by Stephen Olsen
London School of Economics professor Robert Wade and journalist Max Rashbrooke make for a formidable pairing when it comes to framing essential questions about wealth and inequality.
The two combined to give a public talk on November 26 to a packed auditorium at the Royal Society of New Zealand in Wellington.
Structured around opening addresses, followed by a round of questions and answers facilitated by economist Geoff Bertram, the evening brought some excellent clarity to a range of complex issues that impact, one way or another, on all aspects of society.
For his opening turn at the dais, Rashbrooke began with a reference to the response that his new book Wealth and New Zealand, subtitled We can understand poverty only by understanding affluence, had been garnering. Earlier that week he had written about its reception for The Guardian, noting first of all that the core of the 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 per cent have just 4 per cent.
“My book fires no angry salvoes at the affluent, calls no one to the barricades,” he wrote. “So 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’.”
Rashbrooke conceded that some people simply find any focus on wealth and the wealthy unsettling or, as the book’s publisher Bridget William Books put it in a promotional flyer, “It is almost as if talking about wealth — really talking about it — is one of our last great taboos”.
Rashbrooke: “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.”
A fond user of metaphors, Rashbrooke spoke about the distribution of wealth in terms of it being a 10 storey building.
In New Zealand the top two floors of that building would be owned solely by the wealthiest one per cent.
He also said that focusing just on poverty within the debate on inequality is similar to just seeing one half or the downside of a seesaw.
If you’re at the “bottom end” then your income (flowing like a river) isn’t going to accumulate into enough personal wealth sufficient to open up opportunities, or provide security in tough times, or give you something to borrow against, or act as a basis to foster a larger stake in society from.
Another favourite Rashbrooke metaphor is that wealth is like a reservoir, and, mixing metaphors, the wealthy have only become wealthy by drawing on a common pool of resources. A common pool that includes “driving on roads we all paid for, passing information through government-funded communication networks, employing a workforce educated at everyone’s expense”.
Robert Wade applied a much larger lens to shifts in macroeconomic settings
that have, in a contradictory way, had the consequence of flattening economic growth across the OECD, while a more regressive tax system has accompanied less progressive social protection spending. Basically a road to living within our means, along which Governments “shrink away from disaffecting the wealthy” and the middle class keeps showing a high tolerance for austerity.
Wade called it a “trap” to be fixated on taxation, or taking away wealth, as a silver bullet for reducing inequalities. Instead of redistribution of wealth, he favours pre-distribution, or “not giving it to them in the first place”. He later went on to describe the most recent economic crisis not as a credit crisis, but as an “underlying wage crisis”.
Other contributing factors to being on the verge of Victorian-style levels of inequality that surfaced during the Q&A session were the decline of unions and the omission of the finance sector in macroeconomic modelling, despite that sector’s dominance.
Most importantly this was an opportunity to, in Max Rashbrooke’s words, “discuss these issues, calmly and rationally, because we are seeing patterns of wealth which we struggle to understand”.
“If we can’t talk about these issues, we have little chance of knowing how to respond to them — and we will become ever more isolated from the growing international debate on wealth. For either of those things to happen would leave New Zealand all the poorer”.
— Reprinted with permission from Kete Kupu. Stephen Olsen is a media adviser with the New Zealand Council of Christian Social Services.