I have a theory

Guest Post:

I don’t know if you are like me but from time to time I have musings about things that (as far as I can tell) have not been fully considered before.  If I was inclined to delve into these musings more I think they could be developed into a thesis or even a book.  As I am not inclined to do this (being inherently lazy and having the attention span of a goldfish) these musings just rattle around in my head and remain what I would term theories.

I thought it might be an idea to put my head above the Whaleoil parapet, espouse one (or more in future posts) of my theories and see what readers think. We need a rating system so I have put together the following ratings that commenters can use to rate the theory:

  1. Theory? You have settled the science!
  2. Plausible but needs to be more fully developed.
  3. Meh. I am not so sure.
  4. Darryl Kerrigan – tell him he’s dreamin.

In the comments, you can just use the numbers 1 to 4 to rate the theory.

Theory: Chardonnay Socialists are getting what they wanted, capitalism is delivering it for them and they are none too happy (because they are hypocrites) –  a redistribution of wealth at an international level.

For the purpose of this piece, I will provide my definition of what a Chardonnay Socialist is. (I do this knowing that the Whale Oil dictionary has its own definition). Chardonnay Socialists are people on above average income.  They generally live in more well to do suburbs away from the great unwashed.  They espouse socialist policies aimed at lifting the less well off out of poverty and are advocates for the less well off as long as they are kept at a distance and they do not have to touch them (OK I am being a little sarcastic but you get my drift).

Socialism advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole and encompasses a set of beliefs that states that all people are equal and should share equally in a country’s money.

I want to focus on the money and equality element of socialism. After all money, with a few rare exceptions, is the key driver/incentiviser of people. Chardonnay Socialists simply advocate that the less well-off should be provided with more money in order to solve social ills. At a national level the Government uses taxes in order to collect and redistribute this money. Chardonnay Socialists advocate for progressive taxation (higher tax rates on higher income) in order to achieve this redistribution. Note that they advocate for redistribution but it is unclear how they would really feel if they were to be subjected to some of the old tax rates that used to exist or actually felt the pinch of redistribution. In other words it might all just be virtue signalling from afar.

Socialism is invariably implemented and observed at a national level.  Makes sense.  We don’t have a world government yet and each sovereign nation makes up its own rules.  At a national level, in New Zealand, Chardonnay Socialists could bemoan the lack of progress in achieving equality in terms of money distribution. However, what if you were to observe what is going on at an international level?

Numbers get a bit sketchy here, but around 2012 the average world salary was $18,000 USD. This figure was achieved using purchasing power adjustments and so the actual average would have been lower.  On that figure New Zealand salary earners, couples on a pension and many welfare recipients would be on above average income internationally. To be in that group of filthy rich, the 1 percent, all you need to earn is around $32,400 USD.  That is well below New Zealand’s average income which is now pushing $60,000 NZD.

So, for a start, at an international level, New Zealanders are wealthy and if they were all as enlightened as current Chardonnay Socialists they would recognise that they also qualify to be Chardonnay Socialists.  All they need to do is, go down to the nearest bottle shop (oops can’t use that term now) consult their sommelier as to whether an oaked or unoaked Chardonnay will match their Lobster Mornay.

So now we know where New Zealanders sit at an international level we need to look at what has been happening at that international level.  Wages have not been rising much in New Zealand.  Media like to present this phenomenon as a problem that is exclusive to New Zealand and blame the Government. The reality is that wage restraint is a phenomenon that is affecting most western and developed economies. This wage restraint is present despite severe skill and labour shortages in a number of industries. Economists are struggling to explain why incomes are not rising quicker.

So, what has been happening in developing economies? China and India between them represent over one third of the world’s population.  Both countries have embraced capitalism, China in particular. Both countries have experienced significant economic growth. The steps by both China and India to embrace capitalism has been the single factor that has been responsible for the lifting of hundreds of millions of people out of extreme poverty. No argument. You can’t have what is in effect a redistribution of wealth (with people being lifted out of poverty) that sees those less well off being made better off without the more well off paying for it by being made less well off, relatively.

A dampener on wages growth in the west while developing countries see high income growth effectively represents a redistribution of wealth and a balancing (to a degree) of income disparities internationally.

Is this a good thing? I think it is. Capitalism being a system based on free markets with little direct Government intervention, in my view, generally finds its own equilibriums. Compare what I have just espoused with the early industrial revolution in Western Europe and North America. Wealth was initially concentrated in the hands of wealthy industrialists. Workers were paid miserable wages to work. Over time wages and conditions improved. Stone me, but in this era unions had an important role in pushing for that. However, industrialists like Henry Ford also recognised that paying his workers an income that allowed them to purchase the product they were producing made sense, so he paid them more. Demand for labour also increased wages as workers were able to demand better pay and conditions. Income became more evenly distributed and a burgeoning middle class developed. This was in effect a redistribution (at least in part) without Government intervention.  Trickle down theory. It is a thing and is particularly obvious in emerging capitalist economies.

We still have our middle classes in western and other developed countries. However, they are now being forced to move over and allow others to join them from what are/were developing countries.  There is a redistribution going on and those more well off are seeing their relative position deteriorate.

Chardonnay Socialists should be rejoicing at being able to make this sacrifice for the cause of lifting the less well off out of poverty and making the world a better place. Instead they complain about not getting paid more and cry into their Jacobs Creek Chardonnay – the cheap Chardonnay they are now forced to buy. Money or the prospect of money is a strong influence so strong that the thought of losing it can evaporate virtue.

And that is my theory.


by The Undertaker

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A guest post submitted to Whaleoil and edited by Whaleoil staff.