Last Sunday, the Sunday Star Times surprised and delighted by leading, no less, with a story about a survey showing people are increasingly concerned at the growing gap between rich and poor in this country, God’s Own which once prided itself on being egalitarian. http://www.stuff.co.nz/sunday-star-times/news/4571307/Wealth-gap-divides-nation
Yesterday it followed up with a major feature http://www.stuff.co.nz/sunday-star-times/features/4594815/Mind-the-income-gap providing more detail, including a graph from the book The Spirit Level which shows NZ was 18th out of OECD 23 nations in terms of the gap between the richest and poorest 20%.
At Labour’s excellent Summer School over the weekend, Otago University academic David Craig reproduced GINI data which suggested in fact we are now the most unequal society. (He’s sending it and I will post up the link.)
Yesterday’s SST article quotes Brit Tory leader David Cameron as saying of The Spirit Level that it showed that “among the richest countries, it’s the more unequal ones that do worse according to almost every quality of life indicator…”
“We all know, in our hearts, that as long as there is deep poverty living systematically side by side with great riches, we all remain the poorer for it.”
Cameron is doing more than mouthing the words. Last year he appointed former Observer editor and long-time campaigner on equality and a ‘stakeholder’ society, Will Hutton, to head a pay equity review. (I am currently reading Hutton’s latest book Them and Us but more on that at another time.)
So you might think there is the chance for a reasoned debate here in NZ, if not Government pick-up? Accompanying the SST feature yesterday was commentary from both CTU economist Bill Rosenberg (agreeing) and Roger Kerr, director of the Business Roundtable.
I can’t find an e-version of Kerr’s comments (although the BRT website carries this http://www.policyexchange.org.uk/assets/Beware_False_Prophets_Jul_10.pdf but he starts by saying: “Other things being equal, I prefer less inequality in incomes and wealth rather than more…”
Kerr then goes on the pan the book and story and dismisses the idea of better equity by saying: “Equalising incomes, was, of course the socialist goal…” No one is talking about equalizing incomes, that’s stupid and out of line even with a Tory Prime Minister. What we are talking about is a more equitable society, where the gap between rich and poor is reduced because otherwise everyone suffers.
It is simply obscene, for example, for the Westpac chief executive in this country to be commanding a salary of $5m+ a year as we struggle out/through a recession for which banks have to take some responsibility. Banker JP Morgan had a rule that his executives should not earn more than 20 times that of his lowest paid employee. Westpac call centre people earn around $45,000 a year. That would take their CEO to around $1m.
That’s the sort of ceiling in place for state sector chief executives. Even then you have to ask why some SOE CEOs are earning twice + what the Prime Minster earns.
John Key is unlikely to follow the line taken by David Cameron. He is more likely to support Roger Kerr’s defence of the growing pay inequity gap and argues opposition is the politics of envy; that we should simply stop redistributing wealth (as if no redistribution has happened) and look at growing the economic pie.
No argument with that if the growth is sustainable but there’s no evidence provided that this is enhanced by paying someone 50 or 100 times what their workers earn.
Moreover, The Spirit Level graph of inequality appears to suggest that more equitable societies are more stable. Spain at tenth on the list of most equitable is the first truly troubled economy to be listed. The USA is second most unequal, just ahead of Portugal.
Neither our economic stability, nor our growing equality gap now perhaps the worst in the western world will be helped by tax cuts heavily favouring top earners. And another dose of state asset sales pushing up power prices won’t close the gaps either.
I think you draw a long bow to suggest that New Zealand or Australian Banks played any part in creating the recession.
As a Westpac customer I have no problem with the salary being paid to the Chief Executive as long as it is performance based.
“No argument with that if the growth is sustainable but there’s no evidence provided that this is enhanced by paying someone 50 or 100 times what their workers earn. ”
In our present economic situation this reads very like a right-wing argument against increasing the minimum wage.
Let us not forget that John Key in his words -
19 February 2008 Media Statement “would love to see wages drop”
This National Government as with Bolgers and Shipleys have always been about increasing the social divide.
The tory dream of household servant and doffing ones cap to Sir & Lady is bring advanced.
I love to see the green eyed monster come out from left wing pundits every time this discussion comes up. The jealousy that someone may have succeeded and get well paid is too much for you to bear it seems. Why should they be rewarded for hard work?
As Tony Blair put it there is no issue with increasing inequality if the poor are getting richer. Why not focus efforts on developing growth and opportunity rather than trying to pull down successful people into a world of mediocrity? Communism’s objective was equality and look how that ended.
Your Westpac example is not a good one. I have it on good authority that in around 2007 an email went around Westpac senior management saying, basically, “there’s these strange derivatives in the market – I don’t understand them, let’s not buy them.” It is decisions like that that meant the recession in Australia & NZ has been less bad than in the rest of the world.
Not saying that $5m is a “fair” salary – and I have no idea if the current CEO made that decision – but when people take decisions of that quality they deserve remuneration.
Reduced to how much? Give a figure.
Who is this “everyone”?
What is “more equitable”? Please define.
