Rashbrooke on inequality

Written By: - Date published: 9:40 am, November 24th, 2015 - 22 comments
Categories: capitalism, class war, poverty - Tags: , , ,

Max Rashbrooke has another excellent piece on inequality in The Guardian:

New Zealanders need to share our common wealth. Let’s start by discussing inequality

The emergence of a young, monied elite whose inherited wealth is highly visible is a new thing for New Zealand – but how do we respond?

The core of my book is straightforward information: new data showing that the wealthiest 10th of New Zealanders own more than half of all assets, while the poorest 50% have just 4%.

Most of the talk to date about “inequality” has actually been about poverty, the problem of the poorest families falling behind the middle. Inequality is also about the most affluent households pulling away from the rest. This matters because the two trends are connected: we can understand poverty only by understanding affluence.

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.

Similarly, our benefits are much lower than those in other countries – for single people they replace just a third of the average wage, whereas in the Netherlands that figure is 70%. That is partly because we don’t generate enough tax revenue from our wealthiest citizens.

We don’t tax wealth, gifts, inheritances or, except in limited circumstances, gains made from selling assets. That stance is justified by the idea that allowing some people to become very wealthy is the best route to raising incomes for all. So just as a seesaw makes no sense if we look only at one end of it, neither can poverty be understood without considering both ends of the spectrum.

For some people, these facts are confronting. While poverty can be “othered”, or held at a distance, talking about wealth forces people to see inequality, in Linda Tuhiwai Smith’s words, as “a whole-of-society problem”. They have to consider their own position of power and privilege. …

Rashbrooke also discusses the reaction to his book:

…I was a little surprised to find that only a couple of days after my book’s launch, I was described on social media as “consumed by hatred”. Others labelled me a “dangerous communist” and a “depressive leftie”.

See a depressing discussion that followed on the kinds of attacks that Rashbrooke and others have endured.

22 comments on “Rashbrooke on inequality”

  1. Michael 1

    Labour should adopt Universal Basic Income, funded by a mixture of progressive income, capital gains, and financial transactions taxes. It should also reduce GST on most items (although increase them on luxury goods).

    • The Fairy Godmother 1.1

      I think it would be better to completely abolish gst. If we introduce wealth taxes and incteade the top tax rate dramatically we will get the buyers of luxury goods.

  2. Murray 2

    Max Rashbrooke has quite correctly condemned unjustified inequality. On this issue it is almost always overlooked that for the community as a whole aggregate credit balances must be and remain exactly equal aggregate debit balances. It is mathematically impossible to increase the wealth of the wealthy without increasing the debt of debtors.
    If the government were to collect twenty five billion dollars and twenty five cents from the wealthy and use it to reduce the debt of debtors aggregate credit balances in the community would be reduced by exactly twenty five billion dollars and twenty five cents and aggregate debt balances in the community would be reduced by exactly twenty five billion dollars and twenty five cents.
    We continually hear arguments that propose to reduce the debt of debtors without reducing the credit balances of creditors. It can’t be done.

  3. David Scott 3

    Sadly, the Labour Party of today is a gutless shadow of what we need. The first thing they could do is reverse some of the evil attacks on people struggle on welfare by National. Until they actually offer some hope for people living at the bottom of society they won’t recapture votes.

  4. Olwyn 4

    So just as a seesaw makes no sense if we look only at one end of it, neither can poverty be understood without considering both ends of the spectrum.

    Max Rashbrooke is right. If we talk about poverty by itself, then the impression is that things are going smoothly but a few people have fallen through the cracks, when in fact our current wealth/poverty divide is both systemic and broadly damaging. The shift in the balance of power between salary earners and capital has led straight to a similar shift between landowners and the landless, with Key’s government, in NZ, driving the second of these moves.

    The accumulated power of the wealthy does not come with a commensurate social responsibility. Outside of the obligations that arise within their own circles they do not see themselves as having any more social obligation than a low-paid cleaner has. Their power is no longer constrained by Christian teachings, noblesse oblige, or any broadly accepted conception of the public good. Moreover, because this inequality has been introduced to a previously roughly equal society, the poor have no province of their own into which to retreat, and must struggle to meet costs and standards that assume a level of wealth. For example, you cannot get by on cottage industries here because overheads are set in relation to wealth. The result of these developments is license at one end of the scale and despair at the other, which hardly makes for a resilient, cohesive society.

