The Oxfam report on global inequality continues to make news in New Zealand.
A few tidbits from the Credit Suisse report on which Oxfam’s figures are based:
- If you have net assets of $2,200 USD ($3,098 NZD), you’re in the world’s top half.
- If you have net assets of $71,560 USD ($100,760 NZD), you’re in the world’s Top 10%. You fat-cats! There are about two million Kiwis in this category.
- If you have net assets of $744,400 USD ($1.05m NZD), you’re in the world’s Top 1%. Auckland’s average house price cracked the million mark last September. So if you own the average house in Auckland, debt-free, that likely puts you into the world’s Top 1%. About 272,000 Kiwis are in the world’s Top 1%.
It’s also fun to think about how New Zealand’s Superannuation system affects these figures. New Zealand has an indexed public pension system. If you’re 65 and expecting to live to 95, the value of the future Superannuation payments is about half a million dollars. That does not count as wealth in any of these wealth inequality figures.
If the government tomorrow abolished NZ Super and deposited the present value of your superannuation entitlement into your Kiwisaver account, it would count as wealth in the wealth inequality figures. The real extent of wealth inequality is then overstated in measures that ignore transfers that everybody gets.
The same Credit Suisse report provides gini coefficients on wealth inequality across countries. New Zealand sits at 69.1. A few other countries, for comparison purposes:
- Australia: 68.2
- Belgium: 64.1
- Canada: 73.2
- China: 81.9
- Denmark: 89.3
- Finland: 76.6
- Germany: 78.9
- Italy: 68.7
- Sweden: 83.2
- UK: 73.2
- USA: 86.2
It’s not at all obvious to me that any of these numbers are right or wrong; New Zealand’s seems to stand at the lower end of the range, but isn’t particularly remarkable. It’s a lot lower than egalitarian Sweden’s, for example. What isn’t shown in the numbers is the process by which wealth is accumulated.
I think that matters far more than what any particular number is. If you get rich by crony deals in corrupt countries, your wealth has been at the expense of the poor and of the country’s long-term prosperity. If you get rich by providing goods and services that others value more than the money they had in their pockets, then that’s hardly hurting anybody.