Registering property in the USA, UK, Germany and France – World Bank Doing Business rankings compared

Figure 1: registering property rankings, USA, UK, Germany and France – World Bank Doing Business rankings, 2014

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Source: Doing Business – Measuring Business Regulations – World Bank Group.

Why is Labour so staunch on its left-wing policies – the voters must come to them – but opportunistic on race?

Figure 1: who won the electorate vote of New Zealand First party voters, 2014 New Zealand election

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Source: Electoral Commission.

New Zealand First vote splitting data in Figure 1 suggests many more Labour voters vote New Zealand First than for the National Party with their electorate votes.

1/3rd of voters who gave their party vote to New Zealand First voted Labour with their electorate vote. This compares to one in five New Zealand First voters who gave their electorate vote to the National Party.

The Labour Party can win back some traditional Labour voters by borrowing populist policies from New Zealand First and its ageing leader such as prohibiting foreigners from buying New Zealand land.

Who mentioned Shane Jones?

Starting a business rankings in the USA, UK, Germany and France compared

Figure 1: Starting a business rankings, USA, UK, Germany and France – World Bank Doing Business rankings, 2014

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Source: Doing Business – Measuring Business Regulations – World Bank Group.

I have no idea why you have to pledge one third of German per capita income to start a business in Germany. It takes about a week and a half a dozen procedures to start a business in the other countries.

In New Zealand, you can start a business within the hour by registering for GST and registering your company online.

Financial crises surprisingly common, but few countries close their banks

Doing Business in the USA and Canada – World Bank rankings compared

Figure 1: Doing Business in the USA, Canada, World Bank rankings, 2014

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Source: Doing Business – Measuring Business Regulations – World Bank Group.

It’s easier to do business in the USA and Canada because of the difficulties with construction permits and getting electricity and few more problems with enforcing contracts and registering property. It is easy to open a business in Canada.

It usually begins with the RMA – fewer warm, dry homes as an unintended consequence of regulatory restrictions on land supply

The Government admits that its proposed insulation and smoke alarm standards for rental properties could push up rents by more than $3 a week. Under legislation to be introduced in October, social housing would have to be retrofitted with ceiling and underfloor insulation by next July, and all other rental homes by July 2019.

An important driver of lower quality housing in New Zealand is the restrictions on land supply. The costs of those restrictions, land makes up 60% of the cost of new houses rather than 40%. Land prices have doubled and tripled in a number of cities. As the Ministry of Business, Innovation and Employment has said:

The median price of sections has increased from $94,000 in 2003 to over $190,000 today (compared with $NZ 100,000 per section in the US), ranging from Southland ($82,000) to Auckland ($308,000)…

Section costs in Auckland account for around 60% of the cost of a new dwelling, compared with 40% in the rest of New Zealand.

The RMA is the Resource Management Act and was passed just before New Zealand housing prices started to rise rapidly.

housing prices and RMA

Source: Dallas Fed; Housing prices deflated by personal consumption expenditure (PCE) deflator.

Higher land prices for new houses spill into the prices of existing houses, which are now much more expensive than they need to be but for the RMA inspired land supply restrictions in Auckland and elsewhere in New Zealand.

One way in which homeowners and landlords can keep costs down when buying a house either for their own use or as an investment property is not to invest in insulation and smoke alarms. Deposits are less, mortgages are less and rents are less. It all adds up.

$3 is not much for some but it is enough that some parents cannot find $3 or so per week to feed their children breakfast. Joe Trinder, the Mana News editor blogged about the great expense of feeding the kids for ordinary families.

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Put simply, you cannot argue that a few dollars is a lot of money to people on low incomes but ignore the consequences for their welfare of a $3 per week increase in their rents.

If tenants were willing to pay for insulation, landlords would provide well-insulated rental properties to service that demand. Walter Block wrote an excellent defence of slumlords in his 1971 book Defending the Undefendable:

The owner of ghetto housing differs little from any other purveyor of low-cost merchandise. In fact, he is no different from any purveyor of any kind of merchandise. They all charge as much as they can.

First consider the purveyors of cheap, inferior, and second-hand merchandise as a class. One thing above all else stands out about merchandise they buy and sell: it is cheaply built, inferior in quality, or second-hand.

A rational person would not expect high quality, exquisite workmanship, or superior new merchandise at bargain rate prices; he would not feel outraged and cheated if bargain rate merchandise proved to have only bargain rate qualities.

Our expectations from margarine are not those of butter. We are satisfied with lesser qualities from a used car than from a new car.

However, when it comes to housing, especially in the urban setting, people expect, even insist upon, quality housing at bargain prices.

