Max Rashbrooke and his contributors have begun a valuable discussion about wealth distribution in New Zealand – but it is no more than a starting point, and one with huge gaps.

Listener:10 October, 2013

Keywords: Distributional Economics;  Social Policy;

In recent years, debates about income inequality in rich countries have become prominent because of two new concerns. The “inefficiency” one, as argued in The Spirit Level: Why More Equal Societies Almost Always Do Better (2009) by Richard Wilkinson and Kate Pickett, is that high levels of inequality generate poor overall health and increased social delinquency. The “macroeconomic” one is that the spectacular increase in American income inequality was a major contributor to the global financial crisis.

These concerns add to the traditional “ethical” critique that a society with high inequality is socially immoral and that there is surprisingly little evidence inequality stimulates economic growth in rich countries. Perhaps they also illustrate the fourth, “political” argument: the rich in America and Britain have ignored inequality, instead corrupting the political process by subverting democracy into plutocracy.

Such overseas concerns have, at last, reached New Zealand. The facts are that income inequality rose significantly in New Zealand about 25 years ago. In 1985, we were in the bottom half of the Organisation for Economic Co-operation and Development (OECD) in terms of inequality; 10 years later, we were in the top half. Inequality has not changed much since then, but New Zealand is no longer an egalitarian society.

It has taken a long time for such well-established facts to come to public prominence. Inequality: A New Zealand Crisis is the first major popular work. It both oversells the issue – if we are in crisis, we have been in it for over two decades (although the impact may be cumulative) – and undersells it by not being up to date with the research.

After two introductory chapters by the editor, journalist Max Rashbrooke, a useful chapter by Robert Wade, of the London School of Economics, offering an international overview and a couple of a more philosophical disposition follow. Then there are five on some of the consequences – for housing, educational and ethnic inequality and crime.

However, critical issues such as child poverty, health outcomes, social mobility, women and the tax and benefit system don’t get separate chapters. The last omission is particularly unfortunate given almost all the increase in our economic inequality stems from the reductions in the effectiveness of the redistribution system as a result of the lower taxes on the rich introduced by Rogernomics and of the benefit cuts under Ruthanasia.

Consequently, the five final chapters, addressing what may be done, suffer from the lack of foundation in explaining why we are now among the more unequal of rich nations. Some are pious, although others falteringly discuss “predistribution” policies – that is, what can be done to reduce inequality in the market system so redistribution policies do not have to be so expensive.

By bringing the inequality issue to our attention – numerous two-page “viewpoints” may help the reader to appreciate the impact of inequality – the book offers a starting point for a more sophisticated discussion of what is to be done if we want to become an egalitarian society again.