Category: Economic Intelligence

Analysis by Keith Rankin.

Capitalism is in crisis, and our species’ imagination to save ourselves is sorely lacking. There are of course understandings out there, and solutions; but they are so heavily gate-kept that conversations about saving ourselves are well-nigh impossible. It remains a puzzle why those political and intellectual leaders who would most benefit from a regime of socially inclusive capitalism have been so avid in their anti-reform gatekeeping.

The missing ingredient from the capitalism that most of us know, or know of, is ‘public equity’. Capitalism is presented to us all as a system of markets, individualism, laws, and private property rights. The crisis of capitalism can be addressed through the development of a set of public property rights, which we may call ‘public equity’. It is the establishment of public property rights that is necessary to democratise capitalism.

New Zealand’s surprising history of universal income

At the end of my Zero-Sum Fiscal Narratives (22 May 2025), I suggested that we need to promote a narrative of “public equity over pay equity as an efficient means to correct destabilising inequality”.

In global capitalism, the first real narrative of public equity – even though it wasn’t called that – belongs to the New Zealand social security reforms of 1938. And the particular policy announced in those reforms, and implemented in the 1940 financial year, was known as Universal Superannuation. This was the activation of a human right; the right of a country’s citizens, once they reached a certain age, to receive a private income in the form of a public dividend. Irrespective of race, sex, or creed.

At its initial conception, the ‘Super’ was modest; but was projected to grow, in accordance with affordability constraints and fiscal prioritisation. Most good big things start with small beginnings. An annual payment of $20 was set to commence in 1940. And it commenced in 1940. And the 1938 universal welfare state came in under budget (refer Elizabeth Hanson, The Politics of Social Security, 1980).

The concept of Universal Superannuation proved to be extremely popular; a policy from the radical centre that pleased most of the public, though – until its popularity was demonstrated in 1938 – few of the politicians and other ‘opinion leaders’. The policy came to be because Michael Joseph Savage felt that his Labour Government had to come good on its most important 1935 promise, and because the ‘left’ and ‘right’ proposals favoured by each of the two main factions of the Labour Government (fortunately) cancelled out in the political numbers game.

The universal proposal came through the middle, between left-wing attempts to radically extend redistributive measures favouring working-class families and Labour right-wing attempts to bring in an actuarial pension system based on the supposed ‘miracle’ of compound interest. The latter idea, pushed by the finance industry, was to create a contributory ‘money mountain’ from which pensions from some future date would be paid to retired working men. (This idea disclaimed the obvious reality that all spending of pension income – not just public pensions – represents a slice of present [not past] economic output.)

(On the miracle of compound interest, it is useful to imagine persons born around 1920 saving regular percentages of their salaries from early adulthood until age 65. Such persons became rich from home-ownership, not from compound interest.)

This retirement-income policy based on public equity was not successfully exported to the wider world. The war got in the way, and unconditional non-means-tested payments to citizens of a certain age never caught on internationally. The post-depression environment – a relatively sexually-egalitarian time – was displaced by a post-war environment, which favoured men. The more common post-war welfare model was, in its various guises, ‘social insurance’. And even Universal Superannuation in New Zealand came to be seen, increasingly, through a ‘social insurance lens’; recipients widely believed it was a contributory scheme.

The aim of initially Labour, and subsequently National, was to gradually raise the amount of Super paid until it would render redundant (and henceforth displace) the alternative means-tested Age Benefit. National became increasingly committed to the concept of universal income support, favouring taxable universal benefits which would in practice confer more to each low-income recipient than to each high-income recipient. In the 1950s and 1960s, income tax rates were much more heavily graduated than they have been since the 1980s. (‘Graduation’ of income tax rates means higher ‘marginal tax rates’ faced by people with higher incomes.)

By 1970, the full convergence between Universal Superannuation and the Age Benefit had still not been achieved. Retired persons would still choose either US or AB. The convergence eventually took place, in 1976.

