Political Analysis by Dr Bryce Edwards.
Inequality of income and wealth continue to be major post-GFC themes in New Zealand politics. Summing up an important part of the year in politics, Bryce Edwards points to debates and research about these economic problems.
The top political issues for New Zealanders in 2015 continue to revolve around economics, especially those relating to the unequal distribution of wealth and income. The latest Colmar-Brunton poll shows this – see Corin Dann’s two-minute news report this week, Wages fail to keep up with rising cost of Kiwi living, poll suggests. This was also discussed on TVNZ’s Q+A – watch the seven-minute item, Poll results – panel.
Wealth in NZ
In recent years much of the debate has been over income inequality, but in 2015 the focus started shifting towards wealth inequality. As researcher and author Max Rashbrooke explained, wealth can be quite different to income, and in some ways is much more important to deal with. He published a new book which showed that the bottom half of New Zealanders own practically nothing, while the top half have over 90 per cent of all wealth.
You can find out more about Rashbrooke’s new book here: Wealth and New Zealand. And you can read the Introduction from the book here: Income Gets Plenty of Attention – Time to Zoom in on Wealth.
Writing in the Guardian, Max Rashbrooke explained what has happened: “Wages are so low because in the last 30 years the workplace balance of power has shifted away from salary earners and towards the owners of capital, such as shareholders, investors and banks, allowing them to take a growing share of company income. The average New Zealand working person earns $10,000 less than they would if they had kept their early 1990s share of income” – see: New Zealanders need to share our common wealth. Let’s start by discussing inequality.
Rashbrooke also explained his book in a nine-minute interview with Lisa Owen on The Nation – watch: Interview: Max Rashbrooke. Or you can read the transcript. But probably the best summary of Rashbrooke’s findings is his own research report, Wealth Inequality: Who Owns How Much?
See also, Rob Stock’s Max Rashbrooke fears ‘Victorian-style’ levels of wealth inequality. This includes the quote from Rashbrooke that since the 1980s, “Salaried workers have lost around $19 billion a year, or $10,000 per wage earner per year, to the owners of capital.”
For an intelligent discussion of the book – in fact, probably the most interesting response – see economist Geoff Simmons from the Morgan Foundation’s blog post: Who’s New Zealand’s real rich? The results may surprise you.
Simmons praises Rashbrooke’s book for the “rare insight” it brings, and discusses why the issue is important and what some of the possible implications are for public policy. He also give his own summary of wealth statistics: “In 2010 the wealthiest 1% of Kiwis owned 18% of the wealth, the wealthiest 10% had 54%, and the wealthiest 50% had 96% of the wealth. In other words the least wealthy half of the population had 4% of the wealth. Around 8% of the population – 271,000 people had negative net wealth.”
Gareth Morgan has also evaluated Rashbrooke’s solutions, and promotes his own solution – a Comprehensive Capital Income Tax, together with an Unconditional Basic Income – see: Who should pay to reduce poverty? Should it be you?
In contrast, David Farrar considers Rashbrooke’s ideas “the usual hard left policy prescription. Never mind it has failed in every socialist and communist state in the world” – see: The tax and spend solution to inequality.
And if you’re interested in the lifestyles of the young rich kids, Jess McAllen has covered that aspect, with obligatory Max Key photos, in her feature, The haves and the have mores. This follows on from an earlier feature, Super-rich kids: How the other half lives, in which McAllen reports on the partying lifestyles of elite social clubs.
This focus on the kids of the wealthy had some complaining – see David Farrar’s Herald targets Max Key and Nathan Smith’s The inequality debate or why the modern left is failing. On her blog, Jess McAllen justifies her focus on the socialites: Open letter to Nathan Smith.
How wealthy is New Zealand?
A second reason for a new focus on wealth came through the publication in October by Credit Suisse of its Global Wealth Report 2015. According to this, after inequality is taken into account, the average New Zealander is the wealthiest for any country in the world – see David Chaston’s New Zealand scores second on global wealth per capita, and first when adjusted for inequality.
But Rashbrooke has responded to this with a blog post, New Zealand not world’s wealthiest country after, after all. In this he confirmed that the data, taken from the Reserve Bank, had been incorrectly used. The correct data shows that the average New Zealander has “wealth of around US$252,000, as opposed to the US$401,000 originally quoted. That puts us roughly in the middle of the pack with other Western countries, as one would expect.”
So, where do you fit in? To find out where your own asset wealth puts you relative to other New Zealanders, see Rob Stock’s Finding your rung on the wealth ladder.
The increased focus on the wealthy and powerful has been partly reflected in “political roundup” columns I’ve written this year. In June, my column, Is there an establishment in NZ?, pointed to articles dealing with the wealthy. The NBR’s latest annual Rich List was the focus of my July column, Celebrating or condemning the “selfish” super rich?. And the political views of the wealthy in business were explained in my August column, The Business elite view of politics.
Also in August, David Fisher reported on new research by MBIE which shows the motivations and experiences of investor migrants – see: Super-rich love NZ (mostly). And the super-rich are also on the radar of the IRD – see Hamish Fletcher’s NZ’s super rich in taxman’s sights.
The lifestyles of the rich are subsidised in some ways by the broader taxpayers and ratepayers. One example of this was explained by Bernard Hickey last month in his column, In hole for millions.
