tag:theconversation.com,2011:/uk/topics/wealth-gap-31865/articleswealth gap – The Conversation2023-09-14T11:47:05Ztag:theconversation.com,2011:article/2132702023-09-14T11:47:05Z2023-09-14T11:47:05ZWealthy but worried: why the UK’s top 10% are turning their backs on the rest of society<figure><img src="https://images.theconversation.com/files/548010/original/file-20230913-25-9kovxd.jpg?ixlib=rb-1.1.0&rect=406%2C583%2C5339%2C3253&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/flat-isometric-crowd-people-forming-silhouette-577734244">Sentavio/Shutterstock</a></span></figcaption></figure><blockquote>
<p>I feel fairly middle of the road and average, but objectively I know this is completely untrue. I am at the top of the income percentiles – though I also know I’m miles away from the very rich. Everything I earn goes at the end of the month: on school fees, holidays, and so on. I never feel cash-rich. (William, City firm director in his 50s)</p>
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<p>Recently, there seem to have been a lot of people like William, in privileged jobs and on six-figure salaries, complaining that they’re “struggling” – including to <a href="https://www.thetimes.co.uk/article/200k-a-year-and-struggling-affluence-isnt-what-it-was-6sdmx3ml8">The Times</a>, <a href="https://www.indy100.com/viral/100-grand-salary-income-wealth">The Independent</a>, the <a href="https://www.dailymail.co.uk/money/bills/article-9798509/Even-wealthy-dont-cash-rainy-day.html">Mail</a> and the <a href="https://www.telegraph.co.uk/tax/income-tax/why-125000-does-not-make-rich-britain-today/#:%7E:text=The%20Telegraph's%20analysis%20found%20that,after%20taxes%20and%20basic%20outgoings">Telegraph</a>. Perhaps you recall the <a href="https://www.independent.co.uk/news/uk/home-news/question-time-video-man-top-earners-tax-percent-80000-explained-a9213351.html">BBC Question Time</a> audience member who, weeks before the 2019 general election, couldn’t believe that his salary of over £80,000 made him part of the top 5% of UK earners – despite the UK being a country where <a href="https://www.jrf.org.uk/sites/default/files/jrf/uk_poverty_2023_-_the_essential_guide_to_understanding_poverty_in_the_uk_0_0.pdf">almost a third of children live in poverty</a>.</p>
<p>You may instinctively feel little sympathy for these high earners, but don’t let that stop you reading on. Their views and actions should matter to us all. Like it or not, they have disproportionate political influence – representing a large proportion of key decision-makers in business, the media, political parties and academia, not to mention most senior doctors, lawyers and judges.</p>
<p>And in their private lives and behaviour, more and more of this group appear to be turning their backs on the rest of society. When interviewing them for our book <a href="https://policy.bristoluniversitypress.co.uk/uncomfortably-off">Uncomfortably Off: Why the top 10% of Earners Should Care About Inequality</a> (co-authored by <a href="https://feps-europe.eu/person/gerry-mitchell/">Gerry Mitchell</a>), we heard repeated concerns about the threats now posed to their lifestyle and status. This is from people who, while a long way from the UK’s “super-rich”, enjoy far more wealth and privilege than the majority of the country.</p>
<p>We also found misperceptions about wider UK society were common among this group – for example, that state social spending is higher than in other countries, that people in poverty and receiving the most from the state are largely out of work, and that they, as high earners, do not benefit as much from the state as those on lower incomes, forgetting how much <a href="https://www.dannydorling.org/wp-content/files/dannydorling_publication_id4277.pdf">they rely on the state over their lifetimes</a>.</p>
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<p>And we often saw a distance between the worldviews expressed by many in the top 10% and their own actions. For instance, many say they have strong meritocratic beliefs, yet are increasingly reliant on their assets and wealth to secure advantages for themselves and their children, meaning inequalities among millennials and younger generations will become more dependent on inheritance. Such thinking was captured by <a href="https://www.telegraph.co.uk/money/consumer-affairs/millennials-generation-x-inherit-twice-much-baby-boomers/">a recent Telegraph</a> article that declared: “No more rags to riches – family money will be the key to getting wealthy.”</p>
<p>The environment is another area where thoughts and actions often diverge among this high-earning group. While worrying about the environment is positively correlated with income and education, research also shows that the higher your income, <a href="https://wid.world/news-article/climate-change-the-global-inequality-of-carbon-emissions/">the higher your carbon footprint</a>.</p>
<p>One potential endpoint is a world of bunkers, without trust or a functioning public realm, where we all declare one thing and do another without much heed to the common good. But increasing inequality doesn’t just threaten those in poverty – it <a href="https://www.theguardian.com/inequality/2018/sep/18/kate-pickett-richard-wilkinson-mental-wellbeing-inequality-the-spirit-level">negatively affects</a> the whole of society. It means higher imprisonment rates and more expense devoted to security, more mistrust in everyday interactions, worse health outcomes, less social mobility and more political polarisation, to mention just a few of these effects.</p>
<p>This is the road we are on, with UK inequality levels projected to reach a <a href="https://www.resolutionfoundation.org/publications/the-living-standards-outlook-2023/#:%7E:text=Although%20income%20inequality%20across%20the,per%20cent%20in%202027%2D28.">record high</a> in 2027-28. Can anything be done to encourage the UK’s highest earners to recognise that their best hope of a happier, healthier, more secure future – including for future generations of their families – is by working with society as a whole, not turning their backs on it? Or is it already too late?</p>
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<figcaption><span class="caption">Launch video for the book Uncomfortably Off.</span></figcaption>
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<h2>Who’s in the top 10%?</h2>
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<p>If you’re in a privileged position, and all your friends are from a similar background, then you don’t think about inequality on a day-to-day basis. (Luke, young strategy consultant for a Big Four accounting firm)</p>
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<p>In the UK, the threshold for the top 10% of personal income before tax is £59,200, according to the <a href="https://www.gov.uk/government/statistics/percentile-points-from-1-to-99-for-total-income-before-and-after-tax">HMRC’s latest statistics</a>. This is over twice the median wage, which is generally under £30,000.</p>
<p>But the top 10% incorporates a wide range of incomes. Accountants, academics, doctors, civil servants and IT specialists are still typically much closer to the UK’s median wage than the poorest members of the top 1%, who earn upwards of £180,000. The higher you climb up the distribution ladder, the larger the distance between the steps becomes, which is perhaps why a 2020 <a href="https://trustforlondon.org.uk/research/can-public-consensus-identify-a-riches-line/">Trust for London</a> report found little agreement on where the “riches line” is – defining who, exactly, is rich and who isn’t.</p>
<p>The way we think of richness is generally absolute rather than relative. Images of Lord Sugar, Donald Trump and the characters of Succession come to mind – along with Ferraris, caviar and private jets. Such thinking may explain why some in the top 10% agree with the principle that the <a href="https://www.ft.com/content/9d528ae9-ac82-44f1-84a8-36a2c0bf1ab7">rich need to pay more tax</a>, but do not think it includes them.</p>
<p>And while this is a diverse group, they still <a href="https://www.tasc.ie/publications/inequality-and-the-top-10-in-europe-full-report/">share many characteristics</a>. The majority are men, middle-aged, southern, white and married. Members of the top 10% are more likely to own their home or have a mortgage. More than 80% are professionals and managers, and over 75% hold a university degree.</p>
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<p><strong><em>This article is part of Conversation Insights</em></strong>
<br><em>The Insights team generates <a href="https://theconversation.com/uk/topics/insights-series-71218">long-form journalism</a> derived from interdisciplinary research. The team is working with academics from different backgrounds who have been engaged in projects aimed at tackling societal and scientific challenges.</em></p>
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<p>Just as they’re sociologically characterised by their education and occupation, high earners usually define themselves by hard work. After telling us they “didn’t feel rich”, most would admit they were in some way “privileged” – then follow that with a declaration of having “worked hard” to get there. Most clearly feel they’ve earned their privileged position, and that “life is fair”.</p>
<p>At the same time, even though they define themselves through their graft, many high earners don’t think <a href="https://www.vox.com/2018/5/8/17308744/bullshit-jobs-book-david-graeber-occupy-wall-street-karl-marx">their work is particularly meaningful</a>. Susannah, who is in a very senior position at a large bank, was blunt about the contribution of her work to society at large:</p>
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<p>[Laughs]: Not much really … Well, I suppose you could say that I’m helping to make sure the bank are spending efficiently. They’ve got a huge customer base globally, so we’re helping deliver products at a more affordable price and the customer service they get around that is better. But if I compare that to my husband’s contribution as a [public sector worker], his is way more.</p>
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<p>The more that someone’s position is based on being able to distinguish themselves from others – be it through the accumulation of money or “cultural capital” – the less incentive there is to socialise with others who cannot meet this criteria of what is valuable.</p>
<p>Luke spent the first part of his life in a private school, enlisted in the army, then attended Oxbridge. He was later a teacher in the Teach First programme, before starting work as a consultant. He told us that his background meant he doesn’t really think about inequality on a daily basis. He comes from a privileged upbringing and all his friends do too. He does not interact with anyone outside his socioeconomic group, although he did when he was a teacher, commenting: “It was clear I was teaching kids with very different lives.”</p>
<p>An exception among our interviewees was those who had experienced upward mobility. Many of them answered that they did know people who were significantly less wealthy, and who still lived in the place from which they had “escaped”. Gemma, a consultant with a £100,000+ income in her late 30s, moved from the north of England to London. She told us:</p>
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<p>You don’t know what people earn in London. My closest friends tend to be people I’ve worked with, that’s just how it’s turned out, so you’re meeting people at around the same economic level. At home, I know what people do and how much they earn.</p>
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<h2>How the top 10% feel about the world today</h2>
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<p>As I’ve started to earn more and worked hard for it, I care more about the tax I pay. I didn’t think about it when I was younger … But now I’m more aware of it and how it’s helping society. (Louise, sales consultant for a global tech company in her 40s)</p>
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<p>When we asked Louise about inequality, the less well-off and whether the rich should do more, her answers were broadly the same as we would give: inequality is detrimental to society and not inevitable; those in poverty struggle because of circumstances beyond their control; the rich should make much greater efforts to address inequality. However, when asked which political party she voted for in the last election, she responded: “The Conservatives.”</p>
<p>The obvious question we should have asked next was, why? But for some reason, we let the silence linger – until Louise’s voice cracked slightly. “The tax issue,” she said. “Protecting high earners.”</p>
<p>Like so many of the “uncomfortably off” we interviewed – including members of the top 10% by income in Ireland, Spain and Sweden – Louise did not think of herself as rich. She agreed there should be more redistribution and more help for those worse-off in society, but she didn’t agree it should come out of her taxes. This was not an uncommon view among our interviewees:</p>
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<p>If I’m contributing to people who are below the poverty line, fine. But if I’m funding people who are sitting at home and don’t want to work, then I’m not happy about it. Do I want taxes to go up for higher earners? No, I pay more than enough. (Sean, small business owner in his 40s with a top 1% income)</p>
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<p>Our interviewees often don’t think of themselves as beneficiaries of public policy, and tend to think state action is, almost by definition, overweening and invasive – forgetting the myriad ways that all of us depend on public infrastructure and on underpaid <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/articles/coronavirusandkeyworkersintheuk/2020-05-15">key workers</a>. This even applies to those who, like Sean, do not come from wealthy families themselves. </p>
<p>Whenever they can afford it through their own spending or as a perk from employment, high earners in the UK are increasingly <a href="https://www.bbc.co.uk/news/uk-northern-ireland-64971161">relying on the private sector</a>, especially as they see the public sector as <a href="https://theconversation.com/school-concrete-crisis-how-raac-has-been-used-well-beyond-its-expiry-date-212893">crumbling</a> and <a href="https://theconversation.com/strikes-why-refusing-public-sector-pay-rises-wont-help-reduce-inflation-198333">inefficient</a>. The more they do so, the less likely they are to associate paying tax with something that benefits them directly and to trust public solutions to public problems.</p>
<p>Sometimes, this withdrawal into the private realm is justified as a progressive stance to protect others. Maria, a marketing director in her 40s, told us, regarding her recent decision to use private education and healthcare for her family:</p>
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<p>I’ve decided to go private to give my space to someone else. The government wants us to do that – why else would they be advertising that there are no doctors?</p>
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<img alt="Two men in suits with very different piles of cash" src="https://images.theconversation.com/files/548014/original/file-20230913-17-imqte4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/548014/original/file-20230913-17-imqte4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=372&fit=crop&dpr=1 600w, https://images.theconversation.com/files/548014/original/file-20230913-17-imqte4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=372&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/548014/original/file-20230913-17-imqte4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=372&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/548014/original/file-20230913-17-imqte4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=468&fit=crop&dpr=1 754w, https://images.theconversation.com/files/548014/original/file-20230913-17-imqte4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=468&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/548014/original/file-20230913-17-imqte4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=468&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/pay-gap-between-men-two-businessmen-1933629035">Overearth/Shutterstock</a></span>
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<h2>Cracks in the narrative</h2>
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<p>I worry about my kids. I don’t know what they’re going to do because of all the jobs – and I say this from a financial services background – a lot of the entry-level jobs have been moved offshore. The job where I started [at an accountancy firm] is now done in India, and has been done in India for some years … So it’s harder to break into those industries. (Susannah, works in an international bank with a top 1% income, in her 40s)</p>
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<p>As a rule, the UK’s highest earners appear relatively pessimistic about their country’s future, but quite optimistic about their own. This signals a tacit distance between how they see their lives and the fate of the rest. However menacing and huge the challenges of climate change and inequality might be, many are confident they will still manage to do well. Politics, as terrible as it is at the moment, mostly happens to others.</p>
<p>However, cracks are starting to appear in this narrative. We conducted a first round of interviews between 2018 and 2019, and a second in early 2022. During the first round, many in the top 10% said they worried that their children would not be able to climb the professional ladder as they did. They had seen a decline in the status of hitherto solidly middle-class professions that now appear in turmoil, such as <a href="https://www.lawsociety.org.uk/topics/legal-aid/bar-strike-what-you-need-to-know">barristers</a>, <a href="https://www.theguardian.com/society/2023/aug/31/junior-doctors-nhs-england-vote-to-continue-strikes-through-winter#:%7E:text=Junior%20doctors%20went%20on%20strike,fell%20by%2026.2%25%20since%202008.">doctors</a>, and <a href="https://www.ucu.org.uk/article/13171/Start-of-university-term-to-be-hit-with-five-days-of-UK-wide-strikes">academics</a>. Respondents such as Susannah were starting to observe that the link between hard work, education and pay might be weakening as middle-class jobs are being hollowed out, threatened by automation, offshoring and <a href="https://precaritypilot.net/precarisation-and-self-precarisation/#:%7E:text=Precarisation%20denotes%20the%20decisions%20and,workers%20decide%20to%20precarise%20themselves.">precarisation</a>.</p>
<p>During the second round, the cracks appeared even wider. Amid the Ukraine invasion and with inflation rising sharply, many told us they had started feeling the pinch themselves – especially those who relied more on their income than on savings and assets. For some, the private fees required to remain in the same circles as the UK’s wealthiest, and for their children to have a fighting chance of the best jobs of the future, appeared at risk of falling out of reach. </p>
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Read more:
<a href="https://theconversation.com/london-is-a-major-reason-for-the-uks-inequality-problem-unfortunately-city-leaders-dont-want-to-talk-about-it-212762">London is a major reason for the UK's inequality problem. Unfortunately, City leaders don't want to talk about it</a>
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<p>According to the <a href="https://www.resolutionfoundation.org/publications/living-standards-outlook-summer-2023/#:%7E:text=Key%20findings,income%20fall%20in%202022%2D23.">Resolution Foundation</a>, UK citizens are living through the worst parliament on record for household income growth. Meanwhile, as the economist <a href="https://blogs.lse.ac.uk/europpblog/2020/02/21/thomas-piketty-the-current-economic-system-is-not-working-when-it-comes-to-solving-inequality/">Thomas Piketty</a> has long argued, the preeminence of capital over wages is only becoming starker. </p>
<p>In such circumstances, what should high-income earners do? The most obvious answer is to turn as much of their income as possible into assets, in an effort to insulate themselves from inequality: to move away, to hoard, to guarantee advantages for their children. In the pursuit of all of that, tax is just a burden, rather than a potentially progressive tool for the benefit of society as a whole. This is in some sense rational. High earners can see that income from assets is not taxed in the same way, and fear the impact of redistribution on the capacity to pass on privileges to their children.</p>
<p>The top 10% may be floating away in their own socio-economic bubble, but this strategy of social distancing may ultimately prove ineffectual. Inequality doesn’t just threaten those in poverty but <a href="https://www.theguardian.com/inequality/2018/sep/18/kate-pickett-richard-wilkinson-mental-wellbeing-inequality-the-spirit-level">affects the whole of society</a>, whether through an increase in, for example, imprisonment rates, a greater burden on the health service (including higher levels of mental illness), or living in less functional and cohesive communities.</p>
<p>Even those who recognise the dangers – and long-term unsustainability – of isolating and insulating themselves from wider society struggle to find a palatable alternative. Having been raised to see individual hard work as the solution to most things, the combined challenges of AI, global warming and the gig economy – coupled with increasing concentration of wealth at the very top – makes the world a confusing place for many high earners.</p>
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<figcaption><span class="caption">Danny Dorling, professor of geography at the University of Oxford, discusses the global super-rich.</span></figcaption>
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<h2>‘Everyone became polarised’</h2>
<p>The austerity measures adopted by the UK government since 2010 have done very little to increase investment and economic growth. According to inequality expert <a href="https://repositorio.cepal.org/server/api/core/bitstreams/f5af8bf4-18a6-4bca-8000-e95b09ef04bb/content">Gabriel Palma</a>, the UK, like many other rich economies, is undergoing a process of “Latinamericanisation” – of “relentless inequality and perennial underperformance”.</p>
<p>Despite this, the UK’s relatively high earners have, until recently, been mostly insulated from the worst effects of inequality. Their share of national income has grown in the past few years <a href="https://blogs.lse.ac.uk/politicsandpolicy/to-grasp-the-extent-of-inequality-look-at-the-relatively-well-off/">while that of most people has declined</a>. Yet some we interviewed said they were feeling the political effects of a more unequal and polarised society, describing politics today as “extreme” and appearing nostalgic for a lost “centre ground”. Tony, a senior IT manager told us:</p>
<blockquote>
<p>Everything now is ‘far’ [left or right] – what’s happened to the centre group? It’s not just in politics, it’s in every area of life. There’s nowhere everyone can meet … The age of debate is disappearing. The age where you could persuade people of your opinion has gone. I don’t know when it happened – everyone became polarised.</p>
</blockquote>
<p>Yet the reality is their policy preferences still tend to coincide with policy outcomes <a href="https://press.princeton.edu/books/paperback/9780691162423/affluence-and-influence">much more closely than other income groups</a>. We summarise these preferences as “small ‘l’ liberal” in two key aspects.</p>
<p>First, we found that most high earners intuitively hold an individualised worldview in which everyone is responsible for his or her own actions, and should be left alone as long as they don’t hurt anyone else and can prove that they can support themselves and their families. Through their educational and professional successes, they have managed to attain such a position for themselves so it follows that they should have the prerogative to be left mostly alone. This is seen as simply common sense.</p>
<p>Second, while this group is more likely than the rest to be relatively liberal on issues such as same-sex marriage, abortion and immigration, their views on the economy are not so left-of-centre. High earners are the most likely income group to oppose tax increases. According to both surveys and our interviews, a majority were against redistributive policies or raising taxes. <a href="https://www.tasc.ie/publications/inequality-and-the-top-10-in-europe-policy-recomme/">Comparatively</a>, the anti-welfare inclination of the UK’s top 10% is noticeable, along with its stronger support of meritocratic beliefs.</p>
<p>Michael Sandel, a professor of government at Harvard Business School, has studied the negative societal effects of <a href="https://news.harvard.edu/gazette/story/2021/01/the-myth-of-meritocracy-according-to-michael-sandel/">belief in meritocracy in the US</a>. For example, many young Americans are sold the message that they have won college places or landed desirable jobs on their own merit – ignoring the social and economic advantages that have helped along the way. This, Sandel observes, can corrode social cohesion because:</p>
<blockquote>
<p>The more we think of ourselves as self-made and self-sufficient, the harder it is to learn gratitude and humility. And without these sentiments, it is hard to care for the common good.</p>
</blockquote>
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<figcaption><span class="caption">Michael Sandel on mistaken ideas of meritocracy.</span></figcaption>
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<h2>What can be done to change this mindset?</h2>
<p>Any organisation (political or third-sector) arguing for a more liveable and equal society than the UK has now must be able to include at least some of the relatively well-off, by convincing them that greater public investment – and thus higher levels of taxation of one form or another – will benefit them too.</p>
<p>This demands more <a href="https://en.wikipedia.org/wiki/Sociological_imagination">sociological imagination</a> on the part of the UK’s high earners – a greater understanding both of their own position, and that the circumstances that allowed them to become high earners in the first place are not available to all.</p>
<p>However, appealing to any social group at a cognitive level is unlikely to work on its own, especially as the way they have carried out their lives until now, has, in their own minds, been proved correct. Most think they’re taxed enough already, that they aren’t rich and therefore the welfare state is a burden on them, and will increasingly go private.</p>
<p>Whether their position is based on their bottom line or their educational credentials, many have been socialised to create a distance between themselves and “others”. Yet the evidence we see of their mounting anxiety about simply remaining where they are suggests the material interests of many high earners may be changing. </p>
<p>The strategies they have used to propel their, until now, upward trajectories may be becoming less effective – while policies that would benefit the majority would also benefit them. These could include strengthening the welfare state, destigmatising the use of public services, demanding more from the private sector, favouring investment in public infrastructure, and taxing the wealthiest in society. However, none of these policies are currently being championed, either by the government or opposition.</p>
<p>To encourage greater acceptance among high earners, one framing of such policies is to envision a future in which being part of the 90% doesn’t seem so terrible after all. Writing about the US, <a href="https://www.brookings.edu/books/dream-hoarders/">Richard Reeves</a> has argued that high-income earners should be OK with the idea of their children falling down the income ladder. One strand of a more cohesive future is that this prospect shouldn’t be immediately horrifying to them.</p>
<p>While members of the UK’s top 10% often work for and with the very highest earners in industries such as finance and management consultancy, the interests of these two groups increasingly look quite different. It is certainly unhelpful to demonise the top 10% as the main culprits for the UK’s social and economic ills.</p>
<p>Instead, we urgently need to encourage their greater participation in society for the future common good. As the social scientist <a href="https://www.theguardian.com/society/2021/jan/04/sir-john-hills-obituary">Sir John Hills</a> put it in his 2014 defence of the welfare state, <a href="https://policy.bristoluniversitypress.co.uk/good-times-bad-times-1">Good Times, Bad Times</a>:</p>
<blockquote>
<p>When we pay in more than we get out, we are helping our parents, our children, ourselves at another time – and ourselves as we might have been, had life not turned out quite so well. In that sense, we are all – nearly all – in it together.</p>
</blockquote>
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<p><em><a href="https://howthelightgetsin.org/festivals/london?utm_source=MP+L23+Conversation&utm_medium=Article+feature&utm_campaign=HTLGI+London+2023&utm_id=The+Conversation">HowTheLightGetsIn</a>’s theme for London 2023 is <a href="https://howthelightgetsin.org/festivals/london/the-big-ideas">Dangers, Desire and Destiny</a>. The two-day festival on September 23-24 covers everything from politics, science, philosophy and the arts and attracts a host of speakers including Nobel Laureates, Pulitzer prize-winners, political activists and world leading thinkers.</em></p>
<p><em>Alongside the Conversation’s curated event <a href="https://howthelightgetsin.org/events/the-common-good-16017">The Common Good</a>, expect to see Alastair Campbell, Rory Stewart, Ruby Wax, Michio Kaku, David Baddiel, Carol Gilligan, Martin Wolf and more lock horns over a packed weekend of debates, talks and performances. <a href="https://howthelightgetsin.org/festivals/london/programme?utm_source=MP+L23+Conversation&utm_medium=Article+feature&utm_campaign=HTLGI+London+2023&utm_id=The+Conversation">Explore the full programme here</a> and don’t miss out on <a href="https://howthelightgetsin.org/festivals/london/festival-passes?utm_source=MP+L23+Conversation&utm_medium=Article+feature&utm_campaign=HTLGI+London+2023&utm_id=The+Conversation">20% off tickets using code CONVO23</a>.</em></p><img src="https://counter.theconversation.com/content/213270/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marcos Gonzalez Hernando receives funding from the Agencia Nacional de Investigación y Desarrollo and from the Centro de Estudios del Conflicto y Cohesión Social. This research was initially sponsored by the Foundation of European Progressive Studies and the Think-tank for Action on Social Change. His book, Uncomfortably Off: Why the Top 10% of Earners Should Care about Inequality, co-authored by Gerry Mitchell, is published by Policy Press (May 2023).
