Three decades of Rich List growth

I’ve just run the numbers on the latest NBR Rich List, released earlier this month. The graph below shows how the List has grown in the three decades of its life. Very rapidly, is the short answer: from $13 billion to $84 billion (in constant 2015 dollars). It has almost doubled – increased by 95% – since a low point a decade ago during the global financial crisis. (Note: I am counting only the New Zealand resident members of the List, not the overseas billionaires with the occasional bolthole here.)

These wealthiest New Zealanders are definitely enjoying an increased share of the economy. To quote a paper I wrote with Auckland University’s Tim Hazledine a couple of years ago:

We find that the wealth held by the richest 0.01% of the New Zealand population has risen from 6% of annual GDP in 1996 to more than 21% in 2015. There is some evidence that this wealth has persisted or will persist across multiple generations.

These figures, and this increase in wealth concentration, are a useful reminder that wealth inequality is undoubtedly underestimated by the Household Economic Survey that Statistics New Zealand runs – because wealthy people refuse to take part in it, generally speaking.

What else can we tell from 30 years of the Rich List? My principal observation is that the data are consistent with the gloomy prediction of Thomas Piketty, namely, that we are in the long run reverting to a state of Victorian-style levels of wealth inequality. (Albeit our social arrangements, in particular the welfare state, are very different to those which pertained in the 1800s.)

We see, firstly, an increase in wealth concentration at the upper end. Second, much of the new fortunes are being generated in property, according to the NBR itself. Thirdly, inheritance appears to be highly important. As Hazledine and I found, in 2015 around 80 of the 180 fortunes on the List had a strong dynastic element, having either been inherited from previous generations or passed down to the latest ones. And that measured only the fortunes where there was public evidence of multigenerational direct activity in running the business itself. The number of fortunes in which wealth would simply be distributed to the next generation was undoubtedly far greater – perhaps close to universal.

Piketty’s central point is that capitalism tends to generate very large inequalities: the forces tending towards inequality are greater than any ‘natural’ self-correcting mechanism. Inequality is reduced only when its level becomes insupportable to the population. When will that point occur for New Zealand, one wonders?

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2 comments on “Three decades of Rich List growth
  1. As usual, thank you for your thoughtful and evidence-based observations about capitalism gone berserk.

    Although I prefer to think of the ‘problem’ as much deeper than ‘capitalism’ per se. Because, if contemporary capitalism’s bedrock – neo-classical economic theory (and practice if in fact any such thing has ever been observed in real life?) strictly adhered to its largely ungrounded, mismeasured and ultimately disastrous mess of implausible fairy tales, snake oil and conceits, so many of ‘capitalism’s’ worst affronts would be gone by lunchtime.

    In particular out-of-control unearned and therefore undeserved profit, or rent-seeking. Thanks in large part to mismeasured, wilfully ignored and shamelessly offloaded economic and financial costs, negative externalities and spillovers. Hang on; profit/rent is in fact a complete contravention of the the neo-classical take on competitive markets’ long-run steady state. But aren’t these skyrocketing rents (what an apt term given NZ’s property catastrophe!) that the powerful, privileged policy influencers, makers and shakers extract for their own largesse in exchange for dumping the rest of us with all the harmful side effects, a prime mover in our sleepwalk back to Victorian levels of inequality?

    Anyway, in a very roundabout way all the above gets me thinking we are seriously owed some no-holds-barred gold-standard net national welfare cost-benefit analysis deployed across, well, just about every human and institutional endeavour.

    We could start with residential property investment so we can dispense once-and-for-all with the almost certainly massively overstated ‘mum and dad’ investor distraction/deflection. Ditto the housing shortage ‘crisis’ when tens of thousands of residences sit empty in Auckland alone.

    I mean come on! While I haven’t time nor inclination to check the record with Stats NZ (ignoring for now the hypocrisy given my zealous thirst for irrefutable truth and undisputed evidence), but my ballpark guess is at least two-thirds upwards to maybe even 80+% of NZ’s entire population are ‘mums and dads’. Including the powerful, privileged, insanely wealthy individuals, families (duh!) and most of the folk who represent whatever unobserved, unmeasured and unrestrained institutions are hoovering up all the houses to rent for a King’s ransom. Mmm, speaking of, is a new(ish) kind of feudalism assembling in the wings? It’s likely return looming larger by day, and only a bit far-fetched to liken it to the terrifying prospect of the White Walkers’ imminent onslaught on the 7 Kingdoms?

    And next, following your lead, we should get cracking with taxation. That is, an exhaustive, in-depth cost-benefit analysis, instead of the narrow and far less helpful finance and accounting simplicity and trickery that normally frames the subject.

    BTW, was I the only person tuned in to Radio National’s special panel convened the Thursday afternoon the government smacked the majority of the population in the head by reneging on their CGT ‘promise’ to properly digest the selective, self-interest that motivated one panelist to comment to the effect “well good riddance to CGT because I’m fundamentally opposed to double taxation”. Sure, who isn’t? BUT, instead of howls of outrage from ALL five or more talking heads there assembled, immediately countering that, duh! GST is a monstrous, pernicious double tax aimed squarely at the people least able to escape it and least able to afford double taxation. Nothing, nada, zip, dead silence. I couldn’t believe what I was (not) hearing.

    Last whinge then I’ll shut up. I doubt it’s widely known that on an admittedly simplistic PAYE and ACC/Medicare basis alone, NZ wage and salary earners pay more tax than their Australian counterparts right up to about exactly our median income, but for incomes greater than our median, Australians pay more than us. And it’s been like that for yonks. You’ll just have to go on blind faith that I’m no conspiracy theorist, but it wouldn’t surprise me in the least if there weren’t a bit of deliberate intent lurking behind that. After all, by far the most poorly done-by population ‘cohort’ in NZ are our non-voting children whose wellbeing sits third last among the 35-odd OECD countries, while our overly entitled, keen voting retirement age population are right up there at the top. Similarly, so much easier to tax the unsuspecting, less vocal lower-earning masses than the braying, badgering, bullshitting snouts in the trough whose capital keeps piling on their closely guarded capital, but costs so kindly socialised with the rest of us.

    Oh what a world…

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