiel goes country shopping

Weirdo billionaire Peter Thiel loves New Zealand, I see, saying some years ago that it's the country that most aligns with his view of the future.   Which means, I guess, he really loves an economy based on dairy cows  and hobbit films, with next to no manufacturing,  and increasingly entrenched inequality due to the low taxes rich people like him have to pay.  Of course he would like the place. 

I know - on the face of it, the figures for the New Zealand economy currently looks quite OK; but I just have a hunch it's a case of too many eggs in one or two baskets.

And this guy paints a simple picture of how lowering taxes just makes inequality worse:  
VICE: Hi Tim, could anyone have predicted such a dramatic transition over the past two decades?
Tim Hazledine: I mean, which part? We were a very equal society and really prided ourselves on the living wage, or social wage, and then we hit the 1980s and went the other way. As inequality increased economists began to recommend trade-offs. The thinking was that you can reduce inequality by raising taxes. Many argued that would in turn reduce economic growth, because we would be taxing our big industries.

But that's not what happened right? Instead big earners revolted and taxes were lowered?
That's right. Cutting the tax rate was supposed to encourage really smart, energetic people to work hard. But these people basically said thank you very much, played some more golf and then went on more holidays, which didn't help at all. What the OECD study and a few others have revealed is that no, it's not even a trade-off. Not taxing to sustain economic growth is not bad for good—it's bad for bad. The countries that have higher inequality are doing poorer.

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