The universality of Super was lost twice, by the same man, who came from ‘working class aristocracy’: Roger Douglas.

Douglas replaced Super with an actuarial (‘money mountain’ for men) system in 1974; a system which became ‘the election issue’ in 1975. This plan was conceived in the days before Equal Pay for women; ie conceived when ‘labour’ was still a highly male-gendered word in certain Labour circles. (Equal pay for women was legislated for in 1972, when Robert Muldoon was Finance Minister.)

Robert Muldoon won a resounding victory – like Savage in 1938 – by committing to Universal Superannuation (albeit under the name National Superannuation). Muldoon, when recreating Super, did so by retiring the Age Benefit, leaving Super as the only publicly-sourced retirement income.

About Douglas’s 1974 scheme, Margaret McLure (A Civilised Community, 1998) wrote (pp.190/91): “Douglas’ plan was rooted in early and mid-twentieth century English labour history… It drew on the 1904 ideas of Joseph Rowntree which had helped shape English social insurance, and on the English Fabian Society’s promotion of a union’s industrial pension plan of 1954… It rewarded the contribution of the fulltime long-serving male worker and provided him [and his dependent wife] with comfort and security in old age.” The full earnings-related benefit would only be payable on turning 60 to life-long workers born after 1957. It was less generous to others, and represented a backward-looking “narrow vision for the late twentieth century”. While more like the current bureaucratic Australian scheme (with its many hidden costs) than today’s New Zealand Superannuation, the Douglas scheme had inbuilt disincentives for people of ‘retirement age’ to continue in some form of paid work after becoming eligible for a pension. An older population – as in the 2030s – requires older workers with work-life flexibility.

Douglas, in the later-1980s, again removed the universality of Super by introducing a ‘tax surcharge’ on superannuitants’ privately-sourced income, an indirect way of converting Super into a means-tested Age Benefit. Douglas renamed National Superannuation ‘Guaranteed Retirement Income’. (Douglas liked the word ‘guaranteed’, using it as a label for other benefits too. ‘Guaranteed’ implies a ‘safety net – ie an income top-up – rather than an unconditional private income payable to all citizens of a certain age. Income top-ups come with poverty traps; very high [sometimes 100%] ‘effective marginal tax rates’, when increased income from one source displaces [rather than adding to] income from another source.)

Super was restored in 1997 as a universal income when Winston Peters was Treasurer in a coalition government; Peters, the heir to the universalist tradition within the National Party as it once was, has enabled Savage’s enlightened ‘public equity’ reform to survive to the present day, albeit as an international outlier.

A Right. Or a Benefit?

The presumption against universalist principles has come from Generation X, the generation born either side of 1970 who have never known any form of capitalism other than 1980s’ and post-1980s’ neoliberalism. (And noting that Roger Douglas was the poster-‘child’ in New Zealand of the neoliberal revolution which acted to restore capitalism to its neoclassical basics; markets, individualism, laws, private property, and public sector minimalism).

This week I read this from Liam Dann, journalist on all matters relating to capitalism, and very much a ‘Gen Xer’, who wrote: Inside Economics: Should you take New Zealand Superannuation if you don’t need it? 4 June 2025. Dann is trying to resolve the clear view of his parents’ generation that Super is a ‘right’, against his own view that Super is an age ‘benefit’; a benefit that should be bureaucratically ‘targeted’. (A benefit in this sense is a redistributive ‘transfer’. By contrast, an income ‘right’ is a shareholder’s equity dividend; in a public context, the word ‘shareholder’ equates to the word ‘citizen’.)

Liam Dann asks an excellent question though – “Should rich people opt out of NZ Super?” – albeit by misconstruing the opting process. New Zealand Super is in fact an ‘opt-in’ benefit, as Dann comes to realise. Much of the present opposition to Super comes from people who would rather that the money paid to the rich was instead paid to bureaucrats to stop the rich from getting it. In reality, there is probably a significant number of rich older people who don’t get Super because they never bothered applying to MSD to get it. As Dann notes, the government is remiss in not collecting data on the numbers of eligible people who do not opt in to NZS. (And journalists, before Dann, have been remiss in not asking for that data.)

