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Inequality of wealth between people has become quite a topic of interest recently – think Thomas Piketty and similar writers. Reports such as “The wealthiest 20 Americans own as much wealth as the poorest 50% of Americans” (that’s 152 million if you’re keeping score) crop up frequently, and there is a widespread belief overseas that “the 1%” have way more than everyone else.
What about here in the quarter-acre paradise? There’s no really wealthy people here are there? What’s the difference between wealth and income anyway? Is NZ facing a problem of inequality becoming more marked? And is inequality a problem anyway?
Max Rashbrooke has written widely in print and on-line about inequality. He edited Inequality: A New Zealand Crisis in 2013, and that has been on my to-do list for many months (next year, I promise). When I saw this BWB Text I grabbed the opportunity to at least get a start at the material.
Rashbrooke takes the debate about wealth and inequality, and puts it into a New Zealand setting. He presents a lot of data, and raises a lot of question.
What is wealth anyway – as opposed to income? Why does it matter? What does wealth look like in New Zealand? Who are the holders of wealth, and what do they do with it? It isn’t all fast cars and booze you know.
Having NZ data changes the way that we think about things. The level of inequality and the rate of growth of some people’s wealth while others go backward staggered me. It is sobering too to read that “we are not immune to his [Piketty’s] prognosis of a return to Victorian-style levels of inequality”.
Some of course will argue that the disparity of means between groups is unimportant, and that inequality is not a problem. Some too will argue that wealth is not, in fact, all that unevenly spread about the community. The author presents data which will disabuse them. It is hard at first to understand why the share of the national income going to wage and salary earners is so low compared with other developed countries. Rashbrooke shows that this trend started in the 1980’s (surprise!). He also shows that a partial but erratic correction has occurred since early this century. This is just one example of the material he presents in a very clear series of graphs and occasionally tables. Be aware though that some of the graphs have been truncated, so care is required reading them. Some of the data has not be published before, at least in this form.
As well as asking questions and drawing conclusions from them, the author advances possible policy responses to reduce wealth inequality and wide income gaps. There’s quite a variety here, and they should make anyone think. Some are obvious: taking the heat out of housing by making life-time renting both more ‘normal’ and more comfortable, for example. Others are quite controversial: mandating mixed neighbourhoods, for example, or giving everyone a share of the national accumulated wealth as of right.
This is another success in the BWB series of short books. It does things right: presents the facts simply, shows their importance, raises the questions, and proposes some answers. And it’s about economics yet is understandable and readable: a rare combination. I really must get into his earlier book next year.
Reviewed by Gordon Findlay
Wealth and New Zealand
by Max Rashbrooke
Published by Bridget Williams Books