The Great Treaty Debate. Why its words are self-contradictory (in so far as they address Statehood, Sovereignty & Government) at least for an Economist.

Our previous blog about the Treaty of Waitangi Sovereignty Debate spurred much comment on social media sites. Many readers insist that they know "the truth" - the truth about why sovereignty was ceded - or the truth as to why it was not ceded (which is why these "truths" have become more like "beliefs", in my view). I challenge those holding strong views - on both sides - to consider their answer to the following puzzle, which I can't figure out myself:

If I strike a deal whereby the other party promises me that I will retain possession & ownership of my existing assets & treasures, and in exchange I promise to grant that other party powers of Sovereignty, of Statehood, of Government, where does that leave us? Here's the puzzle: a sovereign authority / state / government, has the power to tax. That's the distinguishing feature which defines such entities (together with a monopoly over the use of violence). Once I act as your sovereign / state / government, I become empowered to pass asset tax laws, which mean that I can slowly - or quickly - take the property you were promised, back from you. I only need to introduce a tax on assets at, say, 2% of their value, annually. In a few decades, most of your assets can be appropriated back to me.

What this means to an economist is that guaranteeing to one party they can hold onto their assets & treasures, in exchange for granting sovereign, government, or state powers to another party, creates a contradictory, paradoxical quagmire. Whether you prefer the English or Māori version of the Treaty, it makes no difference - there remains the same unresolvable murkiness concerning what both parties thought they were signing up to.

Though Opposition Leader Hipkins thinks he may have cleverly wriggled out of this debate by arguing sovereignty / statehood / powers of government were not ceded in the Treaty, but have been since, he cannot have it both ways. Why? As just one example, we know he wants to introduce capital & asset taxes in NZ and also know he won't levy such taxes on Māori Authority / Iwi assets. What that means is he unambiguously does not accept the NZ Parliament - right now - holds the key power defining what it is to be the sovereign / state / government. That power is the right to levy taxes on all assets, including those promised to be retained by others in Treaties. Therefore, Mr Hipkins does not accept the ruling authority of his own Parliament. He's currently considering confiscating the wealth of hard-working (non-Māori) Kiwis through the capital & asset taxes he's lining up for next election, thereby asserting his powers of sovereignty/statehood/government over that group, but not Māori.

My interpretation of this situation is that the Treaty, from the viewpoint of an economist, is a self-contradictory document. It was drawn up by folks who, on both sides, did not much, for whatever reason, contemplate the paradoxes it created. It is simply impossible for me to be given the rights to hold onto what I consider to be "my assets" in perpetuity, while at the same time handing you powers to govern over those assets - which means you can take them back through taxation. Its looking to me like the Treaty was not the deal it pretended to be. The economics of it is opaque. What the parties agreed to baffles this economist. That's why we may need to start over again, and stop having endless arguments trying to interpret the uninterpretable.

"The Mood" of NZ's (Weak and Inbred) Boardrooms reflects on their own ineffectiveness, which has cut productivity, not on our MPs quality.

The Mood of the Boardroom Survey & recent remarks by some of this nation's CEOs reflect on the (dubious) quality of New Zealand's boardrooms more than anything else. Namely that most are woke & weak. The fact that our CEOs put ACT Party Leader David Seymour outside the "top ten" of "impressive" Members of Parliament, with a rather poor score of 3.4 out of 5, reflects just one thing. That our CEOs nearly entirely vote National and lack imagination. A bunch of them even called Seymour "divisive". How revealing. One of the most talented leaders of a political party for a generation in NZ - who studied engineering & philosophy - who's the real deal - trying to untangle the constitutional & clarity-of-property-rights mess we've landed ourselves in, is labelled "divisive". What it reveals more than anything is that NZ's Big Corporate CEOs will not themselves push productivity enhancing reforms in their own firms, which ultimately is what the ACT leader is trying to do for NZ, should they be labelled "divisive". They'd prefer, instead, to be Mr Nice Person. Look at the qualifications of many of them - the typical one being in Accounting. Other than that, its a law. Lawyers often get on Boards because Kiwi firms want someone to help with compliance - not a person with imagination about where the future of the company should be.

Since the Mood of the Boardroom Survey, a bunch of CEOs have come out as supporters of higher taxes, particularly capital gains taxes. Big ANZ Bank Monopoly Boss Antonia Watson, said that taxing properties at the point of sale was fair. Talk about virtue signaling. When you've made record profits out of people's mortgage misery arising from oligopoly powers to the extent your share price has risen over 50% the last several years, and you shake people down for outrageous bank fees in the midst of a cost-of-living crisis, you then have the audacity to say that others should pay capital gains taxes to make things fairer. Not to be outdone, ASB chief executive Vittoria Shortt says NZ has to collect more tax to invest in the infrastructure the country so desperately needs. Seems she's not heard of France where motorways are managed by private companies (under government concessions) and are responsible for the upkeep, modernization & safety of the roads. In exchange, they collect tolls from road users, which ensures that the cost of maintaining high-quality infrastructure is shared among those who use it, rather than relying on funding by taxpayers.

If the Big Bank Oligopoly Bosses want to practice Corporate Social Responsibility, they should do so correctly. The market failure applying to them, which our government is having problems correcting, is monopoly powers. Voluntary actions that are good for society should, in their case, be confined to not exploiting those powers - by bringing down bank fees & surcharges. However, since doing so would lower their profits & their personal pay cheques, the CEOs of the Big Banks (and a bunch of other large NZ firms) don't want to go down that road. Instead their plan is to shake others down to repair the social damage that they are doing by advocating the public pay higher taxes.

Before the Productivity Commission was de-commissioned, it identified lack of "managerial capability" as a contributor to our low productivity. In other words, though its tempting to blame the government for getting in the way of business, there's a lot about Kiwi business that is about getting in the way of itself. Many of our CEOs & Boardrooms are not capable. As a top ten rich-lister once observed to me, "When you have the wrong person at the top, things will never work". The staff can't make up for a boss who is the wrong boss. One thing that struck me when I used to attend the meetings of the NZ Initiative was the degree to which the Big Chief CEOs of NZ Incorporated had so happily embraced all manner of woke causes - not because they believed in them - but because such causes had become a way of furthering their own corporate careers. Spare New Zealanders the Mood of the Boardroom. We should be grading them - who do they think they are grading us and David Seymour?

Sources:

https://www.rnz.co.nz/news/business/529263/anz-backs-capital-gains-tax-what-about-the-other-bank-bosses