POLITICS DAILY: New Zealand’s obsession with inequality
Does New Zealand have an obsession with inequality? Is this a good or bad thing? And what are the solutions to inequality?
If New Zealand was to have a statue at the entrance to Auckland or Wellington harbour, it would likely be a “Statue of Equality” rather than liberty. That’s because New Zealand has a long-standing political culture of caring very strongly about equality. This was the view in the 1940s of visiting American political scientist, Leslie Lipson. Lipson’s observation remains true today and, whereas in the US all politicians have to at least pay lip service to defending liberty, here politicians have to acknowledge and show concern about inequality.
Over the last seven years, the focus and concern with issues of economic inequality has skyrocketed in New Zealand politics. This year will be no different, and there will be a useful politicisation of the issue, even if the proposed solutions don’t seem up to the size of the problem.
The Oxfam report on wealth inequality
Given the New Zealand public’s strong interest in economic inequality, it’s not surprising that this week’s Oxfam report on “An economy for the 99 per cent” has created plenty of headlines and debate. One of the best news report on this is Nicholas Jones’ Two Kiwis wealthier than the poorest 30 % - Oxfam. Jones reports that “According to the Oxfam research, the richest 1 per cent of Kiwis have 20 per cent of the wealth in New Zealand, with 90 per cent of the population owning less than half of the country's wealth.”
Another useful report on Oxfam’s findings is Catherine Hutton’s Top 1% of NZers own 20% of wealth. She adds that “Oxfam is not the only organisation to measure household incomes. Every year Statistics New Zealand publishes its Household Net Worth Survey. The 2015 survey, published in June last year, found the country's household wealth was concentrated in the top 20 percent of households, which held about 70 percent of total household net wealth.”
And for further details about measures of inequality, see Andy Fyers’ The truth about inequality in New Zealand.
Challenges to the inequality report
But the Oxfam report hasn’t gone unchallenged – both in terms of its methodology and the politics underlying its production. The New Zealand Institute’s Eric Crampton thinks that wealth inequality isn’t a problem in this country: “And so Oxfam's focus on wealth inequality is strange. It is entirely appropriate to look closely at wealth inequality in countries where tinpot rulers immiserate their citizens for the benefit of themselves and their ruling cliques” – see: Oxfam and inequality again.
Crampton also challenges the way that Oxfam has used the assets of individuals, including houses and debts, to measure their wealth, with little regard to whether that wealth is useful to society. He points out: “If you have net assets of $744,400 USD ($1.05m NZD), you're in the world's Top 1%. Auckland's average house price cracked the million mark last September. So if you own the average house in Auckland, debt-free, that likely puts you into the world's Top 1%. About 272,000 Kiwis are in the world's Top 1%” – see: You may be in the global 1%. See also the profile, Eric Crampton, economist and original, written by Philip Matthews.
Others on the political right have essentially looked at the report and said “so what?” David Farrar has suggested that there’s nothing intrinsically wrong with increasing concentrations of wealth, and that billionaires like Richard Chandler are not harming anyone with their amassed money: “Oxfam is basically a socialist campaigning organisation. Chandler has made almost all of his money overseas. So how does a NZer being successful overseas harm people in New Zealand? Maybe Oxfam thinks we should do what has failed in every country that has tried it and confiscate wealth (not income) and redistribute it. So take the $13 billion Chandler and Hart have and give it to the poorest 1.5 million New Zealanders. They would then each have $10,000 wealth – hardly life changing” – see: So does Oxfam think wealth should be confiscated?
For other views from the right published recently, but before the Oxfam report came out, see Martin Robinson’s Inequality is a matter of choices, and Martin van Beynen’s There is no inequality crisis.
In the latter column, van Beynen argues that “the Government can go only so far in engineering a new society without creating a whole lot more unfairness and disincentives to people taking responsibility for their decisions and paying their way.” Furthermore, “As the election nears, those of us who are interested are going to have to think hard about what sort of society we want. My worry is that the eat-the-rich crowd will tap into unfounded fears about an unequal society to drain the lifeblood of a go-ahead society.”
