The Bank of Mum and Dad has allowed New Zealand’s wealthy to become ‘opportunity hoarders’ | Max Rashbrooke

In the last few decades, an apparently ordinary financial institution has assumed an importance that could hardly have been foreseen. It is not a finance company, a payday lender or even a crypto-currency. It is, rather, the Bank of Mum and Dad. Barely a day goes by without a media story about the struggles of young people to afford a first home, and their experience is rarely free from some kind of parental influence. Even the young grafters who have supposedly pulled themselves up by the bootstraps into homeownership often turn out to have lived rent-free with their parents or received some other kind of family support. Even more often, of course, they have simply relied on a large deposit from mum and dad.

This is, in one sense, innocuous: parents want to assist their offspring financially, and have surely been doing so for as long as money has existed. But it is also insidious, because it allows some young people a significant – and completely unfair – advantage over others. And because those who can help their children into homeownership are themselves more likely to be homeowners, it ensures that advantage and disadvantage are passed down the generations. The economist Shamubeel Eaqub, with his eye for a well-turned phrase, calls this “the return of the landed gentry”.

This is just one sign among many that, contrary to the idea of a classless New Zealand, we live in a country with entrenched social differences. It also calls on us to take a closer look at our history, because for all the traditional talk of fairness, plenty of other forces have been at work.

During the postwar period, the landowner Charles Prendergast Knight, faced with a Labour government that was raising taxes, strengthening the welfare state and attacking inherited wealth, wrote defiantly to his friend Maurice Le Cren, “well, dear fellow, we still have our breeding!”

This scene, which could have come straight out of snobbish Britain, sits oddly with the New Zealand myth that has always proclaimed this an egalitarian country. At certain times, for certain groups, and looked at under certain lights, it has been that country. But it also has been, and is, deeply unequal. The word “breeding” brings this home to us: a signifier of superior bloodlines or upbringing, it bespeaks hierarchy. And while Knight’s belief in it may have been extreme, it was not unique.

Although New Zealand is at last coming to grips with the legacy of colonisation, it has been slower to recognise a deep seam of intense economic and social differences – including among Pākehā (European New Zealanders) – that runs right through its history. In the 1890s, for instance, the wealthiest 1 per cent owned fully two-thirds of the country’s assets. Things are more equal today, but even so, roughly that share of assets is still commanded by the wealthiest tenth. The pursuit of economic wealth is, by itself, unsurprising. People crave the security it provides: the stability, the reserves to draw down, the stake in the future. But it becomes destructive when the imbalance of wealth goes far beyond what is fair or healthy. At present, someone in the wealthiest 1 per cent of adults – a 40,000-strong club – has a net worth sixty-eight times that of the typical (median) New Zealander. Can we really say that someone, no matter how talented or hard-working, is worth nearly seventy times the typical Kiwi?

Dwelling on upper-end privilege can often be discomforting to New Zealanders. Raised on a diet of egalitarian ideas, many feel uncomfortable talking about wealth; such discussion is often dismissed as the politics of envy. Poverty, though still controversial, is a safer subject. But we cannot understand deprivation unless we understand affluence. On the wealth spectrum, everyone is connected; everyone’s actions affect everyone else. The more profits go to company owners, the less there is left for frontline workers. An excess at one end makes a deficit at the other. While we can seek to raise living standards for all – subject to environmental limits – we can never generate so much wealth that we can forget about its distribution.

Think, too, about what accumulates around wealth. An unequal wealth distribution creates, and is created by, inequalities in many of the other “goods” that make for fulfilling lives: health, housing, schooling, income and political power, to name a few. Wealth opens up opportunities to live in certain areas, get one’s children into certain kinds of school, make certain kinds of social connection, exert certain kinds of power. Those things in turn make it easier to accumulate wealth. And wealth itself generates wealth, through interest, rents and dividends. It is as if people have stepped on an up escalator and, whatever their initial merits, been borne upwards by a mechanism that relies little on their own effort. In contrast, those with minimal wealth are kept on a down escalator by factors – forced reliance on loan sharks, lack of decent jobs or the skills to fill them, damp and mouldy housing, discrimination – that are also largely beyond their control.

These disadvantages and advantages get passed along the generations. The most prestigious university courses recruit disproportionately from the wealthiest schools, entrance to which in turn relies on the purchase of the most expensive “in-zone” properties. University entrants more generally tend to be those with university-educated parents. People with serious wealth, in short, can concentrate opportunities and goods around themselves, and pass them on to their children. They can do this using mechanisms not available to other families – mechanisms that, in fact, exclude the children of other families.

New Zealand is not yet the US, with its extraordinary wealth inequalities and pipeline of opportunity running from high-stakes kindergarten entry through exclusive prep schools to elite, inordinately expensive Ivy League universities. But there are signs – especially in the growing segregation of secondary schools – that we have for some time been heading in that direction. Since the 1980s, economic inequality in New Zealand has risen dramatically, exacerbating other disparities and concentrating opportunities at the top. Our wealthy families may have become, as the Americans have it, “opportunity hoarders”.

  • Max Rashbrooke is a senior associate at New Zealand’s Institute for Governance and Policy Studies. This is an edited extract from his new book Too Much Money: How Wealth Disparities Are Unbalancing Aotearoa New Zealand (Bridget Williams Books, $39)



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