So other than taxing the rich as much as you possibly can which seems to be Labours solution, with the consequence of driving those wealthy off shore who fund the social programmes that Labour loves, what is you solution? Certainly in your nine years in Government, the wealth gap grew as people with assets (houses in most cases) became richer, while those without houses stayed the same or went backwards.
There are a variety od reasons why the wealthy accumulate more assets, but the way Labour portrays it, being wealthy is a bad disgusting thing that should never happen. We should all live in a happy socialist utopia and each should only take according to their needs. Of course this is a failed model and is doomed to only end up making the whole country poorer.
That is the politics of envy, and Labour is struggling to move on from that thinking (which is the legacy of Clark / Cullen). Until you understand that NZ under National has changed it’s thinking about wealth, and accept that Labour now also needs to change it’s thinking and therefore its policy framework.
Brendon. Your most coherent post ever!
PDM:”As a Westpac customer I have no problem with the salary being paid to the Chief Executive as long as it is performance based.”
Interesting. Wonder what the performance deserving a big bonus actually is.
How about just doing the job that you contracted to do?
How do you know that his “performance” warrants extra pay?
Our economy was most successful when the gap between income was at it’s smallest, post WWII as it was in the US and UK.
It wasn’t solely because of the war either, it can be traced back to the social, income equalisation programmes of Labour government in NZ and the Roosvelt in the US. Unions played a significant role also.
A nation creates wealth, people get rich and our most successful society figure out how to divide up the pie fairly.
To wquote Warren Buffets:
There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”
http://www.nytimes.com/2006/11/26/business/yourmoney/26every.html
Warren Buffet has nothing to be enivous about, so that sqauking crosby textor Jonkey line of envy is just stupid.
A chief executives’ remuneration is determined by the board. The board in turn have a fiduciary duty to shareholders. There is a link.
As usual, the tories rush out crying the same old tired line of how the left think people should not be rewarded – envy etc – RUBBISH – get over it and stop touting the same old lies. People on the left do not have an issue with people being rewarded – none at at. The issue is about equality. Wake up and smell the coffee – the larger that gap between rich and poor, the more likely the inequality will have a disastrous effect on all of us. The trickle down – or is that up – issues with poverty has an impact on every citizen.
The more the bottom tier struggle, the higher the likelihood that we all end up paying for the problems its casts. (crime esp)
Child poverty in a country like ours is unacceptable – and if you advocate it then you need to find your humanity. And by accepting the large gaps and making excuses for it, then you are essentially advocating the issues that come with it.
Society is far better off when the gaps are not so pronounced – feel free to be rich – but to be rich at the expense of others is not ok. I do not know anyone on the left that does not support being well off – many of them are – its how they made their money, what they do with it, and the values they have that make the difference.
And I ask this question seriously – what kind of country do you want to live in? One where people are happy, well provided for and productive, or one where you must live in a high level of security in order for the ‘lower tier’ not to break in and murder you so they can have a bit of the ‘pie’?
I dont know about you, but I do not want our country to be that bad. Therefore I am more than happy to look at ways to address the inequalities – I owe that to the future generations – my kids, your kids – all our kids – because to live for today and forgetting about tomorrow is just plain stupid. Arrogant as this may sound – how dare you wish that future on my kids, your kids, all our kids!
@Paul
“rich at the expense of others?” Explain?
Some are saying “Westpac (amoung others) had no part in creating the recession”
I be to differ, I too am a Westpac customer and I remember well the little signs that went up outside the tellers workstations offering 100% home loan finance.
This helped create the excesses of the property boom, no doubt those lenders who jumped at the chance are now struggling as the price they paid is more than the home is worth. The reckless lending was what the GFC was all about.
Sure – unfair wages, shonkey health and safety processes, exploitation and poisoning of the environment, inappropriate labour practices – and don’t ask because I know you know what I mean – exploitation, etc – then there are all the things that happened to cause the financial melt down – that is most def getting rich off the misery of others. Does that help?
People are quite capable of doing well without screwing over their fellow countrymen and woman.
I paraphrase from John A Lee’s book “Simple on a Soap Box” on discussion with a wealthy land owners son…
“Once we could get people to work for us for food and lodging; now we have to pay them too!
circa pre WWI,
Workers on minium wage in this country are working for about the same; a bit of food and roof over their heads.
That is not envy that is survival.
Much to chew on here, starting with @pdm ‘long bow to suggest that New Zealand or Australian Banks played any part in creating the recession.” While Aussie banks didn’t follow the derivatives excesses, the lending to the dairy and wine industries is one example of how banks exacerbated the problems. They did their calculations based on $7kg+ milk solids and $2500 a tonne wine prices when those were artificially high. Enncouraging people to take out mortgages linked to those prices was folly.
And “As a Westpac customer I have no problem with the salary being paid to the Chief Executive as long as it is performance based.” That’s how American bank chief executives leveraged themselves into obscene salaries – short-term performance should not be the basis for ramping up salaries. It can and did encourage behaviour that carried a long-term cost which we are all now paying.
People are quite capable of doing well without screwing over their fellow countrymen and woman.