  5. savenz 5

    Personally I think that the problem of inequality rests with the rise of the company. Highly profitable companies are paying either no tax or very little tax in this country and around the world. Apparently in private companies earning over 100 million in Australia the government voted to keep their accounts secret.

    It is through companies that a lot of income and wealth is being massaged. Look at John Key, no one knows what he is worth or what he owns or where it is. If you don’t know that, how can you tax it?

    Rather than blaming 20% of individuals for not paying their share, more careful attention should be directed at companies and highly wealthy individuals.

    “We don’t tax wealth, gifts, inheritances or, except in limited circumstances, gains made from selling assets”

    Taxing all tax payers more is making the concept of a “us against them” and undermining the concept of inequality.

    Everyone has family that die and most families inherit, I’m not sure that the idea of paying more taxes is that palatable to the average Joe especially when the government is using those taxes for their own crony corporate interests.

    Likewise the focus on increasing pension age, increasingly property taxes and so forth. It is another type of austerity because those who really are at the top 1% funnel the money around and still end up not paying it. It may well increase inequality and do the opposite depending on how the government spends the money and if they crack down on corporate tax underpayment.

    You might find that the top 10% do not pay inheritance tax for example through tax planning and only the middle class and poor end up paying it, actually increasing inequality.

    It also does not take into account the massive rise in corporate welfare.

    For example the government has reportedly spent 24 million of taxpayer money on outfitting a previously NIWA boat for oil and gas exploration on behalf of Statoil and Chevron.

    Most economists have an idea that the money is somehow being captured by the middle classes and 20% of top earners. I think that the issue of focus should be how the top 1% are accumulating their wealth and the rise of the company, who are getting more profit and paying those who contribute to that wealth, less.

    In NZ very simple concepts like a living wage, diversifying exports, having a more focused immigration criteria, a limit on the wages between the highest and lowest worker within a company and so forth would work better than to tax everyone more and hope that the government does something useful with the extra taxes and those already not paying through tax loop holes their taxes, or simply not paying any tax whatsoever suddenly volunteers payment. Which to me sounds like wishful thinking.

    You have to think of the psychology of it too.

  6. Atiawa 6

    I am always surprised by the low number of comments from the regulars (with some exceptions) when issues like growing inequality are voiced on this blog. Especially so when the cause of that inequality is pointed out to be the result of the de-unionisation of the workforce. I have no idea of the union membership of those regulars who voice a regular comment, but I believe that most, in all likelihood and who are in paid employment, are unlikely to be members.
    It would seem that many of our social ill’s are caused by the decreasing number of workers belonging to unions, yet on a left leaning blog that is TS, I hear few voices that demand and/or promote a return to organised labour.

    • Anne 6.1

      Atiawa, this subject has been discussed/debated exhaustively over a number of years on this site. That is not to say the regulars are no longer interested, it’s that many of us have made our views known over and over again.

      The only thing we can do is to join the Labour Party, the Greens or Mana and advocate for the reintroduction of an organised union movement based on today’s conditions. But first we have to get into government.

      • Atiawa 6.1.1

        Thanks Anne and I appreciate your past efforts. Political solutions are not the only answer either, but I guess you have debated alternatives.

        • Colonial Viper

          part of the issue is that it is difficult to synthesise and advance solutions due to the lack of power, finances and resources that the left has. The organised Left remains (too) reliant on taking the reins of governmental power in order to implement any change.

      • Macro 6.1.2

        Exactly Anne. We have discussed this more times than I care to think. Max Rashbrooke’s most recent work just confirms the collective thoughts of many here.

  7. Craig H 7

    Increased union membership would certainly aid in reducing inequality, but as the nature of work changes, it’s not the panacea it once was.