Election year debates about inequality and solutions
Regardless of whether the obsession is a healthy one or not, there is no doubt that New Zealand’s focus on the politics of economic inequality will be an important part of this election year. This issue, along with related ones like poverty, is listed by various political commentators – such as Shamubeel Eaqub, Bernard Hickey, Bronwyn Hayward, Stephen Jacobi, Nicola Kean, Claire Robinson, and Andrea Vance – as one of the key debates for this year – see the Spinoff’s 2017 in politics: the big issues for election year in New Zealand – and some wild predictions.
Similarly, see Philip Matthews’ profile: Shamubeel Eaqub, economist, and our social divisions.
The issue of housing affordability is also obviously closely related to concerns about economic inequality. And that looks set to be the number one issue for the election. For further detail on how issues of inequality, poverty, and housing unaffordability are driving public concern, see Roy Morgan’s poll results published last month: New Prime Minister Bill English must find a solution to New Zealand’s growing ‘Housing Crisis’ – the largest problem facing New Zealanders in late 2016.
A failure of politicians to deal with inequality is increasingly being talked about as a cause of possible voter revolt in New Zealand. For the latest on this, see the very good Listener editorial from last week: Democracy's stark choice.
The Listener points to the fact that “globalisation and technological progress have produced a wealthier world” but this has become “associated with low wages, insecure employment, stateless corporations and striking inequalities.” The editorial warns that “New Zealand has avoided the worst of these trends, but it is not entirely immune. Child poverty and the housing crisis, compounded by the growth of a corporate and professional class whose extravagant lifestyles and remuneration packages seem to know no limits, have sown disenchantment in a country that once took pride in egalitarianism.”
Inequality has become so severe that a group of economists want “another summit, like the 2009 jobs summit under former Prime Minister John Key” – see Patrick O’Meara’s Calls for leaders' summit to tackle inequality.
According to this article, which is based on debate between Xero's Rod Drury, BERL's Ganesh Nana, and former Reserve Bank official Michael Reddell, Drury is leading the call for such a summit, given the “the lack of bold ideas from politicians to prepare the economy for the growing challenges of globalisation, automation and inequality.”
Other debates about inequality solutions
Other suggestions are being put forward at the moment to deal with inequality and poverty. Some of these have been prompted by the release last month of the annual Child Poverty Monitor – see Eileen Goodwin’s Children's commissioner Andrew Becroft 'shaken' by extent of child poverty in New Zealand.
This produced useful suggestions such as Jonathan Boston’s How the English-led Govt can help struggling families, and the Dominion Post’s editorial, How Bill English can show he cares about the most vulnerable.
More recently, the Oxfam report has coincided with increased concern about tax avoidance by the wealthy. According to John Minto the rich are “bludgers” – see: Myths about inequality mask a medieval tax system. He argues that “the super-rich” fail “to pay anything but the most miserly amount despite stripping billions from the economy annually.”
Similarly, blogger No Right Turn says that the level of inequality highlighted in the Oxfam report is “simply obscene”, and he calls for a new land tax: “We used to, back in the C19th, when we used a land tax to prevent the establishment of a rural aristocracy and ensure that we became a more equal society than the one (some of) our ancestors had fled. But then it fell out of use. With the return of British levels of inequality, its time we revived that solution, and taxed it out of existence” – see: This is why we need wealth taxes.
And for further debate about tax avoidance, see Tom Pullar-Strecker’s Judith Collins rejects Green Party concerns over tax behaviour of high-earners.
Much of the inequality debate focuses on government taxation. But perhaps what is missing from the debate is a focus on the more immediate source of inequality – the exploitation of those creating the wealth in New Zealand. The non-working wealthy haven’t built up the streets, infrastructure, houses, businesses and products that produce wealth – that’s been built up over the history of New Zealand by working people. And increasingly, the proportion of the economy, or GDP, being paid to workers is decreasing, with a bigger share going to business.
That’s why the most important item about inequality in New Zealand is probably the research released last month by University of Auckland researcher Dr Christina Stringer – see the report: Worker exploitation in New Zealand: A Troubling Landscape. For the best news coverage of this, see Olivia Carville’s Uncovered: Exploitation of migrant workers rife in NZ.
The extremely low wages and poor working conditions highlighted in this study should be an embarrassment to New Zealand. And they show why our obsession with inequality is more than warranted.
Finally, for a satirical view of the wider issue, see my blog post of Recent cartoons about inequality in New Zealand.