Guest Post – How would you deal with inequality using a market approach?

How would you deal with inequality using a market approach?

This political cycle, the usual hot topics of immigration, housing and “poverty” continue to get battered about like the political click bait hot potatoes they are. These are nice, easily digestible, understandable and easily debatable topics that all the major parties are well versed in discussing. The usual band aid policies get rolled out by the usual suspects, the public mindlessly blast their regurgitated slogans all over social media in the hope of converting the rest of the country who have pretty much already made up their mind how to vote or can’t be bothered.

Nobody is proposing anything drastic for any of the problems because it’s all a bit hard.  

Why fix it when you can put a band aid on it and stay in power for another 3 years.

A topic dear to my own personal heart is the money system. It’s at the root of most of our major social and economic problems, but nobody ever wants to talk about it. It’s far easier for a Government just to borrow and throw more money at today’s problems while we all bury our collective heads in the sand.

Fundamentally, our money system is broken, it always has been. From the debt backed method we use to create money itself that means there isn’t enough money in the world to pay back all the debt that exists, to the concept of interest which forever enslaves the populous to debt.

When it comes to inequality and the infamous “Gap”, inflationary pressure automatically penalises those at the bottom, rewards those at the top and is fundamentally the cause of all our inequality woes.

Here is what is causing the “Gap” that everyone talks about, but nobody ever considers…

A 1.5% CPI based salary increase for a CEO on $1M a year is a tidy $15k but a 1.5% increase for a $35k a year wage earner is a mere $525. After 10 years of CPI increases, the CEO has an extra $161k per annum in their pocket and the wage earner only an extra $5560. Boom, there is your gap right there and if you hadn’t already noticed, that’s an exponentially growing gap.

As anyone who has ever studied economics knows, anything exponential is also un-sustainable.

Our obsession with a percentage based CPI is what is driving a slow but accelerating gap between those at the top and those at the bottom. There is no way around it and concepts like Working for Families and tax bracket adjustments only temporarily block the leaking hole by throwing seemingly endless amounts of taxpayers money at the problem. Doing this does no favours for anyone and certainly isn’t addressing the cause.

At this point, many will probably write me off as a hard left nutter who wants to throw away Capitalism and replace it with hard core Socialism. Actually, that couldn’t be further from the truth. I’m a capitalist who sits on the centre to right on most topics. A market driven approach solves most problems better than any interventionalist strategy. However, the Western Money system has always been deeply troubling to me and I find it surprising it doesn’t bother more people. Just because you think a market driven approach is good, doesn’t mean that all aspects of our current market are great. There is always room to improve.

So what are the solutions?

Unfortunately, there aren’t any easy ones. They all involve fundamental changes, which is always uncomfortable. There are some very powerful people making obscenely vast amounts of money out of the current system, so don’t expect anything to change until things get really bad.

Moving to a model where the Government issues currency instead of private banks would alleviate a significant amount of pressure. It would reduce Government debt; however, it would also drive up interest rates as private banks were forced to curb their money printing orgy and actually lend out real money. It is interesting to note that Donald Trump has already dropped several hints this is something he is considering to deal with the US Government’s debt issue. Instead of allowing private banks to create all the money, Donald would issue a Government currency which he would use to pay for hospitals and schools. It is quite different from quantitative easing which has interest attached to every dollar printed. The private banks would oppose anything like this vehemently as it would curb their current license to print money (literally).

Over the years there have been many interesting new models which would allow us to maintain our capitalist lifestyle with which we are so addicted while eliminating some of the current flaws in capitalism. The concept of charging a demurrage or fee on any unspent currency every month has some merit and was tried with great success in Austria in the 1920’s. It resulted in drastic economic improvement and the completion of significant public infrastructure works without the usual accompanied debt. Unfortunately, the Austrian central bank feared a loss of control and shut the system down despite a valiant appeal by the village involved to the Supreme Court.

Such a system would prevent a small percentage of the population from hoarding vast sums of wealth and encourage much faster circulation of our money without the negative aspects of a socialist intervention by the state to redistribute wealth.

The myriad of potential solutions has no point whatsoever if there is no political or public will to do anything about it.

It seems people would far rather throw terms like poverty and inequality around like footballs, either denying the problem exists or pretending that throwing other people’s money at the poor will solve the problem.

Until we recognise the system is broken and have the will to do anything about it, nothing will change.

What are your thoughts?

How would you address social inequality and “Poverty” in New Zealand from a capitalist and market driven perspective?


-Toby Mills

Do you want:

  • Ad-free access?
  • Access to our very popular daily crossword?
  • Access to daily sudoku?
  • Access to Incite Politics magazine articles?
  • Access to podcasts?
  • Access to political polls?

Our subscribers’ financial support is the reason why we have been able to offer our latest service; Audio blogs. 

Click Here  to support us and watch the number of services grow.