</span></em></p>You may feel little sympathy for people in the top bracket of earnings, but don’t let that stop you reading. Like it or not, their views and actions matter to everyoneMarcos Gonzalez Hernando, Honorary Research Fellow, UCL Social Research Institute, UCLLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2127412023-09-05T15:15:03Z2023-09-05T15:15:03ZPoverty in Britain is firmly linked to the country’s mountain of private wealth – Labour must address this growing inequality<p>Labour’s shadow chancellor, Rachel Reeves, <a href="https://www.bbc.co.uk/news/uk-politics-66634187">has said</a> that a Labour government would not raises taxes on wealth, capital gains or higher incomes. She does not, she says, see “the way to prosperity as being through taxation.” </p>
<p>Britain is asset rich. National wealth – a mix of property, business, financial and state assets – stands at almost <a href="https://wid.world/news-article/world-inequality-report-2022/">seven times</a> the size of the economy. That is double the level of the 1970s. </p>
<p>This has not come about as a result of investment and productivity growth. Instead, much of this private-wealth mountain is <a href="https://policy.bristoluniversitypress.co.uk/the-richer-the-poorer">unearned</a> – the product of windfall gains, resulting from state-driven <a href="https://www.resolutionfoundation.org/publications/the-missing-billions/">asset inflation</a>, the mass sell-off of former public and commonly held assets (from land to industries) and the exploitation of corporate power. As philosopher and civil servant John Stuart Mill quipped during the Industrial Revolution, it’s “getting rich while asleep”.</p>
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<p><em>The Conversation is partnering with <a href="https://howthelightgetsin.org/festivals/london?utm_source=MP+L23+Conversation&utm_medium=Article+feature&utm_campaign=HTLGI+London+2023&utm_id=The+Conversation">HowTheLightGetsIn</a>, the world’s largest philosophy and music festival, which returns to Kenwood House in London on September 23-24. On Saturday 23, we will host a discussion on how to restructure society for <a href="https://howthelightgetsin.org/events/the-common-good-16017">the common good</a>. <a href="https://howthelightgetsin.org/festivals/london/programme?utm_source=MP+L23+Conversation&utm_medium=Article+feature&utm_campaign=HTLGI+London+2023&utm_id=The+Conversation">Explore the full programme here</a> and don’t miss getting <a href="https://howthelightgetsin.org/festivals/london/festival-passes?utm_source=MP+L23+Conversation&utm_medium=Article+feature&utm_campaign=HTLGI+London+2023&utm_id=The+Conversation">20% off tickets using the code CONVO23</a></em></p>
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<p>This has widened the wealth gap. The top tenth of Britons now holds nearly half of the UK’s <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/totalwealthingreatbritain/april2018tomarch2020">private wealth</a>. The <a href="https://www.hup.harvard.edu/catalog.php?isbn=9780674430006">poorest half’s share</a>, meanwhile, has never exceeded one-tenth. </p>
<p>As a former US supreme court justice <a href="https://www.newgeography.com/content/004253-concentrated-wealth-or-democracy-not-both">Louis Brandeis</a> famously declared – a century ago – it was possible, in the US, to have either democracy or great wealth concentrated in the hands of a few – but not both. </p>
<p>Britain today badly fails Brandeis’s democracy test. Yet, the Labour party’s leaders have <a href="https://theconversation.com/keir-starmers-first-conference-speech-as-labour-leader-was-a-serious-affair-heres-what-you-need-to-know-168788">no declared plans</a> – at least, as yet – to close this gap.</p>
<h2>Radical thinking</h2>
<p>In its early history, Labour drew on a number of radical, egalitarian thinkers to develop the case for a greater level of equality including via <a href="https://theconversation.com/the-new-enclosure-how-land-commissions-can-lead-the-fight-against-urban-land-grabs-167817">common ownership</a> of assets. As Britain’s first professor of sociology, <a href="https://www.cambridge.org/core/books/abs/hobhouse-liberalism-and-other-writings/introduction/DE180F13230FC78763861C9804E41EC4">Leonard Hobhouse</a> put it:</p>
<blockquote>
<p>Some forms of wealth are substantially the creation of society and it is only through the misfeasance of government that such wealth has been allowed to fall into private hands.</p>
</blockquote>
<p>Historian and Christian socialist <a href="https://www.encyclopedia.com/social-sciences/dictionaries-thesauruses-pictures-and-press-releases/tawney-richard-h">Richard Henry Tawney</a>, meanwhile, warned that assets used simply to extract payments from others, and not to perform a positive role, allowed “property without function”.</p>
<p><a href="https://archive.org/details/attlee00kenn">Clement Attlee</a>, who became prime minister immediately after the second world war, accepted that poverty was essentially due to inequality and excessive private ownership. He set out to reduce wealth inequality through a mix of higher taxes, nationalisation of key industries and a commitment to collectivism. </p>
<p>The course of poverty and inequality is ultimately the outcome of the conflict over the spoils of economic activity. It also traces the interplay between rich elites, governments and societal pressure. </p>
<p>Largely <a href="https://theconversation.com/could-post-war-drive-for-a-more-equal-society-help-with-todays-cost-of-living-crisis-185743">as a result</a> of Attlee’s policies, Britain achieved <a href="https://ifs.org.uk/living-standards-poverty-and-inequality-uk">peak income and wealth equality</a> and a low point for (relative) poverty in the late 1970s. This period turned out to be the high water mark of egalitarianism. </p>
<p>Since then, these gains have been overturned, amid a return to the <a href="https://policy.bristoluniversitypress.co.uk/the-richer-the-poorer">high-inequality politics</a> of the pre-war era. Child-poverty levels <a href="https://www.gov.uk/government/statistics/households-below-average-income-for-financial-years-ending-1995-to-2020/households-below-average-income-an-analysis-of-the-income-distribution-fye-1995-to-fye-2020">have doubled</a>. A small financial and corporate elite has seized a growing share of economic gains.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/london-is-a-major-reason-for-the-uks-inequality-problem-unfortunately-city-leaders-dont-want-to-talk-about-it-212762">London is a major reason for the UK's inequality problem. Unfortunately, City leaders don't want to talk about it</a>
</strong>
</em>
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<p>Former Conservative prime minister Margaret Thatcher’s governing philosophy of a private “<a href="https://www.telegraph.co.uk/business/2023/01/05/thatcher-property-revolution-undone-plunging-home-ownership/">property-owning democracy</a>” brought a shift from collectively to individually owned wealth. It ushered in a string of policies, from the discounted sale of council homes to the sale of cut-price shares through rolling privatisation. </p>
<p>Yet the key outcome of that philosophy has been an erosion of Britain’s common wealth base. A towering <a href="https://policy.bristoluniversitypress.co.uk/the-richer-the-poorer">nine-tenths</a> of the national asset pool is now privately-owned while the share that is in public ownership has fallen from around 30% in the 1970s to one-tenth today. </p>
<h2>Rising inequality</h2>
<p>The property-owning dream is bypassing the current generation. The number of <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/internationalmigration/articles/housingandhomeownershipintheuk/2015-01-22">first-time home-buyers</a> now stands at less than half its mid-1990s rate. </p>
<p>The public’s ownership of <a href="https://www.ons.gov.uk/economy/investmentspensionsandtrusts/bulletins/ownershipofukquotedshares/2020">corporate Britain</a> has shrunk and is largely confined to the rich and affluent. More than a half of shares in the nation’s quoted companies are owned overseas <a href="https://www.ons.gov.uk/economy/investmentspensionsandtrusts/bulletins/ownershipofukquotedshares/2020">up from 8% 60 years ago</a> – largely by giant US asset management companies and sovereign wealth funds. They are displacing the share once held by UK pension and insurance funds.</p>
<p>Labour today remains largely silent on the critical distinction between new wealth creation that contributes to the common good, and extraction that serves the powerful few. In 1896, Italian economist Vilfredo Pareto <a href="https://global.oup.com/academic/product/manual-of-political-economy-9780199607952?cc=gb&lang=en&">defined</a> economic activity as either the “production or transformation of economic goods” or “the appropriation of goods produced by others.” </p>
<p>Such <a href="https://theconversation.com/why-economic-growth-alone-will-not-make-british-society-fairer-or-more-equal-202388">appropriation</a> or extraction was widespread in the Victorian era but less prevalent in the post-war decades. Today, it is once again common practice. </p>
<p>Wealth surges that are not linked to new value creation have a malign socioeconomic impact, including upward redistribution from those without to those with assets. Many large companies have been turned into <a href="https://policy.bristoluniversitypress.co.uk/the-richer-the-poorer">cash cows</a> for executives and shareholders. House price rises benefit existing property owners, at the expense of all renters. </p>
<p>Taxation is one way of rebalancing – if only marginally at current rates – these gains and losses. However, Labour has been eroding its historic mission of greater equality. </p>
<p>As Labour prime minister between 1997 and 2007, Tony Blair’s ambitious commitment to cut poverty ultimately failed because Britain’s model of extractive capitalism was allowed to continue unchecked. </p>
<p>On the day of Thatcher’s death in 2013, he <a href="https://www.bbc.co.uk/news/av/uk-politics-22073434">said</a> he’d always aimed to build on her achievements, not reverse them. He bought into the argument that surging rewards at the top were deserved and that poverty had nothing to do with the process of wealth accumulation. </p>
<p>History cannot be clearer, though. Poverty levels soared during the 1980s because of the sharp rise in the share of national income accruing to the rich, a trend that left less for everyone else. </p>
<p>Current Labour leader Keir Starmer has said that the fight against poverty requires more than “<a href="https://www.scotsman.com/news/politics/why-sir-keir-starmer-wants-to-smash-through-the-class-ceiling-with-vision-for-scotland-4254496">tinkering at the edges</a>.” A successful strategy would require a new set of embedded pro-equality measures. Yet, like Blair, he appears to be downgrading the anti-inequality goal. </p>
<p><em><a href="https://howthelightgetsin.org/festivals/london?utm_source=MP+L23+Conversation&utm_medium=Article+feature&utm_campaign=HTLGI+London+2023&utm_id=The+Conversation">HowTheLightGetsIn</a>’s theme for London 2023 is <a href="https://howthelightgetsin.org/festivals/london/the-big-ideas">Dangers, Desire and Destiny</a>. The two-day festival on September 23-24 covers everything from politics, science, philosophy and the arts and attracts a host of speakers including Nobel Laureates, Pulitzer prize-winners, political activists and world leading thinkers.</em></p>
<p><em>Alongside the Conversation’s curated event <a href="https://howthelightgetsin.org/events/the-common-good-16017">The Common Good</a>, expect to see Alastair Campbell, Rory Stewart, Ruby Wax, Michio Kaku, David Baddiel, Carol Gilligan, Martin Wolf and more lock horns over a packed weekend of debates, talks and performances. <a href="https://howthelightgetsin.org/festivals/london/programme?utm_source=MP+L23+Conversation&utm_medium=Article+feature&utm_campaign=HTLGI+London+2023&utm_id=The+Conversation">Explore the full programme here</a> and don’t miss out on <a href="https://howthelightgetsin.org/festivals/london/festival-passes?utm_source=MP+L23+Conversation&utm_medium=Article+feature&utm_campaign=HTLGI+London+2023&utm_id=The+Conversation">20% off tickets using code CONVO23</a>.</em></p><img src="https://counter.theconversation.com/content/212741/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stewart Lansley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The UK Labour Party used to radically advocate for common ownership. But as private wealth in Britain benefits from ever greater tax breaks, anti-inequality sentiment is waning.Stewart Lansley, Visiting Fellow, School of Policy Studies, University of BristolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2100062023-08-01T12:25:30Z2023-08-01T12:25:30ZRate hikes may have slowed inflation in the US – but they have also heightened the risk of financial crises for lower-income nations<figure><img src="https://images.theconversation.com/files/540041/original/file-20230730-23-hvvs98.jpg?ixlib=rb-1.1.0&rect=28%2C63%2C4690%2C3077&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Sri Lanka is among the countries facing the risk of debt distress.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.co.uk/detail/news-photo/street-vendor-sells-prawns-and-sea-food-at-her-kiosk-at-the-news-photo/1248858886?adppopup=true">Ishara S. Kodikara/AFP via Getty Images</a></span></figcaption></figure><p>The campaign to fight U.S. inflation by upping <a href="https://www.npr.org/2023/07/26/1190093285/fed-federal-reserve-interest-rates-borrowing-inflation">interest rates</a> has been going on for a year and a half – and its impacts are being <a href="https://apnews.com/article/covid-health-business-international-monetary-fund-sri-lanka-ab562cd9e16592e40ec8c6d842c74b7a">felt around the world</a>.</p>
<p>On July 26, 2023, the Federal Reserve announced <a href="https://www.cnn.com/2023/07/26/economy/fed-july-interest-rate-decision-final/index.html">another quarter-point hike</a>. That means U.S. rates have now gone up 5.25 percentage points over the past 18 months. While inflation is now coming down in the U.S., the aggressive monetary policy may also be having significant longer-term impact on countries across the world, especially in developing countries. And that isn’t good.</p>
<p>I <a href="https://polisci.msu.edu/people/directory/bodea-cristina.html">study how economic phenomena</a> such as banking crises, periods of high inflation and soaring rates affect countries around the world and believe this prolonged period of higher U.S. interest rates has increased the risk of economic and social instability, especially in lower-income nations.</p>
<h2>Ripples around the world</h2>
<p>Monetary policy decisions in the U.S., such as raising interest rates, have a ripple effect in low-income countries – not least because of the central role of the dollar in the global economy. Many emerging economies <a href="https://www.reuters.com/breakingviews/global-markets-breakingviews-2023-02-28/">rely on the dollar for trade, and most borrow</a> in the U.S. dollar – all at rates influenced by the Federal Reserve. And when U.S. interest rates go up, many countries – and especially <a href="https://african.business/2023/05/african-banker/interest-rates-hikes-exact-high-price-in-africa">developing ones – tend to follow suit</a>.</p>
<p>This is largely out of concern for <a href="https://www.imf.org/en/Blogs/Articles/2022/10/14/how-countries-should-respond-to-the-strong-dollar">currency depreciation</a>. Raising U.S. interest rates has the effect of making American government and corporate bonds look more attractive to investors. The result is footloose foreign capital <a href="https://theconversation.com/three-reasons-why-the-us-federal-reserve-bank-holds-the-world-in-its-hands-190936">flows out of emerging markets</a> that are deemed riskier. This <a href="https://apnews.com/article/covid-health-business-world-bank-international-monetary-fund-71aa7e9c225e973ec16a962fe6d53773">pushes down the currencies</a> of those nations and prompts governments in lower-income nations to <a href="https://african.business/2023/05/african-banker/interest-rates-hikes-exact-high-price-in-africa">scramble to mirror</a> U.S. Federal Reserve policy. The problem is, many of these countries already have high interest rates, and further hikes limit how much governments can lend to expand their own economies – heightening the risk of recession.</p>
<p>Then there is the impact that raising rates in the U.S. has had on countries with large debts. When rates were lower, a lot of lower-income nations took on <a href="https://www.aljazeera.com/features/2023/7/4/is-a-global-debt-bomb-about-to-explode">high levels of international debt</a> to offset the financial impact of the COVID-19 pandemic and then later the effect of higher prices caused by war in Ukraine. But the <a href="https://www.theguardian.com/business/2022/oct/02/high-interest-rates-paid-by-poorer-nations-spark-fears-of-global-debt-crisis">rising cost of borrowing</a> makes it more difficult for governments to cover repayments that are coming due now. This condition, called “<a href="https://www.imf.org/en/Publications/fandd/issues/2020/09/what-is-debt-sustainability-basics">debt distress</a>,” is affecting an increasing number of countries. Writing in May 2023, when he was still president of the World Bank, David Malpass estimated that <a href="https://www.wsj.com/articles/the-world-economy-needs-to-get-its-growth-back-group-of-seven-developing-countries-debt-financing-yield-curve-private-sector-innovation-4113e720">some 60% of lower-income countries</a> are in or high risk of entering debt distress.</p>
<figure class="align-center ">
<img alt="A man hold aloft a crate of fish." src="https://images.theconversation.com/files/540292/original/file-20230731-247744-e58okb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/540292/original/file-20230731-247744-e58okb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/540292/original/file-20230731-247744-e58okb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/540292/original/file-20230731-247744-e58okb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/540292/original/file-20230731-247744-e58okb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/540292/original/file-20230731-247744-e58okb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/540292/original/file-20230731-247744-e58okb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Mozambique is among the countries facing extra financial stress.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.co.uk/detail/news-photo/fisherman-balances-a-crate-of-fishes-on-his-head-on-news-photo/1230026981?adppopup=true">Alfredo Zuniga/AFP via Getty Images)</a></span>
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</figure>
<p>More broadly, any attempt to slow down growth to lower inflation in the U.S. – which is the intended aim of raising interest rates – will have a knock-on effect on the economies of smaller nations. As borrowing costs in the U.S. increase, businesses and consumers will find themselves with less cheap money for all goods – domestic or international. Meanwhile, any fears that the Fed has pulled on the brakes too quickly and is risking recession will suppress consumer spending further.</p>
<h2>The risk of spillover</h2>
<p>This isn’t just theory – history has shown that in practice it is true.</p>
<p>When then-Fed Chair <a href="https://theconversation.com/paul-volcker-helped-shape-an-independent-federal-reserve-a-vital-legacy-thats-under-threat-128660">Paul Volcker</a> fought domestic inflation in the late 1970s and early 1980s, he did so with aggressive interest rate hikes that pushed up the cost of borrowing around the world. It contributed to <a href="https://www.bloomberg.com/view/articles/2019-12-10/paul-volcker-death-he-left-a-complicated-legacy-in-latin-america?in_source=embedded-checkout-banner&sref=Hjm5biAW">debt crises for 16 Latin American countries</a> and led to what became known in the region as the “lost decade” – a period of economic stagnation and soaring poverty.</p>
<p>The current rate increases are not of the same order as those of the early 1980s, when rates <a href="https://www.bankrate.com/banking/federal-reserve/history-of-federal-funds-rate/">rose to nearly 20%</a>. But rates are high enough to prompt fears among economists. The World Bank’s most recent <a href="https://openknowledge.worldbank.org/server/api/core/bitstreams/6e892b75-2594-4901-a036-46d0dec1e753/content">Global Economic Prospects</a> report included a whole section on the spillover from U.S. interest rates to developing nations. It noted: “The rapid rise in interest rates in the United States poses a significant challenge to [emerging markets and developing economies],” adding that the result was “higher likelihood” of financial crises among vulnerable economies.</p>
<h2>Widening the wealth gap</h2>
<p>Research <a href="https://doi.org/10.1016/j.worlddev.2021.105635">I conducted with others</a> suggests that the kind of financial crises hinted at by the World Bank – currency depreciation and debt distress – can rip the social fabric of developing countries by increasing poverty and income inequality.</p>
<p>Income inequality is at an all-time high – both within individual countries and between the richer and developing countries. The 2022 <a href="https://wir2022.wid.world/">World Inequality Report</a> notes that, currently, the richest 10% of individuals globally take home 52% of all global income, while the poorest half of the global population receives a mere 8.5%. And such a wealth gap is deeply corrosive for societies: Inequality of income and wealth has been shown to both <a href="https://doi.org/10.1017/S0043887109990074">harm democracy</a> and <a href="https://www.journals.uchicago.edu/doi/abs/10.1017/S0022381613001229">reduce popular support for democratic institutions</a>. It has also been linked to <a href="https://doi.org/10.1177/0022343313503179">political violence</a> and <a href="https://www.jstor.org/stable/4145353">corruption</a>.</p>
<p>Financial crises – such as the kind that higher interest rates in the U.S. may spark – increase the chance of economic slowdowns or even recessions. Worryingly, the World Bank has warned that developing nations face a “<a href="https://www.worldbank.org/en/news/press-release/2023/01/10/global-economic-prospects">multi-year period of slow growth</a>” that will only increase rates of poverty. And history has shown that the impact of such economic conditions fall hardest on lower-skilled low-income people.</p>
<p>These effects are <a href="https://www.investopedia.com/terms/a/austerity.asp">compounded by government policies</a>, such as cuts in spending and government services, which, again, disproportionately hit the less well-off. And if a country is struggling to pay back sovereign debt as a result of higher global interest rates, then it also has less cash to help its poorest citizens.</p>
