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?