    • Atiawa 7.1

      Modern day unions are equally interested in the future of work as they are in ensuring it;s members are adequately rewarded for that work. When I first joined the workforce some time ago, I should add, unions were also the vehicle that informed and educated the workers they represented. Some were more effective and radical than others, but they weren’t simply about securing a greater share of the economic pie. The need for the movement has never being greater.

      • Colonial Viper 7.1.1

        unions need to make obsolescent their role as an intermediary between employees and employers (this should probably have been done 40 years ago i.e. in the 1960s and early 1970s).

        Democratic worker owned enterprises need to become a serious economic phenomenon. In that kind of organisation there is no need for traditional unions.

        • Atiawa

          I don’t see unions as an intermediary, that’s the role of a mediator. Democratic unions act in the interests of the will of the majority.
          I have no issue with your second point.

          • Colonial Viper

            I always thought that the Nurses Organisation and the SFWU should join forces and start a major retirement care organisation throughout the country, one owned and democratically run by the workers, and have it push the money hungry rip-off corporates out of the picture.

            But unfortunately its not what they do and they don’t have any vision around that.

            • Atiawa

              If their members supported such an endeavour I don’t see a problem. Perhaps a past members retirement village.

  8. Venezia 8

    I highly recommend Max Rashbrooke’s latest book Wealth and New Zealand to all. It is well researched, evidence based and well written. He joins the dots between poverty, the incomes of struggling working people, and the rich and wealthy. And how the political system works to keep it that way. It is plain to see why the wealthy do not want some of this stuff aired in the public domain. Some parts really surprised me – like how the average working person’s income has fallen so far behind since the early 1990s. And the significant wealth holdings of many (mainly National Party) MPs, which explains a lot about how much out of touch they are with the experience of low income and working people trying to bring up kids.

    • Atiawa 8.1

      Where have you been Venezia? This issue has being discussed and debated exhaustively over a number of years. In fact Max will confirm that the rot really set in pretty soon after the introduction of the Employment Contracts Act 1991, which done away with the Award bargaining system and compulsory unionism.
      Further more there is no appetite from the workers of the country to reintroduce either of those previous industrial requirements.So we are all wasting our time demanding their return and the NZ Labour Party and other like thinking political parties should concentrate their energies on other more important band-aid areas.

  9. savenz 9

    I think to look at inequality you have to look at globalism a lot more and the rise of the mega wealthy individual and the mega wealthy organisation which has never existed in such a way before globalism in terms of reach and ability to change society.

    The irony of our taxes in NZ instead of going to schools and social welfare that they were previously used for, instead being used for corporate welfare like science grants for oil exploration, a NIWA vessel which should be used for helping Kiwis protect themselves from climate change and weather science, instead at tax payers cost now converted to help mega oil corporations look for oil.

    Under TPPA that same oil company being able to sue NZ government in separate courts for ‘lost potential profit’ or tobacco companies now suing Australia for plain packaging or in South American for not being allowed to pollute lakes.

    Inequality is about power imbalance.

    At present corporations are controlling government policy, democracy as we know it is now being eroded into something completely different.

    If you look at an individual like John Key, using his wealth collected by currency speculation to actually take over government in NZ, be a chairman of The IDU (forum in which political parties holding similar beliefs can come together in a unified voice toward the promotion of centre-right policies around the globe) and using spin doctors like Crosby Textor, contacts in media to control the news and so forth it is not a fair fight, dirty politics to control the opposition and defence and police forces now involved in completely political prosecutions (Hager, Dotcom) which benefit friends of John Key. John Key is quite happy to change employment laws for Hollywood and is actually treating his role as a way to further his own wealth and connections and his own right wing agenda.

  10. savenz 10

    If you want a fundamental challenge to inequality and capitalism here is a video from conceptual artist Teo Wells. Note this might be a challenging watch to those who do not have much experience with conceptual art.

    It’s nearly an hour but worth watching to the end to see how somebody with nothing can successfully challenge power structures and distribute ideas and how his ‘outrageous idea’ of being happy being unemployed was so undermining and outraged ministers and the public.

    Wells says; “Both myself and my collaborator Laura Shepard were persecuted by the Ministry of Welfare, slandered on national television by the acting Minister and we were subject to three court trials, lasting a year.”


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