<p>So in a very real sense, a period of higher interest rates in the U.S. can have a detrimental effect on the economic, political and social well-being of developing nations.</p>
<p>There is a caveat, however. With inflation in the U.S. slowing, further interest rate increases may be limited. It could be the case that regardless of whether Fed policy has threaded the needle of slowing the U.S. economy but not by too much, it has nonetheless sown the seeds of more potentially severe economic – and social – woes in poorer nations.</p><img src="https://counter.theconversation.com/content/210006/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Cristina Bodea does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Almost two-thirds of low-income countries are at risk of debt distress – in part because of higher borrowing costs. And that isn’t the only problem.Cristina Bodea, Professor of Political Science, Michigan State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2019972023-07-06T13:20:27Z2023-07-06T13:20:27ZHow your favourite things can boost your wellbeing<figure><img src="https://images.theconversation.com/files/533677/original/file-20230623-28-w0ondt.jpg?ixlib=rb-1.1.0&rect=142%2C42%2C9233%2C6274&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Thinking about a favourite book.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/middle-age-greyhaired-woman-smiling-confident-2207499661">Krakenimages.com/Shutterstock</a></span></figcaption></figure><p>The cost of living crisis has left many people struggling to afford basic necessities such as food and heating for their homes. On the other hand, the top ten richest men in the world <a href="https://www.weforum.org/agenda/2022/04/economic-inequality-wealth-gap-pandemic/">doubled their wealth</a> during the COVID pandemic while 99% of people became worse off.</p>
<p>While this is a comparison of two extremes, many people attempt to “keep up with the Joneses” – looking at what the people around them own and striving to afford the same things. Comparing material wealth and resources to those around you is even more common when others are better off. It’s hard not to wonder why someone else has a nicer car or better clothes. </p>
<p>Lots of <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/jasp.12631">research supports</a> this tendency, <a href="https://journals.sagepub.com/doi/full/10.1177/00222437221141053">including our own</a>. For example, when we asked American people to watch a video about research on income inequality in their own country, unsurprisingly, it made them think about their own wealth and how it compares to those around them. </p>
<p>And we found that it doesn’t matter how wealthy a person is. Relatively well-off people still tend to look upwards in this way. There is nearly always someone who has more money or owns a better car, a bigger house or the latest gadgets.</p>
<p>But while money may not buy you happiness, <a href="https://journals.sagepub.com/doi/full/10.1177/00222437221141053">our research shows</a> that a favourite possession can actually help to make you feel happier when facing income inequality. Thinking about a single treasured possession – even something small like a favourite book gifted by a friend or a keepsake from a trip – can help prevent these feelings of deprivation and actually boost your wellbeing.</p>
<p>We used the <a href="https://www.investopedia.com/terms/g/gini-index.asp">Gini coefficient</a> – a common measure of income inequality – to analyse more than 31,000 Instagram posts from 138 countries. We found that posts tend to convey less happiness in places with more income inequality (i.e., when the Gini coefficient of the location of the post increases).</p>
<p>We focused on posts that were about favourite possessions (that used hashtags such as #favouritething, #favthing), comparing these with posts about favourite things in general, that is things that aren’t “owned”. The latter posts used hashtags such as #fashion or #favoritepeople.</p>
<p>Posts that used hashtags about general consumption and favourite things that aren’t “owned”, such as music or friends, were typically less happy and posted in areas with more income inequality. But when we looked at posts that used hashtags about favourite possessions, such as #favouritething or #favthing, we found there was a weaker relationship with income inequality. </p>
<p>So whether a post was happy or not wasn’t linked to the equality of the area it was posted in. These posts about favourite possessions were therefore less affected by income inequality.</p>
<p>This means that encouraging people to think differently about things they already own could help some cope better with inequality. Rather than focusing on how much you own, which tends to exacerbate social comparison and undermine happiness, focus instead on your favourite possessions. Our research indicates that people who do this tend to make fewer material comparisons, and are happier as a result. </p>
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<img alt="Cover of vinyl copy of The Sound of Music soundtrack." src="https://images.theconversation.com/files/533703/original/file-20230623-27-dgm9y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/533703/original/file-20230623-27-dgm9y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/533703/original/file-20230623-27-dgm9y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/533703/original/file-20230623-27-dgm9y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/533703/original/file-20230623-27-dgm9y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/533703/original/file-20230623-27-dgm9y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/533703/original/file-20230623-27-dgm9y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Maria von Trapp had the right idea about favourite things.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/miami-fl-usa-june-2021-soundtrack-1988882384">Blueee77/Shutterstock</a></span>
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<h2>Simply remember your favourite things</h2>
<p>A treasured possession doesn’t even have to be particularly expensive. From a memento purchased on a trip abroad, to your grandmother’s embroidered cushion, a football jersey that reminds you of your old school teammates, or even that tattered t-shirt of your favourite band, such items can feel priceless to their owners because they are unique and their value transcends any kind of price.</p>
<p>In a separate multi-country study using an online questionnaire, we asked 1,370 participants from China, India, Pakistan, the UK, Spain, Russia, Chile and Mexico to describe either every item of clothing they had recently purchased, or a single favourite item of clothing. After participants described these things, we asked them about their wellbeing, as well as their perception of income inequality in their country. </p>
<p>Those who thought about recent clothing purchases reported lower wellbeing when thinking about income inequality in their country. In comparison, those who talked about a single favourite piece of clothing were not as affected by the income inequality they perceived around them.</p>
<p>Three more online experiments with over 2,000 participants <a href="https://journals.sagepub.com/doi/full/10.1177/00222437221141053">revealed that</a> when people are reminded of their favourite possessions they feel less affected by income inequality because they are making fewer material comparisons. </p>
<p>In one of these studies, we found that merely describing a favourite possession made people less likely to compare their wealth to that of others. When people stopped making these comparisons they were happier – even those living in places with more income inequality.</p>
<h2>#FavouriteThing</h2>
<p>Our research shows the benefits of focusing on a few favourite things that we own, rather than thinking about the amount of possessions we have and what else we need to “keep up with the Joneses”. </p>
<p>Hashtag trends like #ThrowbackThursday encourage people to post photos on certain themes. In a similar vein, encouraging more people to post photos of their favourite possessions using hashtags like #FavouriteThing could do a lot to help boost happiness during the cost of living crisis.</p>
<p>Income inequality is rampant and the cost of living crisis has only made its effects worse. But we all possess something dear to us that can keep us from comparing ourselves to others and help protect our wellbeing in this difficult economic environment.</p><img src="https://counter.theconversation.com/content/201997/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Our research has been partly funded by the HKUST Institute for Emerging Market Studies with support from EY (IEMS17BM04; IEMS 19BM04), and the Hong Kong Research Grants Council (GRF 16507119).</span></em></p><p class="fine-print"><em><span>Amy Dalton receives funding from the Hong Kong Research Grants Council. This research project is partially supported by this funding.</span></em></p><p class="fine-print"><em><span>Anirban Mukhopadhyay receives funding from the Lifestyle International Endowed Professorship in Business at the Hong Kong University of Science and Technology. This research was partially supported by this endowment. </span></em></p>Money may not buy you happiness, but a favourite keepsake can boost happiness and wellbeing.Jingshi (Joyce) Liu, Lecturer in Marketing, City, University of LondonAmy Dalton, Associate Professor of Marketing, Hong Kong University of Science and TechnologyAnirban Mukhopadhyay, Lifestyle International Professor of Business and Chair Professor of Marketing, Hong Kong University of Science and TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2080032023-06-20T18:59:11Z2023-06-20T18:59:11ZNZ’s housing market drives inequality – why not just tax houses like any other income?<figure><img src="https://images.theconversation.com/files/532824/original/file-20230620-1879-25gtds.jpg?ixlib=rb-1.1.0&rect=12%2C6%2C4193%2C2786&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Getty Images</span></span></figcaption></figure><p>The Green Party made waves recently when it proposed to tax net wealth over NZ$2 million for individuals and $4 million for couples. As part of a broad range of actions, the <a href="https://www.newshub.co.nz/home/politics/2023/06/green-party-say-new-zealanders-can-end-poverty-with-wealth-tax.html">policy aims</a> to “end poverty”.</p>
<p>Reactions ranged from endorsement to accusations it was <a href="https://www.newshub.co.nz/home/politics/2023/06/election-2023-greens-new-tax-policies-called-envy-fuelled-by-act-but-james-shaw-marama-davidson-say-it-s-about-inclusion-collective-care.html">fuelled by envy</a>, but the debate signalled what could become a major election issue: the wealth gap and how to fix it.</p>
<p>The claim it amounts to an “envy tax” assumes all wealth has been fully earned and fully taxed in the first place. But we know that’s not the case. A good portion of the wealth accumulated at the top is attributable to fortunate circumstances generating significant tax-free gains.</p>
<p>Inland Revenue’s <a href="https://www.ird.govt.nz/hwi-research-project">recent survey</a> of the wealthiest 311 New Zealand families revealed an average net worth of $276 million. At the same time, we know many households are struggling with the rising cost of living.</p>
<p>According to Stats NZ, around 155,000 households feel their incomes <a href="https://www.stuff.co.nz/business/money/300837638/new-data-on-household-incomes-highlights-the-gap-between-the-richest-and-poorest">aren’t sufficient</a> to meet everyday basic needs. Foodbanks report ever-rising numbers of families <a href="https://www.rnz.co.nz/news/national/490464/hundreds-of-thousands-of-kiwis-don-t-have-money-for-food-as-demand-at-foodbanks-increase">unable to feed themselves</a>.</p>
<p>The major source of this lopsided wealth is the housing market. New Zealand has seen the biggest housing boom in the western world. Property owners have ridden the wave to make large tax-free capital gains, while others languish in substandard emergency housing or are forced to live in garages and cars. </p>
<p>Far too much of our scarce labour, building materials, imported fixtures and land have been diverted to unproductive high-end housing, leaving too little to meet the real housing need. Because it <a href="https://cdn.auckland.ac.nz/assets/auckland/business/our-research/docs/economic-policy-centre/pensions-and-intergenerational-equity/PIE%20Policy%20Paper%202022-2%20Fair%20Economic%20Return%20revisited.pdf">isn’t taxed properly</a>, investing in housing has been encouraged as a way to accumulate wealth.</p>
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<h2>The trouble with a wealth tax</h2>
<p>While the Greens’ wealth tax is a useful start to a wider discussion about inequality, it inevitably creates obstacles that in the end may be too difficult to overcome.</p>
<p>Probably the biggest hurdle is that this kind of tax can be incredibly complex and would provoke endless debate about what should be included.</p>
<p>The Greens’ proposal, for example, would capture business assets, shares, art above a certain value, and cars above $50,000. But what if you have two cars worth $49,000 each – why should they be excluded when one valued at $80,000 is included? </p>
<p>And how is debt factored into calculations of net wealth? House mortgages may be straightforward, but what about credit card debt, car finance or borrowing to finance overseas travel?</p>
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Read more:
<a href="https://theconversation.com/proving-the-wealthiest-new-zealanders-pay-low-tax-rates-is-a-good-start-now-comes-the-hard-part-204532">Proving the wealthiest New Zealanders pay low tax rates is a good start – now comes the hard part</a>
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<h2>Not a capital gains tax</h2>
<p>For all these reasons, it’s time to get away from debating notions of a confiscatory wealth tax and make the issue simply one of treating all income the same for tax purposes. </p>
<p>Instead of a complicated net wealth tax on everything, let’s start with the biggest culprit – housing. This would address the under-taxation of income from holding housing as an asset.</p>
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Read more:
<a href="https://theconversation.com/new-zealands-tax-system-is-under-the-spotlight-again-what-needs-to-change-to-make-it-fair-198492">New Zealand's tax system is under the spotlight (again). What needs to change to make it fair?</a>
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<p>This is not the same as a capital gains tax – those days are over. Numerous tax working groups have failed over 30 years to make headway on this. Politically it is a dead duck. </p>
<p>Besides, the real problems – inequality and misallocation of resources – wouldn’t be touched by a capital gains tax. Such a tax can only apply to gains made on houses sold in the future, not the accumulated gains over many years, and it will always exempt the family home.</p>
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<h2>How a house tax works</h2>
<p>Instead, let’s take the total value of all housing held by each individual, subtract registered first mortgages, and allow a $1 million exemption to reflect that everyone is entitled to a basic family home.</p>
<p>Then we treat this net equity as if it was in a term deposit generating a taxable interest return. When houses are held in trusts and companies, in most cases the income would be taxed at the trust or company rate with no exemption.</p>
<p>Calculated annually and pegged to the capital value of properties, this effective income would be taxed at the person’s marginal tax rate. It would affect those with second homes, multiple rentals, high-value properties – but without significantly affecting the great majority of homeowners who have much less than $1 million of net equity. </p>
<p>Thus a couple living in a $3 million house with a $1 million mortgage would fall under the threshold.</p>
<p>This approach would help put investment in housing, after a basic home, on the same footing as money in the bank or in shares. Better choices for the use of scarce housing resources should follow. </p>
<p>Landlords would no longer need expensive accountants to minimise taxable rental income. And it would reduce the blight of “<a href="https://www.stuff.co.nz/business/129998755/10-of-ghost-home-owners-intentionally-keeping-them-empty">ghost houses</a>” and residential land-banking.</p>
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Read more:
<a href="https://theconversation.com/cutting-gst-on-fresh-produce-wont-help-those-most-in-need-a-targeted-approach-works-better-207598">Cutting GST on fresh produce won’t help those most in need – a targeted approach works better</a>
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<h2>A circuit breaker</h2>
<p>The simplicity of this income approach means the government can build on the existing tax system. It lives up to the mantra of a “broad base, low rate” tax system and affects only the very wealthy and those whose tax rates are highest. </p>
<p>Moreover, it is possible to implement quickly, using existing property valuations and registered mortgages, unlike a net wealth tax where the devil is in the contentious detail.</p>
<p>The effect should be positive for those struggling in the housing market, as more housing for sale or rent is opened up. Good landlords should welcome the greater simplicity. </p>
<p>In the longer term, the extra taxable income could produce revenue for redistribution and social investment. Critically, however, it would start to give the right price signals to reduce the over-investment in luxury housing and real estate held for capital gain.</p>
<p>The approach is essentially a circuit breaker that can simply and quickly address the accumulation of wealth by a small group of people. </p>
<p>Crucially, it has a sound economic rationale. By taking the first step and including luxury and investment housing returns that are currently under the radar, it reduces the advantages of holding housing rather than more productive investments.</p><img src="https://counter.theconversation.com/content/208003/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Susan St John is affiliated with the Child Poverty Action Group.</span></em></p>Forget wealth or capital gains taxes, a straight tax on housing equity – exempting most homeowners – would be a simple and efficient way to break the circuit of inequality.Susan St John, Honorary Associate Professor, Economic Policy Centre, Auckland Business School, University of Auckland, Waipapa Taumata RauLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2038142023-05-14T11:19:12Z2023-05-14T11:19:12ZTaxing the wealthy to the hilt would make us all much better off<figure><img src="https://images.theconversation.com/files/524960/original/file-20230508-221323-dokyrv.jpg?ixlib=rb-1.1.0&rect=0%2C166%2C5044%2C2778&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Levying substantial taxes on the super-rich would lead to far more societal benefits than harms. What's taking us so long?</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/taxing-the-wealthy-to-the-hilt-would-make-us-all-much-better-off" width="100%" height="400"></iframe>
<p>In Canada today, one person — media magnate David Thomson — possesses roughly <a href="https://www.forbes.com/profile/david-thomson/?sh=200798055628">CA$73 billion</a> while <a href="https://www150.statcan.gc.ca/n1/pub/82-003-x/2021001/article/00002-eng.htm">more than 235,000 people are homeless</a>. In Toronto alone, <a href="https://www.toronto.ca/news/toronto-public-health-releases-2022-data-for-deaths-of-people-experiencing-homelessness/">187 homeless people died</a> on the streets in 2022.</p>
<figure class="align-left ">
<img alt="A shaggy-haired blonde man with a microphone in front of him." src="https://images.theconversation.com/files/524993/original/file-20230508-242259-mfeiu4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/524993/original/file-20230508-242259-mfeiu4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/524993/original/file-20230508-242259-mfeiu4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/524993/original/file-20230508-242259-mfeiu4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/524993/original/file-20230508-242259-mfeiu4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/524993/original/file-20230508-242259-mfeiu4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/524993/original/file-20230508-242259-mfeiu4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">David Thomson answers questions during a news conference in Winnipeg in 2011.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/David Lipnowski</span></span>
</figcaption>
</figure>
<p>What can be done to address these kinds of disparities?</p>
<p>Though most people naturally dislike inequality, <a href="https://www.bostonreview.net/forum_response/karl-smith-wealth-tax-will-hurt-economy-not-help/">it’s often argued that raising taxes on the rich</a> will do more harm than good by damaging incentives and investment, thereby slowing economic growth and ultimately hurting us all.</p>
<p>“Given five fat sheep and ninety-five thin, how [to] induce the ninety-five to resign to the five the richest pasture and shadiest corners?” the famous British philosopher <a href="https://archive.org/details/in.ernet.dli.2015.275419/mode/2up">R.H. Tawney</a> once asked. He continued: </p>
<blockquote>
<p>“By convincing them, obviously, that, if they do not, they will die of rot, be eaten by wolves, and be deprived in the meantime of such pasture as they have. Nor, indeed, hitherto has it been difficult to convince them, for there is nothing which frightens thin sheep like the fear of being thinner.”</p>
</blockquote>
<p>But is it really true that high taxes — even very high ones — are detrimental to societal well-being?</p>
<p>The last few years have witnessed an explosion of new evidence from economists, sociologists, political scientists and ecologists that suggests they’re not.</p>
<h2>Exaggerated concerns</h2>
<p>It’s accurate that high taxes on the wealthy bring real risks. But in general, the downsides are highly overblown. </p>
<p>For instance, a common worry is that rich people will respond to high taxes by working less. But there’s essentially <a href="https://www.aeaweb.org/articles?id=10.1257/jel.50.1.3">zero empirical support</a> for this claim. In fact, there is now close to consensus among researchers that while the rich do frequently try to avoid taxes, <a href="http://dx.doi.org/10.2139/ssrn.1136210">they don’t do so by working less</a>.</p>
<p>The most serious potential cost of high taxes is the reduction of private investment. This is <a href="https://www.nber.org/papers/w6374">definitely possible</a>.</p>