We should also note that, in spite of indications that ‘first-world’ life expectancies are levelling out, and indeed falling in some countries, Denmark is looking to raise its age of eligibility for a public pension to 70. In my view, this is moving in the wrong direction. Nevertheless, it is possible to both move in the direction that I am suggesting below, while raising what might be called the age of ‘privileged retirement’, meaning the age at which older people are entitled, as of right, to a higher pension or pension-like income than other citizens.

The Denmark policy is discussed in Denmark to raise retirement age to highest in Europe, BBC, 23 May 2025.

UBI

A Universal Basic-Income has come to mean an unconditional publicly-sourced private income, available to all ‘citizens’ above a certain age, which satisfies some kind of sufficiency test. Thus, a UBI is meant to be sufficient, on its own; a ‘stand-alone income’. New Zealand Super (NZS) – the present name for Universal Superannuation (from 1940) and National Superannuation (from 1976) – is such an income, designed to meet a sufficiency test. In particular, the ‘married-rate’ Super – $24,776 for a year before tax – is a UBI in Aotearoa New Zealand, payable to people aged over 65 who meet a certain definition of ‘citizenship’; a definition that neither discriminates on the basis of sex, race, nor creed.

However, a UBI is considered, by many of its advocates, to be a sufficient adult income, not just a retirement income. Just as NZS is in practice, a UBI needs to be a complement to wages, not a substitute for wages.

Technically, it is very simple to convert the ‘married-rate’ NZS into a UBI for all adults. Just two things would need to be done: lower the age of entitlement to 18, and pay for it by removing the concessionary income tax brackets (10.5%, 17.5%, 30%). (The higher ‘non-married’ rates would continue to apply to people over 65.) Under this proposal, there would no longer be MSD benefits nor student allowances, though there would still be some benefit supplements for MSD to process, such as Accommodation Supplements and NZS ‘single-rate’ supplements.

This UBI proposal would not be fiscally neutral; though it would be less unaffordable than many people would guess. (In practice, a fiscal stimulus at present could pay for itself in increased growth-revenue in just a few years; it might even ‘return New Zealand to surplus’ sooner than realistic current projections.) For present superannuitants working part-time, it would represent a small reduction in after-tax income, given that they would be paying income tax on their wages at what is commonly known today as the “secondary tax rate”.

Other than fiscal non-neutrality, two objections to such a UBI would be these: New Zealand has too many workers who would not meet the present NZS definition of ‘citizen’; and the UBI would be too generous to young people not working and living with their parents.

So, while it might be less unworkable than many people would expect, this instant-UBI policy is not one I would favour.

SUI

SUI stands for Simple Universal-Income. Self. We note that the prefix ‘sui-‘ means ‘self’; equity rights are a development of liberal individualism, not of ‘socialism’ or ‘communism’. Some people equate public property rights with Marxian collectivism, with the ‘nationalisation of the means of production’. They couldn’t be more wrong. Collectivist schemes involve full government retention of citizens’ incomes; they are schemes of government control; completely the opposite of universal income.

A universal private income drawn as a dividend from public wealth is individualism, not collectivism. Indeed, the natural political home of reformed capitalism is the political centre-right, not the left; albeit the new centre-right, not the privileged and stale centre-right politics which New Zealand Prime Minister Christopher Luxon has so far represented. A ‘universal private income drawn from public wealth’ is different from a ‘privileged private income drawn from public wealth’.

