Outside of the ruling class most of John Key`s supporters are politically disengaged. They don`t write blogs or talk passionately about politics in public places. Altruistic concern is foreign to them. Their lives are dominated by the prospect of self advancement and the fear of downward mobility. John Key is their leader, a talisman of aspiration standing against the know-it-alls, doom mongers and bludgers. He`s made $50 million plus without a silver spoon accent or unnecessary erudition. The `aw shucks` mannerisms and occasional hesitancies seem reassuring.
John Key appeals to recent migrants without political knowledge of the national past and to anyone else who eschews the broader social picture. How is society organised? For what purpose and for whose benefit? Why are some people doing well and others not? If these questions are not publically addressed National will remain in office after 2014.
From the government`s perspective everything was going fine until a major book on inequality was launched and publicised. Then,last week Bryan Bruce`s `Mind the Gap` documentary on TV3 repoliticised the issue at the worst possible time.
The` living wage` campaign was under way and unions were marching against new labour legislation. In Labour`s caucus the right wing faction became leaderless. Two dead snapper were left twisting in the wind. The aspirants for David Shearer`s job invoked Norman Kirk and Michael Joseph Savage in the name of a more equal society.
For the Key government and its backers this is all bad news. For readers of the Daily Blog, however, it is now time for a `national conversation` as they say. So, let me start by discussing Max Rashbrooke`s edited collection, `Inequality: a New Zealand crisis`.
This follows international publications such as Richard Wilkinson and Kate Picket`s `Spirit Level` and Joseph Stiglitz`s `The Price of Inequalty`. After 30 plus years of neo-liberal ideology mainstream social scientists and non-doctrinaire economists had reached a consensus; increasing inequality has worsened social problems without improving economic growth or development. Some well off people were even prepared to support progressive taxes and increased social provision for the purposes of social cohesion. It was thus hard to sustain an ethical defence of neo-liberal policy programmes.
In this regard Max Rashbrooke notes that New Zealand is a special case. From the mid 1980s to the mid 2000`s the rich-poor gap widened faster than in any other developed country (p1). Various authors consider the nature, causes and consequences of this development over 15 chapters.
Interspersed between them are 14 unique viewpoints on wealth and poverty in New Zealand. A range of graphs, figures and tables give empirical weight to the view that inequality is structurally entrenched and socially damaging.
Of the analytical chapters two stand out. Max Rashbrooke`s statistical overview is bleakly compelling. Our top income decile starts at a mere $72,000. The top one per cent begins at $170,000 and the top 0.4 per cent at $250,000. Presiding over this tiny group are the chief executives of large companies who receive an average salary of $1.5 million. Meanwhile, 70 per cent of New Zealanders earn less than $43,000 and 50 per cent less than $24,000 (p20-21).
If one considers net wealth (incorporating cash and assets minus money owed) then the top one per cent of the adult population owns 16 per cent. In contrast, no-one from the poorest 20 per cent of New Zealand owns more than $6000 in assets. The entire lower half of adults own just five per cent of all national wealth. (p22). As Rashbrooke points out, these numbers are the outcome of an extreme neo-liberal policy agenda; regressive tax scales,privatisation, tariff removal, benefit cuts, public sector restructuring and de-unionisation. One should also mention a strict monetary policy regime dependent on a `natural` rate of unemployment (see Alister Barry`s `in a Land of Plenty`).
Wealth and income disparities have also widened more recently. Between 2009 and 2011, after the financial crash, living standards fell for the bottom 50 per cent as those of the top decile improved. Robert Wade`s chapter reveals how Anglo-American inequalities are driven by global capitalism in general and finance capitalism in particular. As of 2011 a global super-entity of 147 interlinked firms predominated. All of the top 50 except one were financial institutions. Wade comments that `such concentration provides financial firms with the leverage to colonise the governments of nation states and shape public policy in line with their preferences` (p41). Within New Zealand this process was deilneated by Bruce Jesson in `Only Their Purpose is Mad : the money men take over New Zealand`.
Of the viewpoint pieces in Rashbrooke`s collection, the most interesting were those registering the unease of well off New Zealanders. Thus, Damien Christie contrasts class privilege, property speculation and advertising with the creative contributions of writers and journalists. The latter groups, he suggests, are poorly and unfairly renumerated in New Zealand. Similarly, Asher Emanuel, a former Saint Kentigern College student concedes that skill and effort are not the primary factors in individual success. He regards meritocracy as a myth which obscures the class hierarchies associated with the secondary school system.
Each of the contributions to this book touch upon one or more aspects of inequality; poor health, substandard housing, tax loopholes, suburban boundaries, the impossibility of budgeting, the stigmatisation of beneficiaries. The general picture is, of couse, appalling and a much needed corrective to the mindless optimism of this government. Nevertheless, there are deficencies here which we need to identify before countermeasures can be developed.
Firstly, the destruction of New Zealand`s economic sovereignty is given insufficient attention. As Bruce Jesson observed, `Rogernomics` facilitated major changes in the structure of New Zealand capitalism. Directorial elites, institutional investors and shareholders were caught up in an unprecedented wave of mergers and acquistions. Corporate creditors used local or global markets to activate passive shareholders against against target companies through buyouts and offers of higher dividend returns. From 1984 to 1987, the fourth Labour government accelerated this process by deregulating the finance sector and floating the New Zealand dollar. Consequently banking,finance and finance investment expanded and the `real` economy contracted.
After the October 1987 stockmarket crash New Zealand domestic business activity was routinely incorporated within the flows of global capitalism. Between 1989 and 2008 foreign controlled sharemarket value increased from 19 to 41 per cent. From 1989 to 2006 direct foreign investment increased from $1.9 billion to $82.7 billion. These funds were focussed on the purchase of existing assets rather than the creation of new productive capacity. Between 1997 and 2006,for example, transnational corporations made NZ $50.3 billion in profits from their New Zealand operations, yet only 32 per cent of this sum was reinvested domestically. These developments are of crucial importance in understanding the government`s vantage point. John Key`s personal business success and social advancement was premised upon the erosion of economic sovereignty, in New Zealand and elsewhere. The likes of Merrill Lynch and the Bankers Trust profited from foreign exchange trades and derivatives speculation at the expense of national economies.
Secondly, the book did not fully investigate the business and social worlds of New Zealand`s wealthiest people. The same can be said of Bryan Bruce`s documentary, the plight of homeless and stressed out families should be set against the luxurious lifestyles associated with wealth concentration. Do the rich inhabit a global or national world? Where do they make most of their money? To what extent are they repatriating profits offshore? Answers to these questions will provide a more complete picture of inequality in New Zealand.
The prospect of an ongoing national conversation about inequality will be terrifying the Key government. For the truth is this. They are less interested in economic development and national prosperity than in wealth defence. The 2008-10 tax cuts, the refusal to consider a capital gains tax, taxpayer subsidies for South Canterbury Finance and Rio Tinto, the low interest loan for Media works (now bankrupt), the sweetheart deal with Sky casino, the partial privatisation of Mighty River Power and Meridian, this is all about maintaining privileges and investment opportunities for the wealthy few. Their contributions to a National re-election victory will thereby be guaranteed.
Don`t let them get away with it! Make inequality a political issue and expose the greed that masquerades as individual aspiration.