Discussion around inequality tends to have been dominated by what people earn. Now the debate is turning to the question of wealth, writes Max Rashbrooke in the introduction to his new short book in the Bridget Williams Books BWB Texts series, Wealth and New Zealand.
Imagine a river that, running faster or slower as the season dictates, flows into and fills up a reservoir. While the river is a metaphor of income – a flow that changes from week to week and year to year – the reservoir is wealth: the stock, the store, the accumulation of all those years of flowing water.
In our daily lives, and in public debate, it is the rivers, the flows of income, that get more attention. Income is easier to see. People tend to worry more about having enough money to get through the week than about having enough savings to get through life. Income affects their day-to-day existence more immediately. So the stores of wealth, the reservoirs, are sometimes neglected.
But just as 30 years of change in New Zealand has diverted flows away from some rivers and into others, so too have the reservoirs in some areas been filled higher and higher while in other places they have been emptied. This process is changing the shape of society and the kinds of lives people can lead.
Reservoirs matter: having wealth to draw on, assets that provide security and stability through tough times, can make the difference between disaster and survival. Ownership of things confers a sense of belonging. And, taking a broad view, wealth is bound up tightly with income and opportunity, both generating and being generated by them. Borrowing against a house helps start up a business; financial wealth generates influential contacts. Possessing wealth brings within reach possibilities, power and influence that are otherwise unattainable.
The world was forcefully reminded of these facts last year by Thomas Piketty’s economic blockbuster Capital in the Twenty-First Century, which painted a picture of a world reverting to Victorian-style levels of inequality. Piketty’s predictions are that inherited fortunes will become increasingly important, the concentration of wealth at the upper end will attain “extremely high values”, and a large share of national income will automatically go to wealth holders before the rest is divided up among wage earners.
Piketty’s theoretical brilliance and vast array of data have helped return wealth to a central place in the global debates about economic inequality. They have also helped turn the spotlight towards the more affluent end of the wealth spectrum.
To date, much of the debate about inequality has in fact been about poverty, the problem of the poorest families falling behind the rest. The other half of the equation, the fact that richer families have pulled away from everyone else, has had much less attention.
But we can understand poverty only by understanding affluence. Salaries for many workers are low because a large amount of national income goes to those who run companies and those who own them – banks, shareholders and equity investors, some of whom take those profits offshore. Benefits are low in part because too little tax revenue is gathered from the affluent to pay for higher ones. Poorer families concentrate in certain areas largely because other neighbourhoods have been priced out of their range by wealthier families.
If wealth influences poverty in these ways, and if possessing it confers particular advantages, we need to bring it into the frame through which we look at the world. This demands a more detailed examination of wealth, as opposed to income, and a closer look at those who have it, rather than those who do not. In Wealth and New Zealand, I have sought to provide a clearer picture of wealth and to answer the question implicitly posed at the outset: why are some reservoirs so much deeper than others – and why does that matter?
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