It would be very simple to create an SUI in Aotearoa New Zealand. New Zealand’s income-tax scale has five rates: 10.5%, 17.5%, 30%, 33% and 39%. The 33% rate has formed the backbone of the New Zealand tax scale since 1988. As with the UBI example above, the SUI proposal simply eliminates the 10.5%, 17.5% and 30% rates. In return every adult economic citizen – effectively every ‘tax resident’ – would receive an annual SUI (ie dividend) of $10,122.50; that’s $195.66 per week. For all people receiving Benefits – including Superannuation, Student Allowances, Family Tax Credits – the first $195.66 per week of their benefit payments would be recategorised as their SUI dividend.

That’s it. (The dividend of $10,122.50 is simply a grossing-up of the maximum benefit accrued through those lower tax rates.) Unlike the UBI option, all existing benefits and bureaucratic infrastructure would be retained; at least until they can be reconfigured in an advantageous way. From an accounting viewpoint, existing Benefits would be split into unconditional and conditional components.

It means no change for all persons earning over $78,100 per year ($1,502 per week) before tax. And it means no change for all persons receiving total Benefit income (after tax) more than $195.66 per week. (These people could continue to be called ‘Beneficiaries’, but without stigma. Without stigma, Superannuitants can be happy to be classed as Beneficiaries.) People whose present total weekly Benefit income is currently less than $195.66 would cease to be called Beneficiaries; they would cease to be clients of the MSD, the Ministry of Social Development.

What this means is that most New Zealanders, on Day One, would see no change in their bank accounts. Nobody would receive a lower income. And for most who receive a higher income, it would be only higher by small amount.

This begs the question, if most people’s disposable incomes do not increase, or only increase by a trivial amount, then why bother? The important societal benefits would be dynamic; would be around incentives.

First, individuals (of all adult ages, male and female, regardless of their position in their households) would be incentivised to take employment risks – including self-employment risks – if they receive a core unconditional income that they do not stand to lose when risk doesn’t pay off. Labour supply is boosted; as is the economy’s ‘surge capacity’ (technically, the elasticity of labour supply increases).

Second, lower-paid individuals – many of whom are women – would have increased bargaining power (through unions and as individuals) and would not have to resort to contestable narratives such as ‘pay equity’ in order to achieve a fair wage.

Third, individuals would be better able to negotiate weekly hours of work to optimise their work-life balance. The SUI would minimise the present ‘twin evils’ of overwork and underwork.

Fourth, and especially for today’s high-income workers, the SUI represents an unconditional form of income insurance to facilitate the acquisition of basic needs during a period of what economists call ‘frictional unemployment’; being ‘between jobs’. Or a period of ‘voluntary unemployment’, such as attending to the health needs of another family member.

Fifth, the SUI would count as a democratic dividend, an acknowledgement that each society’s wealth arises from both (present and past) private and public enterprise, and that – for that reason – both private and public dividends should be part of societies’ income mix. All citizens would have both private ‘skin in the game’ and a sense of ‘public inclusion’, motivating all citizens to have an ‘us’ mentality, rather than a divisive and exclusionary ‘them and us’ mentality.

The SUI is my preferred option for New Zealand for the year 2026.

BUI

BUI stands for ‘Basic Universal-Income’. In the New Zealand context, it could be easily created by removing the 10.5%, 17.5%, and 33% income brackets. Thus, except for high-income-earners (say the five-percenters), there would be an effective flat tax set at 30% of production income. It would work much as the SUI.

I have calculated that, for New Zealand, the BUI would be $7,779.50 per year, effectively $150 per week.

To partially offset the tax cut that would be payable to people earning more than $78,100 per year, the income threshold for the 39% tax rate should come down (to $146,000, from $180,000). Tax cuts would be received by all persons earning between $78,100 and $180,000, with the maximum tax cut of just over $2,000 (just over $39 per week) being payable to someone earning $146,000.

With this BUI, compared to the SUI, there would be more day-one beneficiaries (ie more better-off people) on higher incomes, and fewer day-one beneficiaries on lower incomes. Nobody would be worse off. The dynamic benefits discussed in relation to the SUI would still apply.