<p>But the key point to keep in mind is that such a reduction is only half the picture. It’s wrong to think of taxes as simply reducing investment, because states do not simply collect taxes — they also spend them.</p>
<p>Therefore it’s more accurate to regard taxes not as reducing investment but as rearranging it — from the private sector to the public. </p>
<figure class="align-center ">
<img alt="A sign reads Burn Capitalism during a protest. A woman wearing a mask stands next to the sign." src="https://images.theconversation.com/files/524955/original/file-20230508-266123-6zjfix.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/524955/original/file-20230508-266123-6zjfix.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/524955/original/file-20230508-266123-6zjfix.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/524955/original/file-20230508-266123-6zjfix.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/524955/original/file-20230508-266123-6zjfix.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/524955/original/file-20230508-266123-6zjfix.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/524955/original/file-20230508-266123-6zjfix.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An environmental group takes part in a three-day demonstration against what they call France’s inaction on climate issues in Paris in April 2022.</span>
<span class="attribution"><span class="source">(AP Photo/Francois Mori)</span></span>
</figcaption>
</figure>
<p>Whether this is a good or bad thing depends entirely on the details. In many cases, levying high taxes on the rich will mean money is no longer invested in foreign stock markets or spent on unproductive things like private jets and multiple mansions, but is rather spent on productivity-enhancing entities like schools, hospitals, roads, public research grants and so on.</p>
<p>Indeed, <a href="https://doi.org/10.1007/s10887-017-9150-2">critical research</a> shows that, all things considered, high inequality actually tends to reduce an economy’s overall growth rate.</p>
<p>The most sensible and cautious conclusion is that high taxes — very high taxes, in particular — could somewhat reduce economic growth, but these costs are likely to be only mild or moderate.</p>
<p>What about the other side of the ledger? What are the social and economic benefits from high taxes and reduced inequality? In my book <a href="https://global.oup.com/academic/product/against-inequality-9780197670408?cc=us&lang=en&"><em>Against Inequality: The Practical and Ethical Case for Abolishing the Superrich</em></a>, I note that five stand out:</p>
<h2>1. The environment</h2>
<p>It’s well-known that <a href="https://www.ledevoir.com/documents/pdf/chancelpiketty2015.pdf">the rich emit far more</a> carbon than the rest of us. <a href="https://oxfamilibrary.openrepository.com/bitstream/handle/10546/621341/bp-inequality-kills-170122-en.pdf">The wealthiest 20 people in the world emit 8,000 times more carbon than the poorest billion people on Earth combined</a>. </p>
<p>So imposing high taxes on the rich would be doubly effective from an environmental perspective. It would directly reduce the copious emissions of the rich. And it would provide the necessary resources to build the new <a href="https://www.versobooks.com/en-ca/products/2546-a-planet-to-win">low-carbon infrastructure</a> — including public transit, green energy grids, etc. — that we desperately need. That would indirectly help the rest of us reduce our emissions too.</p>
<h2>2. Our democracy</h2>
<p>The evidence is overwhelming that <a href="https://www.journals.uchicago.edu/doi/pdf/10.1086/714930?casa_token=Y28Akco8IIYAAAAA:L1uApOgMwzDv2W_IFi5pioNLRqaF5LX4yujtPuj56-ZO-yqWrv5f3HJBMQiW4gbUjpZy0GI2wv9L">inequality erodes democracy</a>. For instance, American scholars <a href="https://doi.org/10.1017/S1537592714001595">Martin Gilens and Benjamin Page examined</a> 1,779 public policy debates between 1981 and 2002 to see whose voices actually mattered in deciding important issues.</p>
<p>They found that:</p>
<blockquote>
<p>“The majority does not rule — at least not in the causal sense of actually determining policy outcomes. When a majority of citizens disagrees with economic elites or with organized interests, they generally lose.”</p>
</blockquote>
<p>Such evidence demonstrates that significant inequality can actually break a democracy, transforming it into oligarchy, <a href="https://www.thenation.com/article/society/cbo-american-wealth-inequality/">as has arguably already transpired in the United States.</a></p>
<h2>3. Opportunity for all</h2>
<p>Inequality makes a mockery of the cherished aspiration of equal opportunity. To take one particularly egregious example, the poorest residents of Chicago today face a life expectancy <a href="https://www.theguardian.com/us-news/2019/jun/23/chicago-latest-news-life-expectancy-rich-poor-inequality">30 years shorter</a> than their richer neighbours down the street. </p>
<p>High redistributive taxes could reverse this most brutal of disparities. </p>
<p>We also know that countries with more equality <a href="https://www.aeaweb.org/articles?id=10.1257/jep.27.3.79">tend to have greater social mobility too</a>.</p>
<p>Richard Wilkinson, the famous British epidemiologist and inequalities scholar, <a href="https://www.ted.com/talks/richard_wilkinson_how_economic_inequality_harms_societies">likes to quip</a> that if Americans want to live the American dream and not just dream it, they should move to high-tax Denmark.</p>
<h2>4. Reduced xenophobia and racism</h2>
<p>Though right-wing populism has many complex causes, <a href="https://doi.org/10.1111/spsr.12332">research clearly demonstrates</a> that one of its main drivers is economic insecurity. That’s likely because insecurity increases fear that one’s already precarious position will be worsened by competition from “immigrants” and “others.”</p>
<p>The evidence shows that right-wing populism <a href="https://doi.org/10.1111/jcms.12310">can be effectively reduced</a> by enhancing economic security — for instance by taxing the rich to fund free public services — a stronger safety net and perhaps even a guaranteed basic income. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/a-guaranteed-basic-income-could-end-poverty-so-why-isnt-it-happening-182638">A guaranteed basic income could end poverty, so why isn’t it happening?</a>
</strong>
</em>
</p>
<hr>
<p>As <a href="https://www.france24.com/en/europe/20230508-french-police-under-fire-for-allowing-neo-nazi-rally-in-paris-on-ve-day">neo-Nazis once again march</a> in the streets, <a href="https://www.splcenter.org/news/2019/02/19/hate-groups-reach-record-high">hate crimes rise</a>, far-right political parties receive <a href="https://www.bloomberg.com/graphics/2017-europe-populist-right/">more public support</a> than any time since the 1930s, the benefits of reducing such terrifying threats are hard to overstate.</p>
<h2>5. Reduced social friction</h2>
<p>Reducing inequality also builds <a href="https://doi.org/10.1016/j.rssm.2012.06.002">community health and cohesion</a>. </p>
<p>It encourages greater levels of <a href="https://doi.org/10.1016/j.socscimed.2011.03.046">agreeableness</a> and <a href="https://doi.org/10.1111/j.1540-5907.2008.00352.x">tolerance</a>, better <a href="https://doi.org/10.1002/wps.20492">mental health</a> and <a href="https://www.longdom.org/open-access/income-inequality-and-crime-a-review-and-explanation-of-the-timeseries-evidence-2375-4435.1000103.pdf">reduces crime</a>. </p>
<p>All in all, the costs of high taxes and low inequality are likely to be only moderate. But the benefits are truly enormous — a different order of magnitude entirely.</p><img src="https://counter.theconversation.com/content/203814/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tom Malleson has received funding from the Social Sciences and Humanities Research Council. </span></em></p>The costs of high taxes on the rich are likely only to be moderate. But the democratic, environmental, and health benefits are truly enormous and could transform society and dramatically.Tom Malleson, Associate Professor of Social Justice & Peace Studies, Western UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1954142023-01-04T18:59:39Z2023-01-04T18:59:39ZHow the philosophy of the past can help us imagine the economy of the future<figure><img src="https://images.theconversation.com/files/502486/original/file-20221221-13-u2pgfg.jpg?ixlib=rb-1.1.0&rect=8%2C8%2C5542%2C3692&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It's more necessary than ever before to re-examine the fundamentals of our economic order.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>The economy keeps making headlines for all the wrong reasons — stories about <a href="https://www.cbc.ca/news/business/food-price-report-1.6670597">rising prices</a>, <a href="https://www.cbc.ca/player/play/2041999427744">supply shortages</a> and a looming <a href="https://www.theguardian.com/business/2022/sep/23/unprecedented-events-creating-extremely-severe-risk-of-global-recession-economist-adam-tooze">recession</a> have been frequently making the front page these days. </p>
<p>The <a href="https://www.brookings.edu/blog/future-development/2022/03/18/inflation-could-wreak-vengeance-on-the-worlds-poor/">current economic crisis is deepening the long-standing issue of social inequality,</a> widening the gap between the rich and poor — a problem that was already accelerated by the <a href="https://www.penguinrandomhouse.com/books/301357/crashed-by-adam-tooze/">Great Recession of 2008</a> and the <a href="https://www.cbpp.org/research/poverty-and-inequality/tracking-the-covid-19-economys-effects-on-food-housing-and">economic shock brought on by the COVID-19 pandemic</a>. </p>
<p>The richest country in the world, <a href="https://www.cbo.gov/system/files/2021-08/57061-Distribution-Household-Income.pdf">the U.S.</a>, is among the most drastic examples of this trend. <a href="https://www.cfr.org/backgrounder/us-inequality-debate">Today, American CEOs earn 940 per cent more than their counterparts did in 1978</a>. A typical worker, on the other hand, only goes home with 12 per cent more money than workers from 1978 did.</p>
<p>As a <a href="https://www.epi.org/publication/ceo-compensation-2018/">report by the Economic Policy Institute</a> demonstrates, rising CEO pay does not reflect a change in the value of skills — it represents a shift in power. Over decades, American politics has undermined the bargaining power of workers by <a href="https://www.usatoday.com/story/money/cars/2014/02/20/no-south-carolina-union-jobs/5642031/">discouraging</a> and <a href="https://www.fastcompany.com/90775158/anti-union-bills-bubble-up-in-congress-despite-growing-voter-support-for-organized-labor">obstructing</a> self-organizing efforts, such as <a href="https://dx.doi.org/10.1111/j.1467-8543.2006.00518.x">unionization</a>. </p>
<figure class="align-center ">
<img alt="A man speaks into a megaphone in front of a crowd of protesters holding signs" src="https://images.theconversation.com/files/502482/original/file-20221221-23-3rf8m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/502482/original/file-20221221-23-3rf8m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/502482/original/file-20221221-23-3rf8m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/502482/original/file-20221221-23-3rf8m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/502482/original/file-20221221-23-3rf8m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/502482/original/file-20221221-23-3rf8m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/502482/original/file-20221221-23-3rf8m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The Amazon Labor Union protested at the site of the DealBook Summit in New York on Nov. 30, 2022, accusing Andy Jassy, the CEO of Amazon, of union-busting.</span>
<span class="attribution"><span class="source">(AP Photo/Seth Wenig)</span></span>
</figcaption>
</figure>
<p>The growing wealth of a minority at the expense of the majority means power is concentrated in the hands of a few people, <a href="https://inequality.org/facts/gender-inequality/#gender-wealth-gaps">mostly men</a>. It’s not surprising that figures such as <a href="https://www.cnn.com/specials/politics/january-6-insurrection">Donald Trump</a>, <a href="https://www.theguardian.com/technology/2019/mar/17/the-cambridge-analytica-scandal-changed-the-world-but-it-didnt-change-facebook">Mark Zuckerberg</a> and <a href="https://www.brookings.edu/blog/how-we-rise/2022/11/23/why-is-elon-musks-twitter-takeover-increasing-hate-speech/">Elon Musk</a> have a disproportional impact on our communities — sometimes with devastating consequences that threaten our democratic institutions.</p>
<h2>Economics with a human face</h2>
<p>It’s more necessary than ever before to re-examine the fundamentals of our economic order. The search for alternative economic models, however, is made difficult by conventional thinking patterns.</p>
<p>Many believe <a href="https://education.nationalgeographic.org/resource/socialism">we are facing a stark choice</a> between a capitalist market economy on the one hand and a socialist-planned economy on the other. </p>
<p>Although we live in a world that defines economic models in absolutist terms, it doesn’t have to be this way. We argue that the psychological and social perspectives on economy that were developed by 19th-century philosophers such as <a href="https://plato.stanford.edu/entries/hegel/">Georg Wilhelm Friedrich Hegel</a>, <a href="https://www.mqup.ca/john-stuart-mill--socialist-products-9780228005742.php">John Stuart Mill</a> and <a href="https://www.thoughtco.com/georg-simmel-3026490">Georg Simmel</a> can help us re-imagine economics with a human face. </p>
<p>These thinkers were convinced that a good economic order had to incorporate elements of classic capitalism (such as a <a href="https://www.britannica.com/topic/free-market">free market</a> in goods and services) with elements of classic socialism (such as <a href="https://democracycollaborative.org/programs/cwb">collective ownership</a> of the <a href="https://www.oxfordreference.com/view/10.1093/oi/authority.20110803100145887">means of production</a>). This is what we call <a href="https://economicpluralism.com/">economic pluralism</a>. </p>
<h2>Hegel and the problem of affluence</h2>
<p>Hegel is a good example of an economic pluralist thinker. In his <a href="https://www.cambridge.org/highereducation/books/hegel-elements-of-the-philosophy-of-right/09AE6110FE96266A206924435BAF85C5#overview">1820 <em>Philosophy of Right</em></a>, he presented an <a href="https://doi.org/10.1111/ejop.12336">extensive reflection on the modern economy</a>. He discussed the market and its operating principles, social inequality and even the formation of desires through advertisements and consumer culture. </p>
<figure class="align-right ">
<img alt="An oil painting of an older white man with grey hair wearing a white cravat and a fur coat" src="https://images.theconversation.com/files/502247/original/file-20221220-18-jgdche.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/502247/original/file-20221220-18-jgdche.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=781&fit=crop&dpr=1 600w, https://images.theconversation.com/files/502247/original/file-20221220-18-jgdche.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=781&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/502247/original/file-20221220-18-jgdche.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=781&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/502247/original/file-20221220-18-jgdche.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=982&fit=crop&dpr=1 754w, https://images.theconversation.com/files/502247/original/file-20221220-18-jgdche.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=982&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/502247/original/file-20221220-18-jgdche.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=982&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Georg Wilhelm Friedrich Hegel was a German philosopher and one of the founding figures of modern western philosophy.</span>
<span class="attribution"><span class="source">(Jakob Schlesinger)</span></span>
</figcaption>
</figure>
<p>Among the many topics he examined was the <a href="https://doi.org/10.1017/apa.2021.7">problem of affluence</a>. Hegel was not just worried about the poverty created by the modern market economy, but also about the concentration of extreme wealth in few hands.</p>
<p>Writing hundreds of years before modern multi-billionaires arrived on the scene, <a href="https://www.worldcat.org/title/philosophie-des-rechts-die-vorlesung-von-181920-in-einer-nachschrift/oclc/885459313">Hegel already argued that</a> “both of these sides, poverty and affluence, represent the scourge (Verderben) of Civil Society.”</p>
<p>Hegel’s analysis is even more prescient: He believed affluence created the counter-intuitive tendency among the affluent to feel victimized and disenfranchized by society. As a result, the affluent perceived all social demands, like taxes, as unjustified incursions into their personal freedom. </p>
<p>Hegel thought this sense of victimization could lead to an unexpected bond between those at the very top of the economic pyramid and those at the bottom — a bond that overcame differences in lifestyle and mutual antipathy to form an alliance that attacks civil society from both sides. The phenomenon of <a href="https://www.politico.com/news/2020/09/22/donald-trump-union-support-snub-joe-biden-418329">Trump’s MAGA alliance</a> is an interesting modern example of this.</p>
<h2>Re-imagining the economy</h2>
<p>Unlike some later socialists, Hegel did not think problems of affluence were best rectified by introducing a planned economy that enforces wealth equality. Instead, his approach was pluralistic. </p>
<p>He made a case for a free market exchange paired with co-operative modes of production, which are — in some respects — similar to <a href="https://www.newyorker.com/business/currency/how-mondragon-became-the-worlds-largest-co-op">modern-day worker co-operatives</a>. </p>
<p>If most economic production in society was organized co-operatively, Hegel believed, wealthier subjects would be embedded in economic decision-making with others, replacing the detrimental “bond of victimization” between the rich and poor with a collective identity based on shared economic agency.</p>
<figure class="align-center ">
<img alt="A group of people, some holding constriction hats, standing around a whiteboard having a discussion" src="https://images.theconversation.com/files/502483/original/file-20221221-14-jdfiqa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/502483/original/file-20221221-14-jdfiqa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/502483/original/file-20221221-14-jdfiqa.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/502483/original/file-20221221-14-jdfiqa.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/502483/original/file-20221221-14-jdfiqa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/502483/original/file-20221221-14-jdfiqa.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/502483/original/file-20221221-14-jdfiqa.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Worker co-operatives could help us imagine a more just and human-centric economic future.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
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<p>When reimagining our current economic order, we can take a page out of Hegel’s handbook by focusing on <a href="https://www.mondragon-corporation.com/en/about-us/">worker co-operatives</a>: economic ventures that are <a href="https://institute.coop/what-worker-cooperative">co-owned by workers</a> that make productive decisions together, often — albeit not always — in a democratic manner.</p>
<p>Under what conditions are such co-operative modes of production successful? How can the state incentivize these forms of production within the existing market economy? And are these worker co-operatives really a way to achieve economic justice? These are the questions that, inspired by the past, might help us imagine a new, pluralist, more equal and human-centric economic future.</p><img src="https://counter.theconversation.com/content/195414/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This article is an output of our project "Economic Pluralism: Past and Present" which received funding from SSHRC (Social Sciences and Humanities Research Council). </span></em></p><p class="fine-print"><em><span>.</span></em></p>Psychological and social perspectives on economy that were developed by 19th-century philosophers can help us re-imagine economics with a human face.Johannes Steizinger, Associate Professor of Philosophy, McMaster UniversityHelen McCabe, Assistant Professor in Political Theory, University of NottinghamThimo Heisenberg, Assistant Professor of Philosophy, Bryn Mawr CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1946262022-12-20T17:30:05Z2022-12-20T17:30:05ZNZ report card 2022: some foreign bragging rights but room for improvement at home<figure><img src="https://images.theconversation.com/files/498871/original/file-20221205-73820-8y8uz9.jpg?ixlib=rb-1.1.0&rect=16%2C0%2C5321%2C3545&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Getty Images</span></span></figcaption></figure><p>It’s that time of year when school and university students eagerly (or nervously) await their end-of-year results – but also an opportunity to see where the country in general might have passed or failed.</p>
<p>Although international and domestic indices and rankings should be read with a degree of caution – measurements and metrics only tell us so much, after all – it’s still possible to trace the nation’s ups and downs relative to past years.</p>
<h2>Good global rankings</h2>
<p>Overall, the country held its own internationally when it came to democratic values and standards. <a href="https://www.transparency.org/en/cpi/2021">Transparency International</a> ranked us top, equal with Denmark and Finland, for being relatively corruption-free.</p>
<p>The <a href="https://www.visionofhumanity.org/wp-content/uploads/2022/06/GPI-2022-web.pdf">Global Peace Index</a> placed New Zealand second best in the world for safety and security, low domestic and international conflict, and degree of militarisation. And human rights and civil liberties watchdog Freedom House again <a href="https://freedomhouse.org/country/new-zealand/freedom-world/2022">scored New Zealand</a> 99 out of 100 – three Scandinavian countries scored a perfect 100.</p>
<p>On the <a href="https://www.elmundofinanciero.com/adjuntos/98982/WIMF-2022.pdf">Index of Moral Freedom</a> (a libertarian think tank that benchmarks countries’ levels of “individual
freedom regarding ethics and morality”), New Zealand moved to 14th, up five places on 2020.</p>
