Mind the GAP
Max Rashbrooke talks to about his groundbreaking father-and-son research into New Zealand’s damaging wealth divide
Joanna Wane
You could say it all began around the dinner table. Politics, socialism, inequality, the environment … no topic of conversation was out of bounds in the Rashbrooke household, where the old black and white television was always switched off at meal times.
Max Rashbrooke, who’s just turned 40, was the baby of the family. Now a noted author and advocate for social change, one of his Ted talks on the flaws in democracy has had more than half a million views. But as a young kid with two opinionated big sisters, he rarely got a word in, unless he and dad Geoff were talking about football.
Instead, he learned to listen and observe — skills that have proved useful in his work as a writer and researcher who’s exposed some uncomfortable truths about inequity in New Zealand, a country where people still like to think everyone gets a fair go.
It also gave him plenty of practice at calling out “fake news”. Whenever someone challenged the accuracy of a historical fact, or the definition of a particular word, out would come the reference books for what Max describes as a moment of reckoning.
“Even when my parents were renovating, a bookshelf was maintained by the dining-room table so that, in the event of a dispute, there was something on hand to settle it. It never felt combative, but the meaning of words, in particular, was always a great source of debate,” he says.
“Growing up in a household where there was a lot of empathy and concern over social issues and about whether or not the world was fair — that was really important. We definitely understood we were lucky to have the upbringing we did, and that in a fair world, those differences would be evened out.”
His parents, Geoff and Felicity, still live in the family home in Eastbourne, one of Wellington’s lovely seaside suburbs. But it’s at Max’s urbane art-deco apartment in the central city where Canvas sits down with father and son over a meal of spicy Thai takeaways to look back on those formative years and talk about the research project on wealth inequality they’ve been collaborating on for the past six years.
Their findings tell a disturbing story of an economic divide in New Zealand that’s becoming wider and more entrenched with each generation.
An analysis of the most recent data available, from the 2017-18 Household Economic Survey, shows a massive disparity between the top 10 per cent (aged 15 years and over), who have a collective $800 billion in wealth, and the bottom 10 per cent, who owe a combined debt of $13 billion. The richest 1 per cent (about 38,000 people) are worth 68 times more than a typical New Zealander and have a total of $141 billion tucked away in trusts.
Max, whose original research drew from the 2014-15 survey, says the poorest now have essentially the same disposable income after housing costs that they did in the 1980s, while incomes for the richest have doubled. Public perception, however, has yet to catch up.
“People are startled when I point out that the distribution of income and wealth [in New Zealand] is identical to that of the UK. We’re still feeding off the good times, in a sense, and running down the reserves of that social cohesion we built up when we had a more egalitarian society because it doesn’t look and feel like living in the UK.”
Personal wealth isn’t the money you earn, but your “net worth”. That’s calculated by adding up your assets (house, car, Kiwisaver, investments, etc) and subtracting any debts (mortgage, student loan or credit card, etc).
Often, people underestimate where they sit on the scale, assuming they represent the “typical Kiwi”, but there are more paper millionaires than you might think. Individual net worth of more than $92,000 puts you above the midpoint; $860,000plus and you’ve made it into the top 10 per cent.
To put that into perspective, the median house price in Auckland tipped $1 million for the first time last September, and property prices nationwide have been predicted to rise by as much as 13-16 per cent in the next few months.
Max is a strong supporter of some kind of capital gains or wealth tax but points out that housing is only part of the picture. His latest research shows the wealthiest 10 per cent of New Zealanders hold 59 per cent of all the country’s assets. The rest of those in the top half have around 39 per cent, leaving the poorest half of the country with just 2 per cent.
“What I was struck by [in the original research] — and this is coming up and surprising me again in the newer data — is that this is a story about control of the economy,” he says. “At the time, there was a lot of talk about housing and that conversation is at fever-pitch right now, which is completely explicable because of how important housing is.
“But the bit of analysis that almost no one had really done before is to look at how different kinds of assets are distributed. And what you discover is that housing is in fact the most evenly distributed of the major kinds of assets. About 65 per cent of the population owns their own house, even though that’s being eroded.