Richard Posner discussed housing habitability laws in his Economic Analysis of the Law. The subsection was titled wealth distribution through liability rules. Posner concluded that habitability laws will lead to abandonment of rental property by landlords and increased rents for poor tenants.

https://twitter.com/childpovertynz/status/618985237628858368

What do-gooder would want to know that a warranty of habitability for rental housing will lead to scarcer, more expensive housing for the poor! Surprisingly few interventions in the housing market work to the advantage of the poor.

Certainly, there will be less rental housing of a habitability standard below that demanded by do-gooders in the new New Zealand legislation. In the Encyclopaedia of Law and Economics entry on renting, Werner Hirsch said:

It would be a mistake, however, to look upon a decline in substandard rental housing as an unmitigated gain.

In fact, in the absence of substandard housing, options for indigent tenants are reduced. Some tenants are likely to end up in over-crowded standard units, or even homeless.

The straightforward way to increase the quality of housing in New Zealand without increasing poverty is to increase the supply of land.

As land prices fall, both homebuyers and tenants will be able to pay for better quality fixtures and fittings because less of their limited income is paying for buying or renting the land.

Doing Business in France, Germany and the UK – World Bank rankings compared

Figure 1: World Bank Doing Business rankings, France, Germany and the UK, 2014

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Source: Doing Business – Measuring Business Regulations – World Bank Group.

Some things are decidedly harder to do in Germany and France than for businesses in the UK. On the other hand, it is surprisingly hard to register property in all three countries including the UK after 700 years of the blessings of the British common law.

Paying taxes in Germany and France are far harder than in the UK. Don’t  have anything to do with construction permits in France unless you must. It is surprisingly hard to get the electricity on in the UK and France.

The European Union must have some benefits when it comes to trading across the borders of all three countries. Only problem is in Germany where it is very difficult to start a business in the first place. Why is for a later posting.

Has NZ child poverty doubled as @MaxRashbrooke said?

Lindsay Mitchell put me onto a quote by veteran grumbler Max Rashbrooke that the child poverty rate doubled in New Zealand:

In a system where income goes disproportionately to the already well-off, ordinary workers are missing out on the rewards of their efforts, to the tune of billions of dollars a year. Welfare benefits, cut by a quarter in 1991 and increased just 8 per cent in the last budget, are far too low to meet people’s basic needs.

The result is a doubling of child poverty and the return of childhood diseases unknown in most developed countries – a national embarrassment, as one researcher described it.

Poverty, income and inequality data is collected in loving detail by Brian Perry every year for the Ministry of Social Development.

Figure 1: % child poverty in New Zealand (before and after housing costs), 60% 1998 median constant value, 1982 – 2013

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Source: Bryan Perry, Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2013. Ministry of Social Development (July 2014), Tables F.6 and F.7.

The only thing noticeable in the downward trend in child poverty in New Zealand since its doubling with the sharp recession in 1990 with double-digit unemployment rates is child poverty stop falling shortly after in-work family tax credits were introduced in the form of Working for Families in 2005.

There was a break in trend in the long decline in child poverty as soon as in-work family tax credits were introduced in New Zealand. I’m sure this is a coincidence because, as Brian Perry said when discussing the introduction of Working for Families in 2005:

The 2004 to 2007 period was the only one in the 25 years to 2007 in which the incomes of low- to middle-income households grew more quickly than those of households above the median.

The real killer in New Zealand in terms of poverty and inequality are housing costs. Housing costs are wholly under the control of government through its control of the supply of land, which is restricted at the behest of the parties of the left.

Figure 2: real equivalised household incomes (before and after housing costs): changes at the top of lowest income decile, New Zealand, 1982 to 2013

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Source: Bryan Perry, Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2013. Ministry of Social Development (July 2014), tables D.2 and D.4.

Figure 2 shows that real equivalised household income after housing costs has not grown and in fact has fallen for the bottom 10% of the income distribution in New Zealand.

It is the left-wing parties who oppose measures to reduce housing costs and and increase the supply of land through reforms to the Resource Management Act and the relaxation of the Auckland metropolitan urban limit.

Labour and the Greens are in effect keeping the poor poor to win middle-class votes.

Figure 3: real equivalised household incomes (before and after housing costs): changes at the top of the top, middle and lowest lowest income deciles, New Zealand, 1982 to 2013

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Source: Bryan Perry, Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2013. Ministry of Social Development (July 2014), tables D.2 in D.4.

Figure 3 shows that those in the middle and higher deciles, a political territory rich in swinging voters, are still doing well after housing costs. The parties of the left are collaborating with a middle-class home owning voter while betraying the working class and its aspirations from home ownership and quite simply affordable housing costs when they rent.