<p>The <a href="https://www3.weforum.org/docs/WEF_GGGR_2022.pdf">Global Gender Gap Report</a> recorded New Zealand holding its position as the fourth-most-gender-equal country. New Zealand stayed in seventh place in the World Justice Project’s <a href="https://worldjusticeproject.org/rule-of-law-index/country/2022/New%20Zealand">Rule of Law Index</a>. We went up one spot to 13th on the <a href="https://hdr.undp.org/data-center/country-insights#/ranks">Human Development Index</a> of life expectancy, education and income.</p>
<p>New Zealand also remained sixth best for internet affordability, availability, readiness and relevance, according to the <a href="https://impact.economist.com/projects/inclusive-internet-index/2022">Economist Intelligence Unit</a>. And on the <a href="https://www.wipo.int/edocs/pubdocs/en/wipo-pub-2000-2022-section3-en-gii-2022-results-global-innovation-index-2022-15th-edition.pdf">Global Innovation Index</a>, we came in at 24th out of 132 economies – two spots better than last year.</p>
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<h2>Freedom and happiness</h2>
<p>On the other side of the ledger, New Zealand’s rankings fell in a variety of political, economic and health indices.</p>
<p>The <a href="https://www.heritage.org/index/">Index for Economic Freedom</a>, for instance, which covers everything from property rights to financial freedom, placed us fifth, three spots below last year. And we fell three places to 11th in the Reporters Without Borders <a href="https://rsf.org/en/index">Press Freedom Index</a>.</p>
<p>New Zealanders, it seems, aren’t as happy as they were. We fell a place in the <a href="https://worldhappiness.report/ed/2022/happiness-benevolence-and-trust-during-covid-19-and-beyond/#ranking-of-happiness-2019-2021">World Happiness Report</a> to tenth-cheeriest place – although we’re still a bit happier than Australia. The <a href="https://www.socialprogress.org/global-index-2022-results">Social Progress Index</a> had us fall from 12th to 15th position, and we dropped 11 spots in the 2022 <a href="https://www.imd.org/centers/world-competitiveness-center/rankings/world-competitiveness/">Global Competitiveness Report</a>, down to 31.</p>
<p>A little surprisingly, New Zealand placed 41st on the <a href="https://www.visionofhumanity.org/wp-content/uploads/2022/03/GTI-2022-web-04112022.pdf">Global Terrorism Index</a>, apparently worse than Russia at 44. Although New Zealand recently reduced its <a href="https://www.rnz.co.nz/news/political/479798/new-zealand-drops-terror-threat-level-to-low">terror threat level</a> from medium to low, the <a href="https://www.theguardian.com/world/2021/sep/03/man-shot-dead-in-new-zealand-after-injuring-people-in-supermarket-police-say">2021 supermarket attack</a> in Auckland and the ongoing fallout from the Christchurch attacks will have affected our ranking.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/with-a-covid-variant-soup-looming-new-zealand-urgently-needs-another-round-of-vaccine-boosters-193616">With a COVID 'variant soup' looming, New Zealand urgently needs another round of vaccine boosters</a>
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<p>Also maybe surprisingly, Bloomberg’s <a href="https://www.bloomberg.com/graphics/covid-resilience-ranking/?leadSource=uverify%20wall">COVID resilience index</a>, which ranks the “best and worst places to be as the world enters the next COVID phase”, placed New Zealand at 35. This was possibly due to the Omicron wave and increase in deaths since reopening borders, rather than a verdict on the country’s overall response.</p>
<p>And New Zealand continues to struggle environmentally, falling from 19th to 26th on the 2022 <a href="https://epi.yale.edu/epi-results/2022/country/nzl">Yale Environmental Performance Index</a>, which measures environmental health and ecosystem vitality.</p>
<p>While our overall assessment on the <a href="https://climateactiontracker.org/countries/new-zealand/">Climate Action Tracker</a> (which measures progress on meeting agreed global warming targets) hasn’t changed, it’s still categorised as “highly insufficient”. The <a href="https://ccpi.org/country/nzl/">Climate Change Performance Index</a> is a little more generous, pegging New Zealand at 33rd, up two spots on last year.</p>
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<h2>Mixed news on the home front</h2>
<p>Domestically, New Zealand recorded better-than-expected results on four fronts:</p>
<ul>
<li><p>unemployment hit a <a href="https://www.stats.govt.nz/information-releases/labour-market-statistics-september-2022-quarter/">very low 3.3%</a> in September, <a href="https://www.oecd.org/newsroom/unemployment-rates-oecd-updated-november-2022.htm">better than most comparable</a> OECD countries.</p></li>
<li><p>median weekly earnings from wages and salaries rose <a href="https://www.stats.govt.nz/news/weekly-earnings-rise-as-more-in-full-time-employment/">by 8.8% to NZ$1,189</a>, the largest increase recorded since records began in 1998</p></li>
<li><p><a href="https://coronialservices.justice.govt.nz/assets/Documents/Publications/Media-release-Deputy-Chief-Coroner-251022.pdf">suicides decreased</a> in the year to June to 538, down from 607 the year before and significantly lower than the average rate over the past 13 years</p></li>
<li><p>incarceration rates continued to fall, with a prisoner population of <a href="https://www.corrections.govt.nz/resources/statistics/quarterly_prison_statistics/prison_stats_june_2022">7,728</a> (as of June), well down on the near 10,000 figure from 2020.</p></li>
</ul>
<p>On the other hand, inflation is rising. While lower than <a href="https://www.oecd.org/newsroom/consumer-prices-oecd-updated-4-october-2022.htm">October’s OECD average</a>, an <a href="https://www.stats.govt.nz/indicators/consumers-price-index-cpi/">annual rate of 7.2%</a> is still high by recent standards. Related to this, and either good or bad news according to your perspective, annual average house price growth <a href="https://content.knightfrank.com/research/84/documents/en/global-house-price-index-q2-2022-9334.pdf">slowed to 5.5%</a> in the year to June. Real prices are expected to <a href="https://www.reuters.com/markets/new-zealand-house-prices-down-75-year-reinz-2022-11-14/">drop considerably</a> from their 2021 peak, however.</p>
<p>Those falls don’t necessarily make houses affordable for many people, although the stock of public housing continues to increase by over 500 dwellings each year to a recent total of <a href="https://www.hud.govt.nz/stats-and-insight/the-government-housing-dashboard/housing-dashboard-at-a-glance/">76,834</a>. Even so, <a href="https://www.salvationarmy.org.nz/research-policy/social-policy-parliamentary-unit/state-nation-2022/housing">demand for social housing</a> is still growing. Recent <a href="https://orangesky.org.nz/lets-talk-about-it/">research suggests</a> one in six New Zealanders have been homeless, and about 41,000 don’t have adequate access to housing.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/coalitions-kingmakers-and-a-rugby-world-cup-the-calculations-already-influencing-next-years-nz-election-195010">Coalitions, kingmakers and a Rugby World Cup: the calculations already influencing next year’s NZ election</a>
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<h2>Rich and poor</h2>
<p>New Zealand’s poverty rate compares poorly with <a href="https://data.oecd.org/inequality/poverty-rate.htm">other OECD countries,</a> and <a href="https://www.msd.govt.nz/documents/about-msd-and-our-work/publications-resources/research/child-poverty-in-nz/2022-child-poverty-report-overview-and-selected-findings.pdf">child poverty</a> remains a critical challenge. However, in the year to June 2021, the <a href="https://www.stats.govt.nz/news/child-poverty-statistics-show-all-measures-trending-downwards-over-the-last-three-years">percentage of children</a> living in poor households had declined since 2018. </p>
<p>At the other end of the scale, the wealthy continue to hold the <a href="https://www.stats.govt.nz/news/distribution-of-wealth-across-new-zealand-households-remains-unchanged-between-2015-and-2021">lion’s share of assets</a>. The top 10% of households hold about 50% of the nation’s total household net worth (the value of a household’s assets, such as real estate, retirement savings and shares, less its debts). Conversely, the lowest 20% hold just 1% of total household assets, but 11% of total liabilities.</p>
<p>In short, while New Zealand can claim some bragging rights in many important areas and is making modest progress in others, that’s far from the whole picture. Any progress we make should not be taken for granted.</p>
<p>The final verdict has to be: a good effort, but room for improvement.</p><img src="https://counter.theconversation.com/content/194626/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alexander Gillespie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As the year ends, how has New Zealand fared on global and domestic measurements, from social and economic freedoms to tackling poverty and homelessness?Alexander Gillespie, Professor of Law, University of WaikatoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1869802022-07-14T18:22:29Z2022-07-14T18:22:29ZSwelling grocery bills are pummeling the poorest – who spend over a quarter of their incomes on food<figure><img src="https://images.theconversation.com/files/473951/original/file-20220713-9624-u19m7w.jpg?ixlib=rb-1.1.0&rect=0%2C9%2C6048%2C4001&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Food prices are soaring. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/consumers-shop-for-meat-at-a-safeway-grocery-store-in-news-photo/1240711419?adppopup=true">Jim Watson/AFP via Getty Images</a></span></figcaption></figure><figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/474002/original/file-20220713-8948-qy7hmf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/474002/original/file-20220713-8948-qy7hmf.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=255&fit=crop&dpr=1 600w, https://images.theconversation.com/files/474002/original/file-20220713-8948-qy7hmf.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=255&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/474002/original/file-20220713-8948-qy7hmf.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=255&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/474002/original/file-20220713-8948-qy7hmf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=321&fit=crop&dpr=1 754w, https://images.theconversation.com/files/474002/original/file-20220713-8948-qy7hmf.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=321&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/474002/original/file-20220713-8948-qy7hmf.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=321&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p>The cost of eggs and bread is soaring – a trend that’s particularly punishing for the poorest Americans. </p>
<p>Average food prices <a href="https://www.bls.gov/news.release/cpi.nr0.htm">climbed an annualized rate of 10.4% in June</a>, the Bureau of Labor Statistics reported on July 13, 2022. The gains were driven primarily by the cost of groceries, which <a href="https://fred.stlouisfed.org/series/CUSR0000SAF11#">jumped the most since the 1970s</a>, by 12.2%. Overall inflation was up 9.1% from a year earlier. </p>
<p>These sharp increases <a href="https://www.npr.org/2022/06/10/1103995329/inflation-americans-spending-consumer-behavior-prices">have startled consumers</a>, in large part because food costs <a href="https://fred.stlouisfed.org/series/CPIUFDSL">had been rising moderately for decades</a>.</p>
<p>While all Americans have seen their grocery bills swell, many may not fully appreciate the enormous burden that rising food costs pose for low-income households. The reason is simple: Poor families spend a much larger share of their income on food than the median household. </p>
<p>In 2020, the average middle-income American family <a href="https://www.ers.usda.gov/data-products/chart-gallery/gallery/chart-detail/?chartId=58372">spent roughly 12% of its earnings on food</a>. In sharp contrast, poor households spent 27% on food that year. </p>
<p>What explains this enormous discrepancy? The answer begins with a dramatic change in spending patterns among American households during the 20th century, which <a href="https://www.uwec.edu/profiles/solld/">I learned</a> while <a href="https://www.uwec.edu/files/7106/David-Soll-Authors-Celebration-2020-Poster.pdf">researching shifts in commuting practices</a>.</p>
<p>In the 1900s, the bare necessities of life, including food, were enormously expensive compared with today, leaving little room for spending on other goods or services for most Americans, according to a <a href="https://www.bls.gov/cex/csxhistorical.htm">2006 study</a> by the Department of Labor. On average, American families <a href="https://www.bls.gov/opub/ted/2006/may/wk4/art05.htm">spent over 40% of their income</a> on food in 1901, 23% on housing and 14% on clothing.</p>
<p>But the relative cost of food and clothing decreased steadily over the next 100 years. By 2002, the two categories represented only 17.3% of a middle-class family’s expenditures and by 2020, the <a href="https://www.bls.gov/opub/reports/consumer-expenditures/2020/home.htm">figure had fallen to 14.2%</a>.</p>
<p>The sharp drop in the cost of food and clothing led to a massive reshuffling of family budgets over roughly the past century. As people reduced their spending on these items, they spent more on housing, transportation and insurance. As the country became wealthier, <a href="https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2016/03/household-expenditures-and-income">discretionary spending increased</a>, too. Most Americans had more room in their budgets for eating out, televisions and entertainment. </p>
<p>This revolution in household spending largely excluded poor Americans, who continue to devote most of their income to feeding their families and other necessities like shelter. As a result, they are particularly vulnerable to spikes in food costs.</p>
<p>Low-income households devote more than twice as large a share of their budgets to food as middle-income households. As a result, food inflation is around twice as burdensome for families of limited means. But this actually understates the burden of high food costs on the poor because, <a href="https://www.thecentersquare.com/national/report-americans-cutting-back-on-discretionary-spending-because-of-inflation/article_349326e4-c59c-11ec-a095-57da6f173842.html">unlike middle-class families</a>, they have little discretionary spending they can pare back to free up funds for food.</p>
<p>American households <a href="https://www.cnbc.com/2022/06/09/consumers-changing-eating-shopping-habits-as-inflation-pushes-up-price.html">are responding to soaring food inflation</a> by eating out less frequently, buying generic brands and consuming less meat. For many, it may be the first time they’ve ever had to be so careful about what they spent on food.</p>
<p>Poor families, however, have long been forced to deploy these tactics to keep food expenditures in check. </p>
<p><a href="https://www.feedingamerica.org/hunger-in-america">An estimated 38 million Americans</a> are food insecure, meaning that they have insufficient means to obtain sufficient food. The concern is, with food inflation rising at the rate it is, more families will face the prospect of being unsure where their next meal is coming from.</p><img src="https://counter.theconversation.com/content/186980/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Soll does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Soaring inflation in the US has been driven in part by large increases in the price of groceries – a burden that falls disproportionately on lower-income families.David Soll, Associate Professor of History and Environmental Studies, University of Wisconsin, Eau ClaireLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1737262021-12-14T18:00:03Z2021-12-14T18:00:03ZNZ report card 2021: from COVID to housing and happiness, it was a tale of two countries<figure><img src="https://images.theconversation.com/files/437387/original/file-20211213-19-mooezr.jpg?ixlib=rb-1.1.0&rect=11%2C0%2C7657%2C4311&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>As school and university students ponder their end-of-year results, it’s only fair we cast a critical eye over the country, too. Using international and domestic indices and figures, it’s possible to get an idea of how well – or poorly – New Zealand has done in 2021.</p>
<p>It’s not definitive or exhaustive, of course, but it might help provide a bit of perspective after what has been, most people will surely agree, a trying and tiring year of social, political and economic self-analysis.</p>
<h2>The global good news</h2>
<p>When it came to being <a href="https://www.transparency.org/en/cpi/2020/index/dnk">corruption-free</a>, New Zealand was equal top of the class (with Denmark), according to Transparency International. The <a href="https://www.heritage.org/index/">Index for Economic Freedom</a> (which covers everything from property rights to financial freedom) puts NZ second (behind Singapore but up from third last year).</p>
<p>The <a href="https://www.visionofhumanity.org/maps/#/">Global Peace Index</a> ranked NZ third for safety and security, domestic and international conflict, and degree of militarisation (down one place). Watchdog Freedom House <a href="https://freedomhouse.org/country/new-zealand/freedom-world/2021">scored NZ</a> 99 out of 100 – three Scandinavian countries scored a perfect 100.</p>
<p>The Global Gender Gap Report recorded a rise from sixth to the fourth most gender-equal country. The World Justice Project’s <a href="https://worldjusticeproject.org/sites/default/files/documents/WJP-INDEX-21.pdf">Rule of Law Index</a> has NZ at seventh-best in the world. The Reporters Without Borders <a href="https://rsf.org/en/ranking">Press Freedom Index</a> ranked NZ eighth.</p>
<p>NZ was the ninth-most-cheerful country, according to the <a href="https://happiness-report.s3.amazonaws.com/2021/WHR+21.pdf">World Happiness Report</a>, behind eight European and Scandinavian nations, and we were equal sixth (down from second) for internet affordability, availability, readiness and relevance, according to the <a href="https://theinclusiveinternet.eiu.com/">Economist Intelligence Unit</a>.</p>
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<h2>National progress</h2>
<p>Domestically, New Zealand recorded better-than-expected results on four fronts:</p>
<ul>
<li><p>unemployment continued to fall, <a href="https://www.stats.govt.nz/information-releases/labour-market-statistics-september-2021-quarter">hitting 3.4%</a> in September, <a href="https://www.oecd.org/newsroom/unemployment-rates-oecd-update-november-2021.htm">better than most comparable</a> OECD countries</p></li>
<li><p>by mid-year, median weekly earnings from wages and salaries had <a href="https://www.stats.govt.nz/information-releases/labour-market-statistics-income-june-2021-quarter">increased by NZ$32</a> (3%) to $1,093 compared to the previous year</p></li>
<li><p>while still comparatively (and unacceptably) high, <a href="https://coronialservices.justice.govt.nz/assets/Uploads/Chief-Coroner-releases-annual-suicide-statistics-launches-new-web-tool-with-Ministry-of-Health2.pdf">suicides decreased</a> in the year to July 2021, down to 607 from 628 the year before</p></li>
<li><p>the most up-to-date police reports suggested crimes against people and property had <a href="https://www.police.govt.nz/sites/default/files/publications/crime-at-a-glance-dec2020.pdf">declined by 6.6%</a> over the whole of 2020.</p></li>
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<em>
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Read more:
<a href="https://theconversation.com/over-300-000-new-zealanders-owe-more-than-they-own-is-this-a-problem-173497">Over 300,000 New Zealanders owe more than they own – is this a problem?</a>
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<p>On the other hand, those crime statistics still represent a total of 265,162 “victimisations” (73% against property, 27% against people), still too high. </p>
<p>Similarly, improvements to wages and salaries are being offset by rising inflation, now at an <a href="https://www.stats.govt.nz/information-releases/consumers-price-index-september-2021-quarter">annual rate of 4.9%</a>.</p>
<p>But despite increased social tensions due to pandemic restrictions and mandates, the country’s official terrorism threat level remained “<a href="https://www.nzsis.govt.nz/our-work/counter-terrorism/national-terrorism-threat-level/">medium</a>” in 2021. And incarceration rates seem to be dropping, with a prisoner population of <a href="https://www.corrections.govt.nz/resources/statistics/quarterly_prison_statistics/prison_stats_september_2021">8,034</a> (as of September 2021), a drop of more than 1,400 on the year before.</p>
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<strong>
Read more:
<a href="https://theconversation.com/covid-disinformation-and-extremism-are-on-the-rise-in-new-zealand-what-are-the-risks-of-it-turning-violent-172049">COVID disinformation and extremism are on the rise in New Zealand. What are the risks of it turning violent?</a>
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<h2>The not-so-good news</h2>
<p>For life expectancy, education and income, NZ comes in 14th according to the latest <a href="http://hdr.undp.org/en/countries">Human Development Index</a>. We fell a spot to 20th in the 2021 <a href="https://worldcompetitiveness.imd.org/countryprofile/overview/NZ">Global Competitiveness Report</a>, but stayed at 26th place on the <a href="https://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2021.pdf">Global Innovation Index</a>.</p>
<p>According to the latest (2020) <a href="https://epi.yale.edu/epi-results/2020/component/epi">Yale Environmental Performance Index</a>, which measures environmental health and ecosystem vitality, NZ ranks 19th – which is at least higher than our ratings on climate change. </p>
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Read more:
<a href="https://theconversation.com/nzs-unemployment-insurance-scheme-will-be-the-biggest-welfare-shakeup-in-generations-is-it-justified-170710">NZ's unemployment insurance scheme will be the biggest welfare shakeup in generations – is it justified?</a>
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<p>The <a href="https://climateactiontracker.org/countries/new-zealand/">Climate Action Tracker</a>, an independent scientific analysis that measures 39 countries plus the EU, gave NZ an overall (pre-COP 26) assessment of “highly insufficient”. The <a href="https://ccpi.org/wp-content/uploads/CCPI-2022-Results_2021-11-10_A4-1.pdf">Climate Change Performance Index</a> pegged us at 35th place (down seven). Maybe New Zealand’s <a href="https://www.theguardian.com/world/2021/oct/31/new-zealand-pledges-to-halve-greenhouse-emissions-by-2030">COP 26 pledges</a> will reverse this poor showing.</p>