“In contrast, assets that come from controlling the actual active economy are almost exclusively the preserve of the wealthiest 10th of the country. Ownership of successful businesses, direct ownership of shares, financial investments, bonds and term deposits — the graph is basically flat as you go up the spectrum. Then with the wealthiest 10 per cent, it goes up like a skyscraper.
“What that shows you is that for all the advances of the past 100 years in human development and the sophistication of modern life, control and ownership of the productive economy has remained vested in a small group of people — which raises real questions about wealth and equality, people’s ability to control their lives, and where the proceeds of the economy flow.”
The Rashbrookes work closely with Statistics NZ, which provides the raw data. Geoff, an actuary with many years of experience in both the government and private sector, deciphers the data — creating tables of statistics that Max draws on to frame his reports. He plans to release a new book on wealth and the growing divisions in New Zealand society this year.
In his years as a journalist, Max has seen firsthand the realities of life for families falling through the cracks. “I’ve interviewed people in those situations. It’s really grim and it affects multiple generations,” he says. “Children are growing up in quite extreme poverty; their lives are very, very difficult — problems at school, problems with debt, damp and cold housing that makes them sick. I look at all those overlapping problems and it really worries me.
“At the bigger picture level — because inequality isn’t just about poverty, obviously, it’s a story about where all of us are on the spectrum — I worry about those increasing divisions and the loss of a common language and shared experience as the basis for having some kind of coherence as a country.
“When you lose that, people start to lose their trust and empathy for other people, that sense of having something in common. You get a really divided, fissured society. And that’s dangerous.”
If Max’s worldview reflects the shared values his family forged over the dining-room table, it was his teenage years at Petone College that sharpened his sense of injustice.
The low-decile school where two-thirds of the students were M ā ori or Pacific Islanders was a stark contrast to his “very P ā kehā part of the world” in Eastbourne.
“It was eye-opening being around kids who were really struggling and whose home life was pretty disruptive,” he says. “You learned very quickly the reality that life is tough for some people. And I think you learn it in quite an uncomplicated way when you’re 13 or 14 and haven’t built up a huge ideological view of what other people are like.
“I remember seeing how low some kids’ aspirations were as a result of the poverty they lived in; the marginalisation and the lack of support, and a lack of employment for the parents much of the time.
“They’d say things like, ‘I’m really looking forward to turning 16, then I can leave school and go on the dole — it’ll be great.’ If you hear that sort of thing on the news, it makes you furious listening to these ‘lazy’ people. When you’re actually going to school with them, you realise they’re just doing what everyone has to do, which is putting a brave face on it.”
For Max and his sisters, there was simply an expectation that they’d go to university. He began a double-degree in science and the arts at the age of 16.
“If I’d gone from my decile-10 primary school in Eastbourne to a private school, then done English literature and French at university, that would have been quite a rarefied start to life. I might not have ended up where I am now if I hadn’t been exposed to lives that were quite different from mine.”
In his latest book, Capital and Ideology, French economist Thomas Piketty writes about the dual elites that have come to characterise politics: the “Brahmin left”, named after the intellectual upper caste in India, and the “Merchant right”, where the power base is in commerce. Max reckons you can map that concept on to New Zealand pretty easily. “It’s all about what your capital is,” he says.
His mother was a librarian and the house in Eastbourne was full of books. “So we were pretty rich in educational capital. One thing that’s often struck me is that there are very few business people in the [wider] family — it’s all professionals and politics. Half of the people in the public service here appear to have gone to university with my parents.”
WInequality isn’t just about poverty, obviously, it’s a story about where all of us are on the spectrum. — Max Rashbrooke
ellington has remained the Rashbrookes’ native habitat. One of Max’s sisters is a lawyer who works for Treasury, with a special interest in environmental law; the other has a PHD in cell biology and became a vegetarian at the age of 8. Definitely the Brahmin left, then.
Felicity can trace her ancestors back to settlers who came out from England in 1843. Legend has it one of her great-uncles won the chemistry prize at Canterbury University ahead of Ernest