The increases for all groups may be understated by the inability of living standards measures to adequately account for new goods, product upgrades and rising life expectancies.

OECD starting a business rankings (New Zealand (1st) to Germany (114th)) – World Bank Doing Business rankings

Figure 1: Starting a business rankings – World Bank Doing Business rankings, OECD countries, 2014

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Source: Doing Business – Measuring Business Regulations – World Bank Group.

There is surprising wide range in the World Bank Doing Business ranking of the difficulty and delays in starting a business across the OECD.

Germany is ranked 114 from the world for starting a business. New Zealand is ranked first with the USA, Italy and the UK ranked in the mid 40s in the Doing Business database.

Richer is greener: environmentalists are Environmental Kuznets Curve deniers

The Kuznets environmental curve describes an empirical regularity between environmental quality and economic growth. Outdoor water, air and other pollution first worse and then improves as a country first experiences economic growth and development.

While many pollutants exhibit this pattern in the Kuznets environmental curve, peak pollution levels occur at different income levels for different pollutants, countries and time periods. John Tierney explains:

In dozens of studies, researchers identified Kuznets curves for a variety of environmental problems.

There are exceptions to the trend, especially in countries with inept governments and poor systems of property rights, but in general, richer is eventually greener.

As incomes go up, people often focus first on cleaning up their drinking water, and then later on air pollutants like sulphur dioxide.

As their wealth grows, people consume more energy, but they move to more efficient and cleaner sources — from wood to coal and oil, and then to natural gas and nuclear power, progressively emitting less carbon per unit of energy.

When I was living in Japan in the mid 1990s, they just completed a period of rapid operation of the Kuznets environmental curve. I was told by my professors at Graduate School that in the 1960s, cities and prefectures welcomed polluting industries because of the better paid jobs they offered. At that time, shipping companies used like to go to Tokyo because the pollution in Tokyo Bay was so bad that it would clean all the barnacles off their ships. That made them sail faster.

image

Japanese incomes and wages doubled over the course of the 1960s. The Japanese voter was now prepared to support stricter pollution standards and environmental controls.

In the early 1970s, the ruling LDP stole the long-standing environmental policies of their opponents in a big crack down on pollution because the country could now afforded them.

Plenty of developing countries are democracies now. Their people could demand through the ballot box higher environmental standards and clean tap water but they don’t because of its cost to economic development.

The environmental movement lives in a state of denial regarding the relationship between economic growth and environmental quality.

Doing business in Russia and Italy – World Bank rankings compared

Figure 1: Doing Business rankings, Russia and Italy, 2014

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Source: World Bank Doing Business 2015.

It is rather disturbing that it is a lot easier to register property and enforce contracts in Russia than in Italy and  far harder to pay your taxes in Italy. Once again, Italy’s saving grace is the ability to trade across borders Because of its membership of the European Union.

Legal systems and property rights in Greece and Russia – Index of Economic Freedom rankings compared

Figure 1: Index of Economic Freedom rankings for legal systems and property rights, Greece, Russia and USA, 2012

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Source: Economic Freedom of the World – Annual Report 2014 | www.freetheworld.com.

Overall, there are not that many differences between Greece and Russia in the quality of their legal systems and property rights. Don’t go to the police in Russia and good luck trying to enforce contracts in Greece.

Doing business in the PIGS (Portugal, Italy, Greece and Spain) – World Bank rankings

Figure 1: Doing Business rankings, PIGS, 2014

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Source: World Bank Doing Business 2015.

All in all, Italy and Greece are a dog of a place to enforce a contract. The long-suffering taxpayer is better off paying taxes in Greece than in Italy! Not surprisingly, trading across borders is the greatest strength in doing business in the PIGS. The European Union does have some benefits.

Figure 2: Doing Business rankings, Greece and Italy, 2014

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Source: World Bank Doing Business 2015.

All in all, Italy and Greece are equally bad places to do business and Italy is much worse when it comes to taxes. About the only saving graces of Italy is the registration of property and the protection of minority interests in companies.

Figure 3: Doing Business rankings, Spain and Portugal, 2014

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Source: World Bank Doing Business 2015.

Spain and in particular Portugal are much better places to do business than Italy and Greece.

Greece (61st) is ranked one above the Russia in the World Bank’s Doing Business Survey 2015

Figure 1: Greek and Russian Doing Business sub-rankings, 2015

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Source: World Bank Doing Business 2015.

As long as you’re not in a construction or export business, and don’t mind waiting for your electricity, it’s better to do business in Russia than in Greece! The main difference between Russia and Greece is its membership of the European Union makes it easy to export?

In Russia, it’s easier to start a business, register property and enforce contracts than it is in Greece!