<p>Finally, having set a global gold standard for its COVID-19 response, NZ <a href="https://www.newsroom.co.nz/the-stark-inequity-of-the-vaccine-rollout">struggled</a> to equitably roll out vaccination to Māori and also dipped in the Bloomberg <a href="https://www.bloomberg.com/graphics/covid-resilience-ranking/?">COVID resilience index</a> to 32nd. </p>
<p>But these rankings have been highly volatile, and we may find our <a href="https://www.nytimes.com/interactive/2021/world/covid-vaccinations-tracker.html?auth=linked-google1tap">accelerated vaccination rate</a>, combined with still-stringent border restrictions as the Omicron variant spreads, propel us back up the charts. </p>
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<h2>Must do better</h2>
<p>Undeniably, the most negative trends involved housing and poverty. In the year to June, average house price growth (already high by international standards) was <a href="https://content.knightfrank.com/research/84/documents/en/global-house-price-index-q2-2021-8422.pdf">clocked at 25.9%</a>. Good for some, maybe many, but terrible for the young and others locked out of the housing market by extreme prices.</p>
<p>An estimated <a href="https://www.hud.govt.nz/research-and-publications/statistics-and-research/2018-severe-housing-deprivation-estimate/">102,000</a> people are now living in severe housing deprivation, including 3,624 without shelter, 7,929 in temporary accommodation, 31,171 in severely crowded dwellings and 60,000 in sub-standard housing (lacking one of six basic amenities such as tap water or a toilet).</p>
<p>New Zealand’s child poverty rate remains <a href="https://www.oecd.org/els/CO_2_2_Child_Poverty.pdf">above the OECD average</a>. While the numbers have decreased according to the various measures used, this still meant 18.4% of all children – around 210,500, or one in five – were living in households with <a href="https://www.stats.govt.nz/news/latest-release-of-child-poverty-statistics">less than 50%</a> of the median disposable income. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/courts-around-the-world-have-made-strong-climate-rulings-not-so-in-new-zealand-173485">Courts around the world have made strong climate rulings – not so in New Zealand</a>
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<p>Slight improvements in the numbers living with material hardship were also recorded. But this may well have reversed due to the <a href="https://www.rnz.co.nz/news/national/447762/covid-19-may-have-pushed-thousands-more-children-into-poverty">impact of the pandemic</a>, with estimates of up to 18,000 more children ending up in poverty in the 12 months to March 2021.</p>
<p>At the other end of the scale, someone in the wealthiest 1% of adults (about 40,000 citizens) now has a net worth <a href="https://www.theguardian.com/world/commentisfree/2021/nov/22/the-bank-of-mum-and-dad-is-allowing-new-zealands-wealthy-to-become-opportunity-hoarders">68 times</a> that of the typical (median) New Zealander. Wealth inequality remains <a href="https://www.wgtn.ac.nz/__data/assets/pdf_file/0007/1935430/WP-21-10-wealth-inequality-in-New-Zealand.pdf">stubbornly high</a>.</p>
<p>In short, while New Zealand can claim some bragging rights in important areas, there is less to celebrate when it comes to the lives and fortunes of many of its citizens. As ever, the final verdict has to be: room for improvement.</p><img src="https://counter.theconversation.com/content/173726/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alexander Gillespie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As the year ends, New Zealand has done well in important global measures of success. But closer to home, the numbers often told a different story.Alexander Gillespie, Professor of Law, University of WaikatoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1734972021-12-12T19:09:23Z2021-12-12T19:09:23ZOver 300,000 New Zealanders owe more than they own – is this a problem?<figure><img src="https://images.theconversation.com/files/436797/original/file-20211209-25-lc4hw3.jpg?ixlib=rb-1.1.0&rect=46%2C0%2C5184%2C3453&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>New Zealanders, like many of their developed country counterparts, have built up <a href="https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-household-debt">significant debts</a> in recent decades. There are differing views, however, on whether this constitutes a problem.</p>
<p>For some, indebtedness indicates a precarious situation – often described as being “underwater” – in which a person is unable to match their expenses to their income. For others, it represents investment: a temporary borrowing in order to be able to earn more in future.</p>
<p>To investigate this, we used data from the net worth module attached to the <a href="https://www.stats.govt.nz/information-releases/household-net-worth-statistics-year-ended-june-2018">Household Economic Survey</a> in 2014–15 and 2017–18. This provides information about individuals in “negative net wealth” – that is, those whose liabilities (debts) exceed their assets (wealth). </p>
<p>What is clear is that the number of New Zealanders with negative net wealth is both large and growing. In 2014–15, there were 314,000 indebted New Zealanders out of an adult (15+) population of 3.55 million, or 8.8%. </p>
<p>Just three years later, that number had increased to 363,000 out of 3.81 million, or 9.5%, despite the absence of a major economic shock – along the lines of the global financial crisis – in that time.</p>
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<h2>Where the debt sits</h2>
<p>To establish whether this constituted a serious policy problem, however, we had to look more closely at these individuals’ characteristics. </p>
<p>Most of them have low incomes: 32% report incomes under NZ$13,240, and 68% under $36,596 (the median individual income at that time). Just 4% are in the highest tenth of income earners. Clearly, most of those in negative net wealth are not lavish-spending high-rollers.</p>
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<strong>
Read more:
<a href="https://theconversation.com/nzs-unemployment-insurance-scheme-will-be-the-biggest-welfare-shakeup-in-generations-is-it-justified-170710">NZ's unemployment insurance scheme will be the biggest welfare shakeup in generations – is it justified?</a>
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<p>This might ring alarm bells: having a low income suggests an inability to repay debts. But that depends on a couple of further characteristics, including age and the nature of the liability. </p>
<p>Those in negative net wealth are disproportionately young: 58% are under 29, and a further 25% are aged 30 to 44. Just 3% or so are over 65. </p>
<p>Nearly two-thirds of the debts are in mortgages, whether for owner-occupied homes or investment properties (51.3% and 13.7%, respectively). This is followed by student loans (21.9%), “other” debts (11.7%), credit cards (1%) and hire purchase (0.4%).</p>
<h2>Are debts backed by assets?</h2>
<p>Combining the above two forms of analysis, we found that for people in negative net wealth aged 15 to 24, nearly three-quarters of their debts (73.4%) are in student loans, whereas for people aged 55 to 64, 80.6% are in mortgages on their own homes.</p>
<p>This suggests the problems of indebtedness may not be as great as they appear. The major forms of debt – mortgages and student loans – are both backed, at least in theory, by assets: housing, in the case of mortgages, and “<a href="https://www.merriam-webster.com/dictionary/human%20capital">human capital</a>” (marketable skills and education) in the case of student loans. </p>
<p>This indicates that many of those in negative net wealth have the ability to repay their debts or, at the very least, are accumulating some kind of asset.</p>
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<strong>
Read more:
<a href="https://theconversation.com/nzs-government-plans-to-switch-to-a-circular-economy-to-cut-waste-and-emissions-but-its-going-around-in-the-wrong-circles-170704">NZ's government plans to switch to a circular economy to cut waste and emissions, but it's going around in the wrong circles</a>
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<p>But there are still several reasons to be concerned. Firstly, the assets mentioned above may not be entirely solid. Although house prices generally rise, and have recently been soaring, they have also been known to fall (in New Zealand as elsewhere). And the long-expected correction in the housing market may finally be about to happen, if <a href="https://www.newshub.co.nz/home/money/2021/12/asb-predicts-house-prices-to-drop-in-late-2022.html#:%7E:text=A%20major%20New%20Zealand%20bank,of%20four%20percent%20next%20year.">bank predictions</a> are to be believed. </p>
<p>Human capital is also somewhat notional: while graduates do on average <a href="https://www.universitiesnz.ac.nz/latest-news-and-publications/degree-smart-investment-0#:%7E:text=Median%20hourly%20earnings%20are%2065,with%20lower%20level%20tertiary%20qualifications.%E2%80%9D">earn two-thirds more</a> than those with no tertiary qualification, not all degrees lead to high incomes, especially in a labour market characterised by high levels of <a href="https://union.org.nz/wp-content/uploads/2016/12/CTU-Under-Pressure-Detailed-Report-2.pdf">precarious, insecure and casual work</a>. </p>
<p>Many young people will be burdened by both large student loan debts and significant mortgages (assuming home ownership is attainable at all).</p>
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<h2>Debt and poverty</h2>
<p>It is also not difficult to imagine negative net wealth becoming a problem for, say, a mid-level office worker who suddenly loses their job at the same time that their home – which they borrowed heavily to buy – falls sharply in value. </p>
<p>One of the principal concerns about debt, after all, is that it often represents a vulnerability – in other words, a probable lack of resilience in the face of major economic shocks.</p>
<p>Secondly, even if the forms of debt more generally considered problematic – such as those incurred on credit cards and via hire purchase – are relatively marginal, they are also most likely to affect those in the most difficult financial situations. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/covid-19-is-predicted-to-make-child-poverty-worse-should-nzs-next-government-make-temporary-safety-nets-permanent-147177">COVID-19 is predicted to make child poverty worse. Should NZ's next government make temporary safety nets permanent?</a>
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<p>Charities and NGOs have <a href="https://www.fincap.org.nz/big-changes-needed-to-protect-consumers-from-high-cost-loans-and-debt-collection-practises/">repeatedly warned</a> about the problems faced by families forced to turn to payday lenders and finance companies charging high interest rates. Research has also <a href="https://cdn-assets-cloud.aucklandcitymission.org.nz/acm/wp-content/uploads/2021/09/15153121/Auckland-City-Mission-Family100-Speaking-for-Ourselves.pdf">highlighted debt</a> as one of the central factors keeping families in poverty.</p>
<p>Thirdly, the burden of negative net wealth is not evenly distributed. Of the 363,000 individuals in that situation, 195,000 are women, against 168,000 men. Just 8.1% of people of European descent are indebted, compared to 11.5% of Asian New Zealanders, 13.3% of Māori and 14.5% of Pasifika. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/nzs-second-well-being-budget-must-deliver-for-the-families-that-sacrificed-most-during-the-pandemic-160528">NZ's second 'Well-being Budget' must deliver for the families that sacrificed most during the pandemic</a>
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<h2>The wealth gap</h2>
<p>These inequalities then overlap, such that the proportion of Pākehā men in negative net wealth (7.5%) is less than half that for Pasifika women (17.5%). This reflects – and exacerbates – other economic disparities, such as <a href="https://www.hrc.co.nz/our-work/economic-and-social-rights/pacific-pay-gap-inquiry/">ethnic and gender pay gaps</a>.</p>
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<p>Negative net wealth also has to be viewed against its counterpart, large wealth concentrations at the upper end of the spectrum. As discussed in my <a href="http://www.bwb.co.nz/books/too-much-money">recent book</a>, the wealthiest 1% of individuals hold 25% of all assets, once members of the “<a href="https://www.newshub.co.nz/home/money/2021/05/nbr-list-the-top-kiwi-wealth-creators-of-2021.html">Rich List</a>” are included. </p>
<p>Such large surpluses and deficits contribute to financial instability. One of the dynamics that caused the GFC, for instance, was <a href="https://www.aeaweb.org/articles?id=10.1257/aer.20110683">the significant surpluses</a> owned by wealthy Americans being lent to low-income families whose wages had been suppressed for several decades. </p>
<p>Negative net wealth, then, is part of the much larger story of economic inequality – one that is now centre stage in political debates, in New Zealand as elsewhere.</p>
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<p><em>The author gratefully acknowledges Geoff Rashbrooke, of the Institute for Governance and Policy Studies, and Albert Chin, of Statistics New Zealand, who collaborated on this research.</em></p><img src="https://counter.theconversation.com/content/173497/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Max Rashbrooke does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The number of New Zealanders with ‘negative net wealth’ is large and growing – reflecting widening economic inequality that remains an urgent political priority.Max Rashbrooke, Research Associate, Institute for Governance and Policy Studies, Te Herenga Waka — Victoria University of WellingtonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1591762021-07-26T13:22:47Z2021-07-26T13:22:47ZWant to fix financial literacy? Focus on billionaires squandering their wealth, not school curriculum<p>Shortly after the COVID-19 pandemic threw the global economy into a crisis in March 2020, I wrote an essay expressing my hope that the unfolding financial collapse wouldn’t be used to <a href="https://publicseminar.org/essays/the-financial-literacy-delusion">justify a push for more financial literacy education in schools</a>. But this has since happened. </p>
<p>In May 2020, the Organization for Economic Co-operation and Development (OECD) announced its <a href="http://newsletter.oecd.org/q/142H2yKlsjcTqycjG2fls/wv">Program for International Student Assessment 2018 results</a> with the following question: “With unemployment increasing and a global recession looming, it’s more important than ever to ask: are adolescents knowledgeable about money matters?” </p>
<p>Ontario recently added <a href="https://www.thestar.com/news/canada/2021/06/16/ontario-ends-grade-9-math-streams-adds-coding-and-financial-literacy-to-curriculum.html">financial literacy to Grade 9 math curriculum</a>. Some researchers have emphasized the <a href="https://theconversation.com/especially-after-covid-19-canadians-need-better-financial-literacy-and-teachers-can-help-152933">relevance of financial literacy education</a> amid the current COVID-19 economic crisis.</p>
<p>Financial literacy, as defined by the OECD, is “<a href="https://www.oecd.org/financial/education/2018-INFE-FinLit-Measurement-Toolkit.pdf">a combination of awareness, knowledge, skill, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial well-being</a>.” </p>
<p>My research on high school curriculum documents in Canada and the United States shows that financial literacy education frames <a href="https://eric.ed.gov/?id=EJ1268451">financial outcomes in individualistic ways that are rooted in the ideology of merit</a>. Mainstream financial literacy pays little attention to the broader economic and socio-political contexts in which taking control of finances is progressively more difficult for hard-pressed families as the <a href="https://www.broadbentinstitute.ca/wealth_gap">gap between the rich and everyone else</a> continues to widen.</p>
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<h2>Post-recession pushes</h2>
<p>In the aftermath of the 2008 recession, financial literacy gained traction in both Canada and the U.S. </p>
<p>Education scholar <a href="https://doi.org/10.1007/978-981-10-0360-8_10">Laura Pinto</a> argues the negative economic effects of the 2008 financial crisis were less pronounced in Canada than in other OECD countries. Yet, the connections made by governments and the media between the state of the economy and the need for financial literacy among citizens led to the development of financial literacy education policy across the nation. </p>
<p>In 2010, a <a href="https://www.thestar.com/business/personal_finance/2010/04/20/roseman_task_force_wants_your_ideas_on_making_smarter_decisions_with_money.html"><em>Toronto Star</em></a> columnist summarized: “After the last stock market crash, the federal government realized that people needed help with spending, saving, investing and — of course — borrowing.” </p>
<p>In both industrialized and emerging economies, <a href="https://www.oecd.org/pisa/pisaproducts/PISA%202012%20framework%20e-book_final.pdf">the OECD</a> declared that a “lack of financial literacy was one of the factors contributing to ill-informed financial decisions …” It recommended that governments develop financial education programs and integrate financial literacy education into school curricula, and many <a href="https://silo.tips/download/january-the-maryland-state-curriculum-for-personal-financial-literacy-education">followed suit</a>.</p>
<p>Such recommendations and government efforts suggested that it was the spending habits of the general public at large that were to blame for the recession, despite the fact that both a <a href="https://www.americanprogress.org/issues/economy/reports/2017/04/13/430424/2008-housing-crisis/">lack of government regulation</a> and <a href="https://thehill.com/opinion/finance/350829-lehman-crash-anniversary-recalls-the-risk-of-corporate-greed">reckless and illegal behaviour in the financial sector</a> were significant contributing factors.</p>
<h2>Financial irresponsibility?</h2>
<p>Today, some financial literacy proponents are focusing on how the COVID-19 recession has unmasked some people’s <a href="https://thehill.com/opinion/finance/488906-coronavirus-reveals-financial-irresponsibility-of-americans">financial irresponsibility</a>.</p>
<p>In the U.S., the <a href="https://www.schwab.com/">Charles Schwab</a> <a href="https://www.forbes.com/profile/charles-schwab/?sh=5dadb3d92e4b">brokerage, whose CEO is a billionaire</a>, is one of many financial services companies that produces financial literacy resources. </p>
<p>Results of the company’s <a href="https://www.schwabmoneywise.com/public/moneywise/tools_resources/charles_schwab_financial_literacy_survey">online survey, conducted by the Harris Poll</a> of more than 2,000 U.S. adults in June 2020, are reported on the website Schwab Money Wise, which promotes school lesson plans. The survey found that 89 per cent of people polled agree that lack of financial education contributes to poverty (58 per cent), lack of job opportunities (53 per cent), unemployment (53 per cent) and wealth inequality (52 per cent). According to the company, the findings expose the “grave impact” of the “lack of financial education during COVID-19.”</p>
<figure class="align-center ">
<img alt="A sign at a demonstration reads, 'Fund the people not the police / BLM'" src="https://images.theconversation.com/files/412793/original/file-20210723-21-6502we.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/412793/original/file-20210723-21-6502we.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=426&fit=crop&dpr=1 600w, https://images.theconversation.com/files/412793/original/file-20210723-21-6502we.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=426&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/412793/original/file-20210723-21-6502we.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=426&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/412793/original/file-20210723-21-6502we.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=535&fit=crop&dpr=1 754w, https://images.theconversation.com/files/412793/original/file-20210723-21-6502we.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=535&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/412793/original/file-20210723-21-6502we.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=535&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">People attend a demonstration in Montrréal, Aug. 29, 2020, where they protested to defund the police with a goal to end systemic racism.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Graham Hughes</span></span>
</figcaption>
</figure>
<h2>Economic, racial injustices</h2>
<p>Advocates of financial literacy education continue to tie individual financial know-how and behaviour to deep-seated social problems and economic woes even in the face of <a href="https://www.nytimes.com/2020/10/03/upshot/pandemic-economy-recession.html">a financial crisis caused by a pandemic</a> and a year of <a href="https://theconversation.com/black-lives-matter-movement-finds-new-urgency-and-allies-because-of-covid-19-141500">global civil rights protests</a> following the murder of George Floyd in Minneapolis. </p>
<p>Both the pandemic and the protests have forced the public to reckon with the racial wealth gap in both <a href="https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/">the U.S.</a> <a href="https://www.policyalternatives.ca/publications/reports/canadas-colour-coded-income-inequality">and Canada</a>, and <a href="https://d3n8a8pro7vhmx.cloudfront.net/broadbent/pages/7831/attachments/original/1611011661/Addressing_Economic_Racism_in_Canada's_Pandemic_Response_and_Recovery_-_Report.pdf">economic racism</a> in Canada’s pandemic response and recovery. </p>
<p><a href="https://doi.org/10.20955/r.2017.59-76">Economists like Darrick Hamilton and William A. Darity, Jr.</a> have shown how deep-seated economic and social structures, such as inheritance and intergenerational wealth transfers benefiting whites, perpetuate wealth inequality and racism in the U.S. Yet, they write, financial literacy narratives imply that poor decision-making or deficient financial knowledge on the part of Black Americans is at the root of poverty. </p>
<p>Political economist <a href="https://doi.org/10.1080/10253866.2014.1000315">Chris Clarke</a> has noted how in response to economic crises, financial literacy education appears to serve as a coping strategy that makes people more resilient in the face of inevitable market failures. </p>
