Bryce Edwards: Extreme inequality a test for the new Government

Bryce Edwards: Extreme inequality a test for the new Government

Jacinda Ardern has just arrived in Davos for the World Economic Forum, where she is promoting her Government’s “economics of kindness” approach to other world leaders and elites. Her message is in line with the fact that her Labour-led administration was elected on the basis of dealing with New Zealand’s severe inequality and associated social ills.

It is early days, but stories and evidence continue to come out to suggest that little has changed under the new government and, for some, life may be getting worse. The latest is a report from Oxfam which paints an extreme picture of economic inequality in this country.

Here are the statistics on uneven wealth distribution in New Zealand:
• The top 5% has more wealth (45% of wealth) than the bottom 90% (42% of wealth)
• The top 10% of the population has more wealth (58% of wealth) than the bottom 90% (42% of wealth)
• The top 1% of the population has more wealth (26% of wealth) than the bottom 70% (18% of wealth)
• The top 1% of the population has 25% of all wealth in NZ

For more on this, see TVNZ’s report, Oxfam report shows rich Kiwis getting richer as poorest ‘miss out’. The article reports Oxfam’s Executive Director Rachael Le Mesurier on the ill social effects of this wealth inequality: “We know inequality is harmful for us all. It perpetuates poverty, erodes trust, fuels crime, makes us unhappy, negates economic growth, and robs opportunity from the poorest – including shortening their lives.”

Oxfam is calling on the Government to make “brave” changes to address this inequality. Le Mesurier is also reported by RNZ as believing “It was time the government stepped up and took action to reduce inequality in New Zealand” – see: The rich are getting richer, the poor are getting poorer – new research. She claims: “There are a suite of tools that governments have that they can bring in place to reduce the size of this gap.”

The report also draws attention to those at the very top of the wealth scale – New Zealand’s two billionaires: “The research revealed that New Zealand’s two wealthiest men, Graeme Hart and Richard Chandler, increased their collective wealth by $1.1 billion between 2017 to 2018.” Apparently, “In that same period, the poorest 50 percent of New Zealanders saw their collective wealth decrease by $1.3b.”

But economist Eric Crampton is questioning the methodology of the report, suggesting that the supposed worsening of wealth inequality in the Oxfam report really just comes down to global currency movements. He says that, actually, the evidence “shows we all got poorer (and wealth inequality dropped), but that it’s mostly changes in exchange rates” – see: Oxfam – again.

Crampton – who heads the rightwing think tank, the New Zealand Initiative – complains about some of the media reporting of wealth statistics, and he suggests some alternative headlines, such as: “New Zealand is poorer (but it’s mostly currency movements)” and “All things considered, we’re pretty wealthy”.

Other signs of inequality

The Oxfam report isn’t the only evidence that paints a damning picture of the state of wealth distribution in New Zealand. Just before Christmas, Statistics New Zealand released its Household Net Worth survey, which also suggested worsening inequality. This suggested that over the last three years the wealthiest 20 percent of New Zealand households have increased their net worth by $394,000, while the bottom 40 percent has seen no increase in wealth at all.

For the best news coverage of this, see Zane Small and Jamie Ensor’s Inequality: New Zealand’s rich getting richer while poor remain static. The report quotes Statistics NZ labour market and households senior manager Jason Attewell saying “Household net worth in New Zealand is concentrated in the top 20 percent of Kiwi households surveyed in the past year. That group collectively holds about 70 percent of total household net worth”.

The report was also expertly analysed by inequality researcher Max Rashbrooke of Victoria University of Wellington, who compared the figures to other similar countries: “Our wealthiest individuals have a greater share of total assets than do their counterparts in Australia, Canada and even the UK, traditionally regarded as a country with deep class divisions. In the English-speaking world, only the US, where the wealthiest tenth have 79 percent of all assets, is significantly more unequal” – see: How can NZ close the gap between rich and poor?

Rashbrooke examines the myth that the wealthy have created their fortunes themselves: “much of their increase in wealth has come from rising property values – and sitting on an asset appreciating in value hardly counts as tough labour. To some extent those fortunes will have also been generated through luck, help from family and friends, and the use of collectively funded infrastructure such as schools, roads and broadband.”

And he concludes that, for the rest of us, “there is clearly something wrong with our economic settings when so many individuals, despite working hard, cannot build up a decent wealth stake.”

Other signs of poverty

There have been plenty of reports over the last month that suggest a crisis situation for those at the bottom of the wealth heap. For example, many charities have been reporting record demand for their services. See, for example, Mei Heron’s report, Salvation Army says this has been the toughest Christmas on record for Kiwi families.

Here’s the key part: “The Salvation Army says it has been the toughest Christmas on record for Kiwi families with almost 16,000 children needing emergency aid. Across New Zealand it has handed out more than 14,000 food parcels and other charities’ are experiencing similar increases for help.”

Last week, the Ministry of Social Development also declared that there has been record demand for emergency grants – see Derek Cheng’s Emergency grants skyrocket due to ‘housing crisis’ – Minister. Apparently, “Welfare payments for emergency housing have skyrocketed almost 200 per cent over the last year, while hardship payments for food have risen 38 per cent.”

Pressure on the Labour-led Government

Some commentators are viewing the revelations about inequality as a sign that the new Government is failing to prioritise their promises to fix this problem. According to leftwing blogger Steven Cowan: “The latest Oxfam report on economic inequality contradicts the Minister of Finance’s claim that we are all enjoying a sense of shared prosperity” – see: The Economy of the one percent.

Cowan also wonders if less attention is now being placed on shocking inequality figures due to the change of government: “The chattering class – the liberal intelligentsia – have also chosen not to talk about the Oxfam report. While they never hesitated to attack John Key and his government for its abysmal record on tackling poverty and inequality, Jacinda Ardern has largely escaped criticism. The hypocrisy is all too evident.”

Similarly, documentary-maker Bryan Bruce has drawn attention to news such as “In Canterbury the Central Mission report demand for food has gone up 44% since last year” and suggests that the Government is too complacent. The problem, he sees, is that the Finance Minister has an “approach to running the nation’s economy is barely distinguishable from that of Bill English or Michael Cullen” – see: Hunger is the measure of our Economy.

And the No Right Turn blogger also pressures the Government to make some radical changes to fix the problem: “New Zealand’s two richest men increased their wealth by only slightly less than was stolen from the poorest 50% of us. Which is exactly the sort of sh*t Labour was elected to put a stop to… So Labour, are you going to do this? Or is your entire pitch – government for the many, not the few – a lie?” – see: Time for redistribution.

However, a spokesperson for Prime Minister Jacinda Ardern has responded to criticism about inequality to outline some of the progress already made by the Government: “An increase in income tax, GST, inheritance tax, changes to the taxation of the family home or the land under it and the adequacy of the personal tax system and its interaction with the transfer system were outside the scope of the review. The government was working hard to reduce poverty and inequality, having introduced a number of measures to lift incomes and living standards, such as the Families Package which lifted the incomes of more than 384,000 families by $75 a week, and a winter energy payment” – see Tom Hunt’s Tax more: Oxfam calls for wealth tax to tackle growing inequality.

Finally, why aren’t New Zealanders’ revolting about the state of economic inequality in this country? For an excellent discussion of this by Max Rashbrooke, see Debrin Foxcroft’s The French are rioting, but they have it better than Kiwis. The article also quotes veteran activist John Minto, who is optimistic about inequality revolts coming to New Zealand: “I think our time is coming… We are surrounded everywhere by market failure that’s not being expressed by National or Labour. A reservoir of anger is building up and when it goes it’s going to take everybody by surprise.”