Here’s Hickey’s key point: “Auckland and the taxpayers of New Zealand were giving billions of dollars to the wealthiest property owners in the land. “Did you know that 1400 members of the Remuera Golf Club receive the exclusive benefit of a piece of Auckland Council-owned land valued at up to $517 million? The club pays rates of $130,000 a year. If up to 70 per cent of that land was broken up and sold for housing and the rest left in parks, it would produce revenues of $16.5 million a year. That’s an annual subsidy of $16.37 million, or $11,700 a member. That includes Prime Minister John Key, who is an honorary member. Even if each member played 50 rounds a year, that would be a subsidy of $233 per round or $13 a hole.”
Left and right united in response. Blogger No Right Turn said “Cities need public spaces. But golf courses aren’t public spaces. Instead, they’re exclusive preserves of the well-to-do, the New Zealand equivalent of a medieval English forest”. He recommended: “Auckland should either redevelop its golf courses, or sell them” – see: Let the rich pay for their own golf courses. Similarly, see David Farrar’s The Remuera Golf Club subsidy.
The Business and CEO world
This month, the annual “Roger Awards” will locate which transnational company has been the worst for New Zealand – see the Daily Blog’s 2015 Roger Award finalists named.
One finalist is Apple. They were also the focus of John Campbell’s new RNZ podcast series – you can listen to his 24-minute investigation into Apple’s high ideals and low tax bill. And for a three-minute update on Apple’s response to Campbell, as well as some photos of Apple’s Auckland office, watch Campbell three-minute video, Apple Update.
A focus on rich bosses has continued in the media – especially public sector CEOs. Last month we learnt about the high pay of public sector bosses, including one who received a $220,000 payment when he stepped down – see Claire Trevett’s The big taxpayer-funded pay rises: $50,000-plus boost for top public CEOs. And for more detail of the pay rates of various jobs across the public sector, at all levels, see: Hottest jobs in the public service. University bosses get paid in excess of $500,000 – see Kirsty Johnston’s Tertiary heads farewelled with ‘golden handshakes’.
In this focus on CEO pay, the private sector has been represented by the big banks, with recent revelations that some banking bosses are earning “up to 120 times more than the average bank teller” – see Tim Fookes’ Gap Between Rich and Poor.
The poor and exploited
The plight of those who actually create the wealth in society – workers – got increased attention in 2015. This was due to more media focus, partly due to some union victories, but also due to the National Government shifting to the left on some industrial issues – see my round up about this from April: Victory for the workers.
Various other elements of the “precariat” received investigation from the media, with one of the best being Michael Morrah’s 12-minute TV3 investigation last month into migrants working in restaurants – watch: NZ’s most vulnerable workers. See also, Michael Morrah’s opinion piece, The exploited.
Such issues have led Duncan Garner to ask a lot of questions about inequality – see his most recent: Are we an equal society?
Related social problems
All year, issues of unaffordable housing – especially for the poor – have been huge. In June, I wrote about Solving the housing crisis, which was a problem due to the “vested interests of politicians”. This was followed by a focus on the poor state of rental housing – see: Anger over ‘slum landlord’ Government. And then, I pointed to arguments that the housing affordability crisis was a “class” one – see: The Housing apartheid problem.
Housing problems continue to be prominent – the latest following last months report by the Salvation Army, showing the impact of the problem on those at the margins – see Shabnam Dastgheib’s Auckland housing crisis makes more children and families homeless – report. See also the Herald’s editorial, Housing hikoi sign of rising social unrest.
A new book also examines the problems – see Rob Stock’s Philippa Howden-Chapman highlights NZ’s increasingly embarrassing housing crisis.
The focus on poverty in 2015 reached a high point in May when the Government actually responded to the upsurge in concern for those at the bottom and increased benefits for the first time in decades – see my Political roundup from the time: The government’s Campbell Live budget.
Max Rashbrooke also explained what was happening for his British audience, via the Guardian newspaper – see: What child poverty campaigners in the UK could learn from New Zealand.
And the problems of wealth inequality continue to impact on other social areas – see Tom Haig’s Who has power in the education system? and Alistair Woodward & Tony Blakely’s Unequal Health In New Zealand: Always Like This?
The politics of wealth, economics, and inequality
At the start of this year I made a forecast: “2015 is almost certain to be characterised by more traditional concerns. Primarily these will include the economy and other resource-based issues: unemployment and job growth, inequality, housing, the cost of living, and perhaps the Government’s promised return to budget surplus” – see my January column, What to expect from politics in 2015.
The ongoing strength of the National Government appears to be partly due to their continued concentration on such issues, and the perception they’ve created that they are managing such problems relatively well. And by the end of the year, the Labour Party had become more focused than ever on “bread and butter” economic issues – see my recent column, Where is Andrew Little taking the Labour Party? And how well is he doing it?
Could the political left benefit from more focus on economics and inequality? Absolutely, according to Labour Party dissident Josie Pagani – see her blog post, We need to talk about the one per cent. She makes the case that “Global inequality is the number one issue for the progressive left.” She also argues for: 1) “switching taxes from income to wealth”, 2) “managed markets”, and 3) international treaties and agreements to harmonise economic issues such as tax and trade.
But if the public is already so concerned with inequality, why aren’t the parties of the left doing better? That’s a question discussed by AUT’s Peter Skilling in Perceptions Of Inequality. His answer – with reference to “system justification theory” – is that social psychology means that the framing of the problem can lead to resistance to change. See also Kirk Serpes’ Why we need to stop talking about inequality.
Finally, for a graphic representation of the wealth problem, have a look at New Zealand’s Inequality Tower by RNZ cartoonist Toby Morris.