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October 16th, 2000

To the Rt. Hon. Helen Clark, Prime Minister of New Zealand:

A week ago I published an open letter to you expressing my concern with the state of the country’s economic condition. Your response was that my comments were irrelevant and out of your control. I and many other New Zealanders who contacted me beg to differ. I have no political axe to grind. The suggestions outlined below could be adopted as your own.

The questions are

  1. what is it that seems to have got business offside with the Government? and

  2. what constructive suggestions can be made to give New Zealanders a better opportunity to keep up with the rising standards of living in countries we like to compare ourselves with?
  • It's not so much that taxes in New Zealand are relatively high, it's the fact that the Government seems so happy to put them up.

  • It's not that the new employment law is so radical, it's just the Government seemed so intent on reinstating past practices.

  • It's not that a state owned Accident Compensation scheme was new, it's just the Government seemed so intent on nationalization, irrespective of the efficiency implications.

  • It's not that a telecommunications regulator would be so unique, it's just the Government seems so willing to assume regulators make customers better off.

These policies have not been found to be successful in the long run in the economies with which we compete.

It's not where we are at that is important, nor who is to blame; it's where we are heading that has caused a loss of confidence.

Here are some specific considerations for serious debate. On some the Government may already have initiatives, but none should be dismissed out of hand.

NOTE TO WEBSITE USERS: If you agree or disgree with each point made, please check one of the following categories.

  1. Sell the state owned enterprises rather than plunder them, even if ownership is restricted to New Zealanders. Make them accountable to real shareholders.
  1. Invest the proceeds from SOE sales in physical and social infrastructure with high externalities including schools, universities, public health, skill development and public access to the internet.
  1. Cut taxes on things you want more of, such as the generation of wealth (income and profits), and raise offsetting revenue by taxing things you want less of, such as consumption, which imposes costs on others. For example the generators of waste, pollution and the users of non renewable resources.
  1. Encourage New Zealanders to own their own businesses by exempting small businesses from compliance with selected regulations and labor laws, paying small business's compliance costs and reducing taxes on small businesses for a period of time or in exchange for a share of the business.

    Be BOLD, be innovative in your approach. These are challenging times. A review of the entire tax structure would seem appropriate.
  1. Tourism, wood processing, wine production, film making, marine farming, and software development, are all fast growing sectors of the economy. In many cases these are small scale, skill and labor intensive businesses. These are value added businesses, with skills and products in demand worldwide.

    Government should ask these entrepreneurs what they need the most. Is it access to skilled labor, casual labor, working capital, equity partners, market intelligence, tax relief? Then Government should design policies to give them what they say they need.
  1. If the Government concludes an increase in the national savings rate can be achieved by compulsion, then foster New Zealanders’ sense of self reliance rather than dependency by funding individual accounts for all New Zealanders from general taxes, let New Zealanders see their savings grow. In time grant them control over their savings, even if access is restricted till retirement.
  1. Allow foreign companies double deduction for onshore research and development spending and abolish company tax on New Zealand companies which distribute their profits to New Zealand taxpayers.
  1. Think of the Government as a one third shareholder in every business in New Zealand. Ask each day what new thing your Government has done to create value in the enterprise to justify your free carry. And be sure to tell the business community about your contribution to your shared success.
  1. Think of your Government as a passive partner in every New Zealand household, not just some. Ask how you can make some households better off without making any worse off. These are the policies which will close gaps while creating growth and prosperity. Averaging up has unlimited potential, averaging down stops when everyone has the same - nothing. We should aspire to be an egalitarian society – one where the focus is on equal opportunity not equal outcomes.
  1. Recognize the comparative cost advantage and existing investment in infrastructure in provincial and rural New Zealand and resist the temptation to squander scarce public capital on urban roading.
  1. Instead of spending limited capital on defence hardware, why not offer to fund a battalion of New Zealanders on permanent station in Australia and in the USA in exchange for equipping a third battalion in New Zealand with compatible equipment? Surveillance of the offshore fisheries should be funded by levies on those profiting from the protection of the resource, that is the holders of quota, and by fines on those caught cheating. There need be no cost to the taxpayer.
  1. Tell New Zealanders that it's OK to be rich and make money and that profits do not imply customers or employees are being exploited. Celebrate business success. Get over the tall poppy syndrome.

In summary it is time to be BOLD. After all, a hundred years ago New Zealand was the first country in the world to give the vote to women, it is time for you to LEAD.


John M Carr
San Antonio, Texas

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 Related Links
New Zealand Herald Online - Brain drain debate escalates (09.10.2000 07:30)
New Zealand Herald Online - Clark dismisses latest attack on economy (09.10.2000 16:25)
New Zealand Herald Online - US-based critic of economy has lots more to say (10.10.2000)

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