Is investor state dispute settlement a form of overseas development assistance?

Would objections to the Investor State Dispute Settlement provisions in the proposed Trans-Pacific Partnership wilt away if the adjudicating body was the International Court of Justice? The left-wing opponents of investor state dispute settlement genuflect at the very mention of the International Court of Justice and international law generally (unless it is international economic law).

Disputes over the provisions of European union treaties are adjudicated by the European Court of Justice. The judgements of that court brought by individuals against member states so annoy the British that it is a leading reason for many British wanting to leave the European Union and replace the Human Rights Act 1998 with a British Bill Of Rights policed by British courts rather than by the European Court of Justice and European human rights law.

It is routine for any treaty to have some provision for arbitration of disputes. This includes trade and investment treaties.

The World Trade Organisation treaty includes a dispute settlement provision with arbitrators based in Geneva. Some of the more than 400 cases heard have been motivated by discrimination against imports on the basis of a breached environmental protection policies of the importing country.

A number of countries want to ban imports that are produced in ways that upset them. Others want to include labour and environmental standards in trade agreements to impose developed country standards on developing countries in what is a new form of colonialism.

I have previously said that investor State Dispute Settlement provisions have no place in trade and investment treaties between democracies. I must now admit there are good reasons to have arbitration clauses in treaties between democracies.

The puzzle is why refer these trade and investment disputes to a little-known arbitration body adjunct to the World Bank rather than the far more prestigious International Court of Justice.

Perhaps the reason is both sides want an arbitrator who is not too strong and not too credible. It would look very bad if the International Court of Justice was to rule against you.

William Landes and Richard Posner contended that judicial independence maximises the value of legislative deals with interest groups by enhancing the durability of those deals.

Why no International Court of Commercial Law? When deciding what type in judiciary to enforce international trade bargains, the signatories may prefer a less credible adjudication and enforcement mechanism in case they want to opt out of it or chip around the decision.

The jurisdiction of the International Court of Justice is to settle, in accordance with international law, legal disputes submitted to it by special agreement and matters specifically provided for in treaties and conventions in force.

UN member states are the parties to any litigation but that doesn’t stop them raising cases on behalf of individuals. That said, organizations, private enterprises, and individuals cannot have their cases taken to the International Court, such as to appeal a national supreme court’s ruling. Only the states can bring the cases and become the defendants of the cases.

The International Court of Justice is different from the European Court of Justice because individuals cannot easily bring complaints before it. One of the causes of action before  the European Court of Adjusters is under European competition law over member states providing financial aid to industries.

Democratic countries with high levels of economic and  social integration, such as the  European union, do find it in advantage to set up a European wide Court to adjudicate disputes over rights under European law.

Why then would a democracy sign up to an investment protection treaty with a developing country? One reason is overseas development assistance.

Developing countries with corrupt and incompetent courts, politicians and bureaucracies sign international treaties as a way of assuring foreign investors and trading partners of some degree of security of their property rights and their ability to enforce contracts with suppliers and buyers.

By folding these assurances into trade treaties, the developing country has a stronger incentive to honour its promises. There will be domestic constituencies wanting to retain reciprocal export market access who will lobby for the honouring of the promises of legal protection to investors and businesses in their home country.

New Zealand signing up to the Trans-Pacific Partnership is an example of this form of overseas development assistance. Exporters and investors from the developing country who export and invest in New Zealand have another reason to support more secure property rights and better enforcement of contracts in their home country as a way of securing their treaty rights to export and invest in New Zealand.

The Left of the political spectrum should be keen on this form of overseas development considering their general belief in greatly increasing the amount spent on overseas development assistance. Rather than pay cash to the development country, the payment is in kind as reciprocal legal promises.

Trade treaties that include investor state dispute settlement are forms of governance assistance to developing countries. The reciprocal exchange of promises about investor protection and the enforcement of contracts and property rights improves the quality of governance in the developing country.

The countries most likely to be subject to investor state dispute settlement are those with weaker governance. Even in the European Union, the member states most likely to be sued are former communist countries. The most common course of action was the cancellation of a licence or permit.

Investor state dispute settlement clauses are no different from any other international treaty include environmental and human rights treaties. All these treaties require countries to give up part of their sovereignty.

Democracies give up their sovereignty in investor state dispute settlement in the hope that developing country partners to the treaty will improve the development potential of their country through better governance and more secure property rights.

That is an overseas development aid objective the Left of the political spectrum should support, but it does not. The Left of the political spectrum is happy to use trade agreements to impose developed country labour and environmental standards on poor countries desperate for access to rich country markets, but is not willing to give up anything in return.

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