Indeed.
@Shane – yes they are – left, right, center etc – unfortunately, we have those in all industries who do not conduct their businesses with integrity and while this continues, countries and communities will continue to decline and fail. Why is it that we are so much better at holding the smaller players who rip others off accountable – but fail to tackle the big businesses/corporates? (rhetorical question – corporate corruption and greed is rife around the world)- but it does strike me as ironic that the bit players end in jail but the big boys/girls continue to pillage and our govts, policies and systems allow them to do so.
So to sum up – being rich is no crime – and people who do well should be applauded for their efforts – but not at the expense of the rest of society.
Paul, are you suggesting that governments’ support corporatism?
Are you also suggesting that those businesses who treat customers, employees & the country badly will do better than others who do not?
A few years ago I had a discussion with a charming young lady who worked for an up-market stud farm in England. She was decrying the behaviour of the thieving poor. The farm had to have high barbed wire fences and security guards. She was staggered to walk down a Kiwi street and see house-hold garage doors left open. “Back home the thieves would steal everything in sight,” she said.
I asked her if the gap between rich and poor left a whole underclass feeling bitter and hopeless. She didn’t know and hadn’t thought about it but anyway it was nothing to do with her.
NZ today is heading that way. But what to do about it apart from invoking Robin Hood?
ianmac – By Robin Hood you mean, government theft?
@Shane – its a little more complex than just saying the govt supports corporate greed, is it not? Is this not where the left and right fundamentally disagree about how this is managed? Too many regulations and the corporates find ways to get around it – eg: regulate against pollution by putting standards in still gives corporates the opportunity to pollute, just at a lessor level. Take the regulation away and then the corporate can do what it wants. Or, make everything private, and the right will tell you that because the corporate has a vested interest (in making profit) then they will regulate themselves – as in, have a vested interest in not polluting. I am not convinced.
I do not profess to be an economist – but there must be a middle ground where business can make money, be accountable and still be good for the economy and those who live in the community. In fact, one would think you need both to be successful. You can not have a social agenda without a corporate model to assist paying for it. I guess it depends on what value you place on the whole picture – not just one part of it.
As for companies that do badly re people and environ doing well re profit – is history and in fact the last economic mess proof of that?
As an aside to the above – the guy that predicted the economic meltdown is now predicting food shortages and high cost of food to be the next crisis – in my thinking, NZ is well placed as a nation to take ‘advantage’ of this as a country. We have land, we have the ability to make food, provide jobs and make money from our land as a business. Hence selling off large tracts of it offshore just does not seem smart to me – surely investing in what the world will be short of, good R & D in this area, just makes fiscal sense. So, why sell it and why not take advantage – surely this would be a win win situation for kiwis – right and left?
Otago is not claiming David Craig! University of Auckland, thank you very much!
@darrenw – you are equating equity to mean universal communistic equality. That’s like me,whoops,equating neo-liberalism with facism
@gooner – everyone suffers when there is huge inequality because no-one, no matter how wealthy, can insulate themselves from the rampant social ills that poverty drives. Like it or not, we are a society
@monty, “There are a variety of reasons why the wealthy accumulate more assets” Yes, including skewed tax cuts, light handed regulatory regimes overseeing asset bubbles, the sale of state assets allowing rampant pricing…
If we start lowering the pay of top executives in NZ, they will simply go elsewhere – our top executives are talented managers, and are in demand around the world. Downgrading the skill level at our top companies won’t help NZ.
The problem in NZ is not that our top people are paid to highly, it’s that our bottom people are unable to earn because of a lack of skills.
The real answer lies in tackling the 20% of our population who were left behind after the Rogernomics period by getting them skills that can be used in jobs that compete with the rest of the world. Because of the huge cost of this, no Government has really tackled this problem, but it has to be done.
You’re dead right Paul, but I draw you back to your middle ground. Food shortages and associated unrest around the world will result in massive movements of people, increased immigration to NZ from our usual sources and more refugees from elsewhere. Do we have the resources to cope with that? We also have the land (to build houses on?), but to exploit that resource we’re looking at damning the Hurunui (awful decision), massive areas given over the dairy farmers, more mining, the raiding of our fish stocks, and so on…
@Paul – even from your answer I can sense the envy rising that someone is making more than you. You don’t mind people succeeding and being rewarded so long as you deem the level of reward suitable in your view. The simple fact is if we focus on redistributing existing wealth (the labour policy) we will see a quick and lasting reduction in the wealth of NZ and our ability to create wealth. If however we create some cashflow for the economy, invest this wisely in productive sectors of the community (not in providing hand outs) we can create a growth based future where everyone’s wealth can increase. This is at least a sustainable solution and better than $10 tax cuts at the cost of $1billion a year of extra borrowing. Working in International development I completely understand the reality of real poverty and I can assure you those living in extreme poverty are not looking for unsustainable handouts but a chance to create their own futures. Perhaps I just have a little more faith in the ability of people to create a future for themselves than the let who demand to own and run everything (into the ground???)
Gods own country? That was over a hundred years ago though!