<p>But in positioning financial crashes as inevitable, the contradictory elements of this thinking become evident: <a href="https://doi.org/10.1080/10253866.2014.1000315">Market-conforming behaviour endorsed by financial literacy education cannot ultimately guarantee economic well-being for its subjects</a>. </p>
<p>Recipients of financial literacy education are instructed, as Clarke writes, in “learning to fail.”</p>
<h2>Key takeaways from COVID-19</h2>
<p>Let’s challenge the idea that if we learn to better manage our money, we can prevent the next financial meltdown or thrive in it. </p>
<p>On the contrary, the pandemic has reminded us that we aren’t self-reliant but part of a collective. What we now see is a powerful case for a strong social safety net that includes <a href="https://www.cbc.ca/news/politics/federal-sickness-benefit-paid-sick-leave-1.5872913">paid sick leave</a>, <a href="https://www.cmhc-schl.gc.ca/en/blog/2020-housing-observer/housing-matters-during-covid19-national-housing-day-2020">affordable housing</a>, unemployment insurance and a strong health-care system.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-ontario-had-to-transfer-thousands-of-toronto-covid-19-patients-to-other-cities-hospitals-160109">Why Ontario had to transfer thousands of Toronto COVID-19 patients to other cities' hospitals</a>
</strong>
</em>
</p>
<hr>
<p>Years of <a href="https://canadiandimension.com/articles/view/jean-chretiens-austerity-made-canada-less-prepared-for-covid-19">austerity policies</a> and a disinvestment in the welfare state prior to the pandemic, however, have only exacerbated the effects of COVID-19 in Canada.</p>
<p>At the same time, the <a href="https://theconversation.com/cerb-was-luxurious-compared-to-provincial-social-assistance-158501?utm_source=dlvr.it&utm_medium=twitter">Canadian Emergency Response Benefit (CERB)</a> showed economic restructuring and wealth redistribution are possible once a problem is deemed a crisis. </p>
<h2>Poor decisions by those in power</h2>
<p>Instead of focusing on financial literacy education for students, let’s reframe the discussion around the <a href="https://doi.org/10.1215/17432197-4211350">profound illiteracy</a> of those in power. </p>
<p>Poor policy-making allowed <a href="https://www.policynote.ca/the-rich-and-the-rest-of-us/">Canadian billionaires</a> to increase their wealth by $78 billion during the pandemic while nearly <a href="https://www150.statcan.gc.ca/n1/daily-quotidien/210604/dq210604a-eng.htm?HPA=1">three million Canadians</a> lost their jobs in March and April 2020 alone. </p>
<p>Those <a href="https://www.ctvnews.ca/health/coronavirus/immigrants-at-higher-risk-of-death-from-covid-19-due-to-work-overcrowded-housing-statcan-1.5463480">working in poorly paid essential industries</a> who could not afford time off bore the burden of COVID-19 infections and deaths. </p>
<p>Today, as the planet <a href="https://www.bbc.com/news/57770728">continues to burn</a> and <a href="https://www.nytimes.com/interactive/2021/world/covid-vaccinations-tracker.html">many people globally</a> await vaccines, we see the hoarding and squandering of resources. Amazon founder Jeff Bezos, who’s amassed almost <a href="https://inequality.org/great-divide/updates-billionaire-pandemic/">$70 billion</a> since the pandemic began, recently made headlines when he celebrated a <a href="https://newrepublic.com/article/162928/richard-branson-jeff-bezos-space-blue-origin">private space race</a>.</p>
<p>Teaching kids better budgeting won’t fix inequality. Addressing the financial literacy of politicians and key decision-makers who make policies that leave CEOs like Bezos avoiding <a href="https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax">federal income taxes</a> or allow wealthy Canadians to squirrel funds away in <a href="https://www.thestar.com/opinion/contributors/2020/08/22/why-do-canadas-wealthiest-families-get-huge-tax-breaks.html">offshore tax havens</a> just might.</p><img src="https://counter.theconversation.com/content/159176/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Agata Soroko receives funding from the Social Sciences and Humanities Research Council of Canada. </span></em></p>Teaching kids better budgeting won’t fix post-pandemic inequalities. A more robust social safety net, less hoarding and squandering of wealth and more equitable tax policies might.Agata Soroko, PhD Candidate, Faculty of Education, L’Université d’Ottawa/University of OttawaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1614272021-06-02T08:56:07Z2021-06-02T08:56:07ZBook calls for a rethink of capitalism amid the ravages of COVID-19<figure><img src="https://images.theconversation.com/files/402548/original/file-20210525-17-1rmgw2k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A woman sweeps outside her shack in Khayelitsha, Cape Town. South Africa is among the most unequal societies in the world. </span> <span class="attribution"><span class="source">Getty Images</span></span></figcaption></figure><p>Instead of being the <a href="https://eu.boell.org/en/2020/07/15/great-leveller-how-covid-19-responses-could-widen-gender-inequality-uk">great leveller</a>, as pandemics have been throughout history, the coronavirus pandemic has revealed and compounded pre-existing inequalities in wealth, race, gender, age, education and geographical location.</p>
<p>This is the paradox with which <a href="https://iangoldin.org/">Ian Goldin</a> – the former CEO of the Development Bank of Southern Africa and now a professor at the University of Oxford – begins his <a href="https://iangoldin.org/books/forthcoming-rescue-from-global-crisis-to-a-better-world/">recently published book</a>, “Rescue: from global crisis to a better world”.</p>
<p>Past <a href="https://www.amazon.com/Global-Inequality-New-Approach-Globalization/dp/067473713X">studies</a> of the forces driving the reduction of inequality have foregrounded ‘malign forces’ – such as wars, natural catastrophes and epidemics – and ‘benign forces’ – more widely accessible education, increased social transfers and progressive taxation. </p>
<p>Social scientist <a href="https://www.therborn.com/">Goran Therborn</a>, in <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/1467-954X.12228">his classic 2013 study of inequality</a>, brings these two forces together. He acknowledged the significance of the ‘malign’ forces of violent revolution and war. But he also emphasises the ‘benign’ forces of peaceful reform that led to the ‘egalitarian moment’ after <a href="https://www.britannica.com/event/World-War-II">World War Two</a>. This is when welfare states were built around the notion of full employment, universal health care, education and social security.</p>
<blockquote>
<p>Under certain circumstances, far-reaching peaceful reform has been possible.</p>
</blockquote>
<p>Why then has the coronavirus pandemic deepened inequality rather than reduced it?</p>
<p>Goldin attributes this paradoxical outcome to four decades of neoliberal thinking.</p>
<p>I agree with his critique of neoliberalism. But he doesn’t give sufficient attention to power, particularly the concentration of economic power. This book, nevertheless, offers important opportunities for the elites of the world and ordinary citizens to explore ways of reducing inequality. </p>
<h2>The case for a rethink</h2>
<p>Inequality, Goldin suggests had been rising in both Europe and the US since the 1980s. He argues that this is:</p>
<blockquote>
<p>mainly due to the tide of liberalisation that was ushered in when Margaret Thatcher in Britain and Ronald Reagan in the US initiated a race to the bottom in taxation, attacks on trade unions, and a weakening of competition policy, which all allowed for the growing concentration and strength of employers.</p>
</blockquote>
<p>What is needed, Goldin believes, is a fundamental rethinking of capitalism. Big government and the activist state is back, he says. The pandemic has led to a counter-revolution. Conservative governments now go beyond even arguments put forward by the economist <a href="https://www.econlib.org/library/Enc/KeynesianEconomics.html">Maynard Keynes</a> in the 1930s that governments needed to spend their way out of the Great Depression. </p>
<p>Unless inequality is reduced, he warns, populism and protectionism will become dominant.</p>
<blockquote>
<p>The tragedy is that the policies implemented by these populist leaders benefit the few not the many, thereby deepening and entrenching inequality. </p>
</blockquote>
<p>For Goldin this global trajectory of populism is not inevitable. He believes that it is human actions and leaders that shape societies, not simply events.</p>
<p>The chapter <em>Reducing inequality</em> is full of sensible proposals designed to reduce inequality. Among these are:</p>
<ul>
<li><p>the closure of tax havens and loopholes, </p></li>
<li><p>the introduction of wealth taxes on the assets of the top 1% earners, </p></li>
<li><p>higher inheritance taxes on the transfer of wealth of the top 1 per cent, and</p></li>
<li><p>progressive income taxes that exempt the lowest earners and then rise steeply for the highest earners.</p></li>
</ul>
<p>Goldin discusses how five biggest American tech companies -– Facebook, Amazon, Apple, Netflix and Google –- dominate the stock markets. He cites the fact that the US$28 trillion attributed to these companies is five times greater than all the physical assets owned by all the other 500 companies in the Standard and Poor’s stock index. </p>
<p>Jeff Bezos, the founder of Amazon, saw his wealth almost double. This makes him the first person in history to be worth more than US$200 billion. Meanwhile, the wealth of Elon Musk, the founder of Tesla, increased by more than US$160 billion during the pandemic, to US$184 billion.</p>
<h2>What needs to be done</h2>
<p>Goldin draws on Nobel Prize Winner, <a href="https://www.nobelprize.org/prizes/economic-sciences/1998/sen/facts/">Amartya Sen</a>, who sees inequality as the function of the distribution of capabilities. From this perspective, inequality is above all about inequality of opportunities available to people to lead fulfilling lives. Central to this is education, gender and human rights. </p>
<p>Sen is far removed from orthodox neoliberalism. He adopts human well being, rather than mere growth, as the goal of development. But his approach to development is grounded in pragmatic neoliberalism. His message is clear: people in developing countries should adopt free markets, strictly delimit the role of the state, promote liberal democratic institutions , ensure the provision of basic education and health care and welcome open discussion of issues.</p>
<p>I disagree with Goldin when it comes to drawing on Sen. This is because I am sceptical of Sen’s faith in free markets, free speech and reasoned social progress. He abstracts freedom from power relations and focuses on individual actors. </p>
<p>But inequality is primarily a power relation. Sen gives a false promise to the poor and excluded. He does not challenge the concentration of economic power, centred on global and national markets. Instead he takes them for granted. </p>
<p>A ‘rethinking of capitalism" requires that our primary focus should be on the distribution of economic power (rather than the unequal distribution of capabilities) as the <a href="https://www.oxfordhandbooks.com/view/10.1093/oxfordhb/9780190630577.001.0001/oxfordhb-9780190630577-e-42">potential leading causal factor driving inequality</a>.</p>
<p>This perspective requires that the distribution of economic power be addressed head-on and necessitates a bolder more integrated approach. </p>
<p>One of the strengths of this book is its historical perspective. At the height of World War Two, the deadliest conflict in human history with an estimated 70 to 80 million fatalities, civil servants in the UK, were told to collaborate with economists like John Maynard Keynes and <a href="https://www.britannica.com/biography/William-Beveridge">British economist and liberal politician William Beveridge</a> to plan for a better life for all. </p>
<p>The <a href="https://www.parliament.uk/about/living-heritage/transformingsociety/livinglearning/coll-9-health1/coll-9-health/">Beveridge Report</a>, published in the UK in November 1942 at the height of the war, provided the foundations for the welfare state. It set out to overcome the ‘five giants’ of ‘want, disease, ignorance, squalor and idleness’.</p>
<p>Whether this optimistic and inspirational scenario of post-war Europe is feasible in many countries, including South Africa, is questionable.</p>
<p>But by identifying some of the ways in which we can precipitate change to reduce inequality, this book is a valuable contribution to the debate on any country’s future.</p><img src="https://counter.theconversation.com/content/161427/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Edward Webster receives funding from Friedrich Ebert Stiftung. He is affiliated with the Southern Centre of Inequality Studies at Wits University
</span></em></p>Rethinking capitalism requires that the primary focus should be on the distribution of economic power as the potential leading causal factor driving inequality.Edward Webster, Distinguished Reserach Professor, Southern Centre for Inequality Studies, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1614332021-05-25T12:03:47Z2021-05-25T12:03:47ZForcing disclosure of wages and executive pay in South Africa is a good idea: here’s why<figure><img src="https://images.theconversation.com/files/402333/original/file-20210524-19-6ci1ah.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Workers at a textile factory in Cape Town, South Africa. Differences between wages and executive pay isn't currently in the public domain.</span> <span class="attribution"><span class="source">Dwayne Senior/Bloomberg via Getty Images</span></span></figcaption></figure><p>Plans are afoot <a href="https://www.news24.com/citypress/business/proposed-law-to-force-wage-gap-disclosure-20210523">to make amendments to South Africa’s Companies Act</a> that would require companies to report on wage differentials. This is the gap between executive pay and the lowest paid workers in the company. The announcement was made by South Africa’s Minister of Trade and Industry Ebrahim Patel.</p>
<p>This is a significant development. And in my view, long overdue.</p>
<p>The proposed change would go some way to address the challenge of inequality in South Africa as well as better regulate excessive executive pay. This is because transparency about wage differentials will mean companies cannot continue to ignore the inequalities in earnings in South Africa. Transparency will also enable social actors to question inequality in companies and to change it. On top of this, at least in theory, the massive inequalities between executive pay and the wages of workers would put some pressure on the highest earners to curb their excessive pay. </p>
<p>In my view, this approach to addressing the problem may be more effective than laws that stipulate maximum pay.</p>
<p>The disclosure approach would help modernise South Africa’s corporate reporting in line with<a href="https://connect.sustainalytics.com/sfs-corporate-esg-in-focus-an-overview-of-esg-and-its-impact-on-companies?utm_term=&utm_campaign=Leads-Search-20&utm_source=adwords&utm_medium=ppc&hsa_acc=4619360780&hsa_cam=11145778763&hsa_grp=108965194933&hsa_ad=514798435870&hsa_src=g&hsa_tgt=dsa-390170183270&hsa_kw=&hsa_mt=b&hsa_net=adwords&hsa_ver=3&gclid=Cj0KCQjwna2FBhDPARIsACAEc_V9D6QptzDSs7N3DqLtgFYJBhesga2lnYwRokIroS-K1smamtSujVgaAvqzEALw_wcB"> a framework designed</a> to measure performance beyond financial returns to include environmental, social and governance responsibilities of business entities. </p>
<p>South Africa is one of the most unequal societies in the world. The country’s gini-coefficient – which is used to measure levels of income inequality in a country – <a href="https://www.indexmundi.com/facts/indicators/SI.POV.GINI/rankings">is the highest</a> in the world among countries that have data to construct the index. It is estimated to be 0.65. Even very unequal societies in Latin America, such as Brazil (0.51) and Chile (0.48) have lower levels of inequality. At the other end of the spectrum, are egalitarian countries like Sweden’s 0.29 and Denmark’s 0.28. </p>
<p>Levels of inequality are borne out by a host of other statistics too. For example, <a href="https://www.wits.ac.za/media/wits-university/faculties-and-schools/commerce-law-and-management/research-entities/scis/documents/Estimating%20the%20Distribution%20of%20Household%20Wealth%20in%20South%20Africa.pdf">the top 0.01% </a> of the wealthiest South Africans – 3500 individuals – own 15% of the total wealth in the country. Whereas the top 1% of individuals each have net wealth of R17.8 million, the bottom 50% of South Africans have net wealth of -R16 000. In other words their liabilities exceed their assets.</p>
<p>The initiative announced by the minister of trade and industry Ebrahim Patel comes against a backdrop of <a href="https://www.businesslive.co.za/bd/opinion/editorials/2021-05-21-editorial-law-on-wage-disclosure-is-a-step-towards-greater-equality/">increasing awareness</a> of the excessive levels of executive pay in the country. CEOs of the top companies in <a href="https://www.pwc.co.za/en/publications/executive-directors-report.html">South Africa earn</a>, on average, R24 million per year while the minimum wage for workers is just above R21 per hour – about R43 000 per year. One of the most striking statistics that demonstrates the massive wage inequality in South Africa was <a href="https://www.groundup.org.za/article/checkers-worker-would-take-291-years-earn-what-her-boss-was-paid-month/">the calculation</a> that it would take a low paid worker at Checkers – a large food retailer – 290 years to earn the equivalent of what then its then CEO Whitey Basson earned in one month.</p>
<p>This is not the basis <a href="https://www.newframe.com/category/editorial-and-analysis/">for a sustainable society</a>. This level of inequality is a structural trap that holds people back, leads to lower levels of economic growth, and sooner or later, to much higher levels of social unrest. </p>
<h2>Why it matters</h2>
<p>The amendments being proposed are innovative. But they are by no means unusual. Companies being required to go public with this information is increasingly becoming the norm across the world. </p>
<p>The environmental, social, and corporate governance investment framework evaluates companies beyond their financials. It also measures them on environmental, social and governance performance. This approach is being used widely across the globe and more and more investment decisions are now based on this framework.</p>
<p>Within the ‘social’, companies are evaluated on the labour practices and levels of inclusion. For example, does the company pay fair wages; does it have good relationships with the communities around it; does it train workers; does it promote small business?</p>
<p>One measure is whether the gap between workers and executive pay is fair and justified.</p>
<p>A number of countries have laws in place that require companies to report on pay gaps. In California, for example, firms are required <a href="https://www.dfeh.ca.gov/paydatareporting/">to submit pay data reports</a>. In Europe and the UK, companies are required to report on the gender pay gap within their organisation. The UK legislation <a href="https://www.bbc.com/news/business-39502872">has been effective</a> at making gender pay inequality transparent.</p>
<p>South Africa’s own corporate governance codes – the <a href="https://cdn.ymaws.com/www.iodsa.co.za/resource/collection/684B68A7-B768-465C-8214-E3A007F15A5A/IoDSA_King_IV_Report_-_WebVersion.pdf">King IV report</a> – is also in line with this framework, emphasising the fact that companies are part of a wider society where inclusivity and sustainability need greater attention.</p>
<p>There is a lot that needs to be clarified about the proposed amendments: will it apply to all companies, or just listed companies? Will it apply only to large companies, with an employment threshold, such as the <a href="http://www.labour.gov.za/DocumentCenter/Reports/Annual%20Reports/Employment%20Equity/2019%20-2020/20thCEE_Report_.pdf">employment equity reporting requirements</a>, which apply only to companies that employ more 50 workers? Will the amendments include the requirement to report on the gender pay gap, as is the case in many other jurisdictions? How is ‘executive’ defined? How does the legislation propose to deal with extensive sub-contracting arrangements that often hide low-paid work in so-called independent companies?</p>
<p>And will the minister use the opportunity to introduce tighter controls and reporting requirements on environmental considerations?</p>
<h2>First step</h2>
<p>Legislation to require reporting on issues such as wage differentials, the gender pay gap, and the impact on the environment are important for accountability and for creating the conditions for a more equitable society. But it’s important to recognise that changes to the law, on its own, won’t ensure more inclusive and equitable organisations. </p>
<p>As a society, South Africa needs to use the legislation to pressure companies to change the patterns of wage differentials. Without social action, the legislation alone will not change behaviour.</p>
<p>For example, South Africa’s Companies Act gives a lot of power to shareholders. Yet, shareholder action to hold executives accountable is not a hallmark of the country’s corporate governance milieu. Even when highly paid executives have failed to perform, shareholders have found it <a href="https://www.businesslive.co.za/bd/companies/2020-12-17-2020-the-year-shareholders-voted-against-high-executive-pay/">difficult to hold executives to account.</a>.</p>
<p>To ensure more equity and accountability, the amendments being proposed by the minister will require civil society organisations, NGOs and trade unions to use the data for social action aimed at promoting inclusivity and equity in companies.</p><img src="https://counter.theconversation.com/content/161433/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Imraan Valodia receives funding from a number of local and international organizations that support research.</span></em></p>Companies being required to go public with information about executive and workers pay packets is increasingly becoming the norm.Imraan Valodia, Dean of the Faculty of Commerce, Law and Management, and Head of the Southern Centre for Inequality Studies, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1591032021-04-22T14:39:49Z2021-04-22T14:39:49ZEarth Day 2021: Canada’s latest budget falls dangerously short on climate action<figure><img src="https://images.theconversation.com/files/396605/original/file-20210422-16-13kmglw.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5512%2C4000&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Canada's latest federal budget did little to tackle climate action or income inequality, two problems with strong ties. Alberta's Bow Lake is seen in this photo.</span> <span class="attribution"><span class="source">Josh Woroniecki/Unsplash</span></span></figcaption></figure><p><a href="https://www.budget.gc.ca/2021/home-accueil-en.html">The 724-page federal budget</a> made vital spending commitments to extend supports to Canadians as the pandemic shock waves continue. It also made critical social safety net improvements, most notably <a href="https://theconversation.com/federal-budget-2021-7-actions-to-ensure-canadas-child-care-plan-is-about-education-159191">universal child care</a> and increases in old age security and supports for eldercare. </p>