This is a policy that the Act Party should embrace, given its stated commitments to liberal-democracy, individualism, enterprise, and the future of capitalism.

A wider benefit of BUI is that it could represent a small beginning to something bigger and better. Just as with Universal Superannuation, the ‘establishment fear-factor’ soon dissipated. And universal benefits came to be embraced in the 1950s by both ‘left’ and ‘right’ in Aotearoa New Zealand; a decade in which there were very few persons of working age relative to persons classifiable as ‘dependents’.

HUI

HUI represents Hybrid Universal-Income; a mix of UBI and SUI. What would happen is that the age of entitlement to New Zealand Superannuation would be lowered, but not all the way to age 18. Today the ‘threshold age’ is 65. Under a HUI, all adult tax residents under the new threshold age would receive a SUI, on the same basis as described above.

A variant of HUI would be more flexible; a flexible Hybrid Basic Income. Everyone between say 30 and 70 would be able to have a UBI for say ten years; otherwise they would have an SUI. (This might be a policy that would work well for Denmark.)

Today a large proportion of babies are born to mothers aged 30 to 40. Many of these mothers might prefer to have children while in their early thirties, but, for financial reasons, end up having their children later. If all adults could choose when to have their ten years UBI, I could imagine many women choosing their thirties, and many men choosing their forties. Thus, women would be able to leave paid work to a greater or lesser extent around when they would most like to have children, and their partners could take their UBI after the mothers of their children have returned to fulltime employment. For persons in their forties, parenting non-infant children fits with the life-stage when many people would like to be establishing their own businesses and becoming employers. This would create incentives to both working-class (and bourgeois) human reproduction, more enterprise, and more employment opportunities in the private sector for youngish and oldish workers.

A further variant of this variant could be to extend the SUI to a UBI for individuals over 60 who lose their jobs on account of redundancy. This would help the many women such as those who were caught out by the Labour Government’s barely-noticed 2020 decision to remove NZS entitlements to ‘non-qualifying-spouses’ (ie people who become redundant, mostly women, whose life-partners are already on New Zealand Superannuation). (We might also note that the Sixth Labour Government – 2017 to 2023 – cut the after-tax wages of all women [and men too] by not inflation-adjusting income-tax bracket thresholds. Looked at in full historical context, Labour governments in New Zealand have not been kind to women.)

GUI

We might note that the UBI case, first-mentioned above, would be very close to a Generous Universal-Income. In this case, only the 39% income-tax rate would be retained, and the UI would be an annual GUI dividend of $20,922.50 (ie $402.36 per week). All income would be taxed at 39% and all economic citizens would receive a weekly private (but publicly-sourced) dividend of just over $400.

Conclusion

The UI policies presented above (possibly excepting the GUI, and the UBI) reflect a liberal non-establishment centre or centre-right political perspective. The GUI and UBI, in practice, realistically reflect only future policy directions (given their clear fiscal non-neutrality), whereas the SUI, BUI, and HUI all represent changes that could be easily implemented in the May 2026 Budget.

My preference, for immediate implementation, is the SUI. In inclusive capitalist societies, public equity returns to individuals are a right. Much of societies’ capital resource is not privately owned.

As in 1938 to 1940, New Zealand can set an example for the democratic reformation of global capitalism. Unfortunately, the 1938 to 1940 reform – Universal Superannuation – was not taken up by an otherwise distracted world. (Sadly, New Zealand’s misguided 1989 monetary policy ‘reform’ – the Reserve Bank Act – was taken up by a then-attentive wider world. Unnecessarily high interest rates have caused huge grief on a global scale.)

We can choose to have a 2026 reform – a technically simple reform, that, through being promoted to the wider world as an example of how capitalism can be democratic and inclusive – which can have beneficial global consequences. Do our leaders have the intellect, imagination and courage that Michael Joseph Savage revealed in 1938? Hopefully ‘yes’, but realistically ‘no’.

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Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.