<p>But where is the road map to reduce Canada’s carbon emissions? If we are to have a serious chance of meeting net-zero targets by 2050, Canada must phase out fossil fuel production and use, eliminate fossil fuel subsidies and financing, and end all carbon-emitting activity. This is especially true given that Canada provides more <a href="http://priceofoil.org/2020/05/27/g20-still-digging/">public finance to the fossil fuel sector per capita</a> than any other G20 country.</p>
<p>In a paper for the Cascade Institute, University of Waterloo academics Angela Carter and Truzar Dordi <a href="https://cascadeinstitute.org/technical-paper/correcting-canadas-one-eye-shut-climate-policy/">have calculated</a>, based on government projections, that fossil fuel production in Canada is scheduled to rise until 2039 and remain above current levels in 2050. They conclude that Canada, with 0.5 per cent of the world’s population, would exhaust 16 per cent of the world’s remaining carbon budget to maintain emissions below 1.5C.</p>
<h2>Green economy funding</h2>
<p>The 2021 budget provides major funding of $17.6 billion for the transition to a green economy, including $319 million over the next seven years for research and development for potentially problematic <a href="https://www.nationalobserver.com/2021/04/21/news/trudeaus-wager-carbon-capture-budget-2021">carbon capture and storage</a>. </p>
<p>It earmarks $1 billion over five years to attract private capital to clean tech industries, and a $5 billion green bond issue in this fiscal year to fund infrastructure, clean tech and conservation projects. This is in addition to $3.4 billion — the bulk of it for departmental funding — over five years for land waterways and ocean conservation. It also allocates $4.4 billion in interest-free loans to landlords and homeowners for home retrofits.</p>
<figure class="align-center ">
<img alt="Freeland delivers the budget as Trudeau sits beside her reading the document." src="https://images.theconversation.com/files/396391/original/file-20210421-13-1scdp3f.jpg?ixlib=rb-1.1.0&rect=37%2C0%2C4176%2C2750&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/396391/original/file-20210421-13-1scdp3f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/396391/original/file-20210421-13-1scdp3f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/396391/original/file-20210421-13-1scdp3f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/396391/original/file-20210421-13-1scdp3f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/396391/original/file-20210421-13-1scdp3f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/396391/original/file-20210421-13-1scdp3f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Finance Minister Chrystia Freeland delivers the federal budget in the House of Commons as Prime Minister Justin Trudeau looks on in Ottawa on April 19, 2021.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Sean Kilpatrick</span></span>
</figcaption>
</figure>
<p>But there are no mandated requirements to ensure those getting the funding meet the government’s zero emissions goal — simply lots of carrots, but no sticks. All of this is consistent with what the <a href="https://thebusinesscouncil.ca/report/clean-growth-3-0/">big business</a> lobby was demanding. The words “climate,” climate change" and “climate crisis,” in fact, did not appear once in the finance minister’s speech.</p>
<p>Canada’s climate emissions <a href="https://www.nationalobserver.com/2021/02/04/analysis/canada-pledges-strengthen-2030-climate-targets">have risen 26 per cent since the 1997 Kyoto Protocol</a>. By comparison, American emissions have remained stable and the European Union’s emissions have declined 25 per cent from the Kyoto accord’s 1990 baseline. Even during the past five years, while the Liberals have been in power, Canada’s emissions have continued to creep up.</p>
<h2>Canada vs. the EU</h2>
<p>The government did announce a new target in the budget. It aims to reduce emissions to 36 per cent below 2005 levels by 2030. Reportedly <a href="https://www.ctvnews.ca/politics/trudeau-pressured-to-adopt-tougher-emissions-target-for-biden-climate-summit-1.5396326">under pressure from the Americans</a>, Prime Minister Justin Trudeau announced a further reduction to between <a href="https://pm.gc.ca/en/news/news-releases/2021/04/22/prime-minister-trudeau-announces-increased-climate-ambition">40 and 45 per cent</a> at the U.S.-sponsored Earth Day climate summit. </p>
<p>Yet this still amounts to only a 20-22 per cent reduction since the 1990 Kyoto baseline. The EU, meantime, has <a href="https://www.cnbc.com/2020/12/11/eu-leaders-agree-on-55percent-greenhouse-gas-emissions-reduction-target.html">strengthened its pledge to reduce emissions 55 per cent below its 1990 levels</a>. Globally, the target needs to be about 25 per cent below 1990 levels for a chance of maintaining temperatures at 1.5C. Given Canada’s record of broken promises, skepticism about its ability to meet these commitments is understandable. </p>
<p>There was also scant action in the budget on tackling income disparities, <a href="https://www.sei.org/publications/the-carbon-inequality-era/">even though the link between carbon emissions and inequality</a> is striking. The world’s richest families have a disproportionate impact on climate. In 2015, <a href="https://www.oxfam.org/en/press-releases/carbon-emissions-richest-1-percent-more-double-emissions-poorest-half-humanity">the top one per cent accounted for 15 per cent of global emissions</a>, almost half of them from North America. The top 10 per cent accounted for more than half of global emissions, almost a third from North America. </p>
<figure class="align-center ">
<img alt="People lie on the ground while taking part in a climate action protest" src="https://images.theconversation.com/files/396392/original/file-20210421-19-r74jia.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/396392/original/file-20210421-19-r74jia.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/396392/original/file-20210421-19-r74jia.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/396392/original/file-20210421-19-r74jia.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/396392/original/file-20210421-19-r74jia.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/396392/original/file-20210421-19-r74jia.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/396392/original/file-20210421-19-r74jia.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">People lie on the ground while taking part in a die-in outside the B.C. Supreme Court as part of a climate action demonstration in Vancouver in February 2021.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Darryl Dyck</span></span>
</figcaption>
</figure>
<p>In Canada, <a href="https://oxfam.app.box.com/s/gsrhhjkee8p3630fp21a3k1y3pz1ozjo">the richest 0.1 per cent emitted 136 tonnes of CO2 per capita in 2015</a>. The bottom 50 per cent of Canadians in terms of income, by comparison, emitted only seven tonnes of CO2 that year.</p>
<h2>No wealth tax</h2>
<p>Last September’s <a href="https://theconversation.com/the-throne-speech-must-blaze-a-bold-new-path-including-imposing-a-wealth-tax-145747">speech from the throne</a> promised to “identify additional ways to tax extreme wealth inequality.” </p>
<p>But there was no wealth tax on the super-rich in the budget, no increase in the top income tax bracket or the capital gains tax, no surtax on billionaires disproportionately profiting from the pandemic despite the fact that, a year into the crisis, <a href="https://www.policyalternatives.ca/newsroom/news-releases/one-year-pandemic-canadian-billionaire-wealth-78-billion">Canadian billionaire wealth</a> was up by $78 billion.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-throne-speech-must-blaze-a-bold-new-path-including-imposing-a-wealth-tax-145747">The throne speech must blaze a bold new path — including imposing a wealth tax</a>
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<hr>
<p>The top <a href="https://www.pbo-dpb.gc.ca/en/blog/news/RP-2021-007-S--estimating-top-tail-family-wealth-distribution-in-canada--estimation-queue-superieure-distribution-patrimoine-familial-au-canada">one per cent of Canada’s income earners hold 26 per cent of Canadian wealth</a>. The top 10 per cent hold 56.4 per cent of family wealth, while the bottom 50 per cent of Canadians hold a negligible 1.2 per cent of total family wealth. The budget announced <a href="https://www.cbc.ca/news/business/budget-tax-1.5993593">a few boutique taxes</a> for the very wealthy and limits on interest deductibility. That’s about it.</p>
<p>The aforementioned social spending commitments could greatly improve the living conditions for low- to middle-income households and vulnerable populations, but they’ll barely make a dent in bringing down overall income and wealth inequality to where it stood in the early 1980s. Between <a href="https://www.policyalternatives.ca/publications/reports/75-years-of-income-inequality-canada">1982 and 2018, average incomes for the top one per cent doubled</a> in Canada, with most of those income gains going to the top 0.01 per cent. Average real income for the bottom half of Canada’s income earners declined during the same period.</p>
<h2>No clampdown on banks</h2>
<p>Canadian financial institutions, rife with one of the <a href="https://www.desmog.com/2021/04/06/revealed-climate-conflicted-directors-leading-the-worlds-top-banks/">world’s most “climate-conflicted bank directors,”</a> continue to lend massive amounts of money to the fossil fuel sector. The world’s biggest 60 banks, including four of the big five Canadian banks, have provided US$3.8 trillion of financing for fossil fuel companies since the Paris climate accord came into effect in 2016, according to the <a href="https://www.ran.org/bankingonclimatechaos2021/">Banking on Climate Chaos 2021</a> report.</p>
<figure class="align-center ">
<img alt="Bank building in Toronto's financial district." src="https://images.theconversation.com/files/396393/original/file-20210421-23-1dr12ci.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/396393/original/file-20210421-23-1dr12ci.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/396393/original/file-20210421-23-1dr12ci.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/396393/original/file-20210421-23-1dr12ci.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/396393/original/file-20210421-23-1dr12ci.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/396393/original/file-20210421-23-1dr12ci.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/396393/original/file-20210421-23-1dr12ci.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Bank buildings are seen in Toronto’s financial district in June 2018. There’s no indication in the budget that the federal government will curb bank financing of the fossil fuel industry.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Tijana Martin</span></span>
</figcaption>
</figure>
<p>Yet there’s nothing in the budget to indicate that the Bank of Canada and the Office of the Superintendent of Financial Institutions will clamp down on lending to the fossil fuel industry.</p>
<p>Global corporate tax rates have plummeted over the past four decades, including in Canada. The average worldwide statutory corporate tax rate fell <a href="https://taxfoundation.org/publications/corporate-tax-rates-around-the-world/">from 40 per cent in 1980 to 24 per cent in 2020</a>. </p>
<p>In the United States, the Joe Biden administration <a href="https://www.cnbc.com/2021/03/31/biden-infrastructure-plan-includes-corporate-tax-hike-transportation-spending.html">has unveiled</a> a plan to raise American corporate tax rates to 28 per cent from 21 per cent. </p>
<p>But there was no increase in Canadian corporate rates in this budget. Nor does the budget mandate carbon reduction targets for corporations that receive government funding, continuing to let private sector’s <a href="https://www.bairdeurope.com/Is-ESG-Investing-Making-a-Difference">environmental, social and governance [ESG]</a> investment fund initiatives take the lead, even though they invariably <a href="https://www.independent.co.uk/climate-change/wall-street-finance-blackrock-oil-greenwashing-b1819272.html">favour profit over climate</a>.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/sustainability-rankings-dont-always-identify-sustainable-companies-157023">Sustainability rankings don't always identify sustainable companies</a>
</strong>
</em>
</p>
<hr>
<p>The snail’s pace of action in this year’s federal budget is out of step with the urgency of the climate and income inequality crises. </p>
<p>It’s done nothing to threaten <a href="https://www.penguinrandomhouse.com/books/305569/plutocrats-by-chrystia-freeland/">the plutocracy’s</a> hold on power and privilege. Most disconcerting, Canada remains an outlier in the global effort to prevent the slide towards the climate abyss.</p><img src="https://counter.theconversation.com/content/159103/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bruce Campbell is affiliated with the Canadian Centre for Policy Alternatives, the Group of 78, the Rideau Institute for International Affairs, and the Polaris Institute</span></em></p>The snail’s pace of action in this year’s federal budget on climate is out of step with the urgency of the climate and income inequality crises.Bruce Campbell, Adjunct professor, Faculty of Environmental Studies, York University, CanadaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1512082021-01-26T18:52:43Z2021-01-26T18:52:43ZWe are the 1%: the wealth of many Australians puts them in an elite club wrecking the planet<figure><img src="https://images.theconversation.com/files/380346/original/file-20210124-13-1vb2vqt.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C8688%2C5709&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Among the many hard truths exposed by COVID-19 is the huge disparity between the world’s rich and poor. As economies went into freefall, the world’s billionaires <a href="https://www.theguardian.com/business/2020/oct/07/covid-19-crisis-boosts-the-fortunes-of-worlds-billionaires">increased</a> their already huge fortunes by 27.5%. And as many ordinary people lost their jobs and fell into poverty, The Guardian reported “the 1% are coping” by <a href="https://www.theguardian.com/world/2020/mar/13/coronavirus-lifestyles-of-the-rich-and-famous-how-the-1-are-coping">taking private jets</a> to their luxury retreats.</p>
<p>Such perverse affluence further fuelled criticism of the so-called 1%, which has long been the standard <a href="https://www.washingtonpost.com/lifestyle/style/why-does-everybody-suddenly-hate-billionaires-because-theyve-made-it-easy/2019/03/13/00e39056-3f6a-11e9-a0d3-1210e58a94cf_story.html">rhetoric of the political Left</a>. </p>
<p>In 2011, Occupy Wall Street protesters called out growing economic inequality by <a href="https://www.aljazeera.com/news/2011/12/27/occupy-wall-street-we-are-the-99">proclaiming</a>: “We are the 99%!”. And an <a href="https://www.oxfam.org/en/press-releases/carbon-emissions-richest-1-percent-more-double-emissions-poorest-half-humanity">Oxfam report</a> in September last year lamented how the richest 1% of the world’s population are responsible for more than twice as much carbon pollution as the poorest half of humanity.</p>
<p>But you might be surprised to find this 1% doesn’t just comprise the super-rich. It may include you, or people you know. And this fact has big implications for social justice and planetary survival.</p>
<figure class="align-center ">
<img alt="People crossing the street in Sydney" src="https://images.theconversation.com/files/380388/original/file-20210125-19-hdvuk6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/380388/original/file-20210125-19-hdvuk6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/380388/original/file-20210125-19-hdvuk6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/380388/original/file-20210125-19-hdvuk6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/380388/original/file-20210125-19-hdvuk6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/380388/original/file-20210125-19-hdvuk6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/380388/original/file-20210125-19-hdvuk6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Many everyday Australians have a net worth that puts them in the world’s richest 1%.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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</figure>
<h2>Look in the mirror</h2>
<p>When you hear references to the 1%, you might think of billionaires such as Amazon’s <a href="https://mkorostoff.github.io/1-pixel-wealth/">Jeff Bezos</a> or Tesla founder <a href="https://www.bbc.com/news/technology-55578403">Elon Musk</a>. However, as of October last year there were <a href="https://www.cnbc.com/2020/10/08/asia-pacific-is-home-to-most-billionaires-globally-pandemic-grows-wealth.html">2,189 billionaires worldwide</a> — a minuscule proportion of the 7.8 billion people on Earth. So obviously, you don’t have to be a billionaire to join this global elite. </p>
<p>So how rich do you have to be? Well, Credit Suisse’s <a href="https://www.credit-suisse.com/about-us/en/reports-research/global-wealth-report.html">Global Wealth Report</a> in October last year showed an individual net worth of US$1 million (A$1,295,825) - combined income, investments and personal assets — will make you among the world’s 1% richest people. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/five-ways-coronavirus-is-deepening-global-inequality-144621">Five ways coronavirus is deepening global inequality</a>
</strong>
</em>
</p>
<hr>
<p>The latest official data shows the average Australian household has a <a href="https://mccrindle.com.au/insights/blog/australias-income-and-wealth-distribution/">net worth of A$1,022,200</a>. Australia’s richest 20% of households – about two million of them – have an <a href="https://mccrindle.com.au/insights/blog/australias-household-income-wealth-distribution/?pdf=953">average net worth of A$3.2 million</a>. Even if those households comprised two income-earning adults, their net worth equally divided would put many in the top 1% of global wealth holders.</p>
<p>A net wealth of US$109,430 (A$147,038) puts you among the world’s <a href="https://www.credit-suisse.com/about-us/en/reports-research/global-wealth-report.html">richest 10%</a>. Half of Australia’s households have a <a href="https://www.abc.net.au/news/2019-07-12/household-income-and-wealth-abs-data-shows-rich-are-richer/11302696">net worth of A$558,900</a> or more. </p>
<figure class="align-center ">
<img alt="Aerial view of suburban Australian homes" src="https://images.theconversation.com/files/380348/original/file-20210124-13-133suwd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/380348/original/file-20210124-13-133suwd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=477&fit=crop&dpr=1 600w, https://images.theconversation.com/files/380348/original/file-20210124-13-133suwd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=477&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/380348/original/file-20210124-13-133suwd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=477&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/380348/original/file-20210124-13-133suwd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=599&fit=crop&dpr=1 754w, https://images.theconversation.com/files/380348/original/file-20210124-13-133suwd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=599&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/380348/original/file-20210124-13-133suwd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=599&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The net worth of many Australians puts them in the global elite.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>What does all this mean for the planet?</h2>
<p>It’s true the per capita emissions of the super-rich are likely to be far greater than others in the top 1%. But this doesn’t negate the uncomfortable fact Australians are among a fraction of the global population <a href="https://www.gfmag.com/global-data/economic-data/richest-countries-in-the-world">monopolising global wealth</a>. This group causes the vast bulk of the world’s <a href="https://www.leeds.ac.uk/news/article/4562/shining_a_light_on_international_energy_inequality">climate damage</a>.</p>
<p>A 2020 Oxfam report shows the world’s richest 10% produce a staggering <a href="https://www.oxfam.org.au/wp-content/uploads/2020/09/bp-power-profits-pandemic-100920-en-embargoed.pdf">52% of total carbon emissions</a>. Consistent with this, a 2020 <a href="https://www.nature.com/articles/s41560-020-0579-8?proof=t">University of Leeds study</a> found richer households around the world tend to spend their extra money on energy-intensive products, such as package holidays and car fuel. The UN’s 2020 Emission Gap Report further <a href="https://www.unenvironment.org/emissions-gap-report-2020">confirmed this</a>, finding the top 10% use around 75% of all aviation energy and 45% of all land transport energy.</p>
<p>It’s clear that wealth, and its consequent energy privilege, is neither socially just nor ecologically sustainable.</p>
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<img alt="Man with one shiny shoe and one scruffy shoe" src="https://images.theconversation.com/files/380372/original/file-20210125-21-1uki61.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/380372/original/file-20210125-21-1uki61.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/380372/original/file-20210125-21-1uki61.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/380372/original/file-20210125-21-1uki61.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/380372/original/file-20210125-21-1uki61.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/380372/original/file-20210125-21-1uki61.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/380372/original/file-20210125-21-1uki61.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Global wealth disparity is not just or sustainable.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<h2>A potential solution</h2>
<p>Much attention and headlines are devoted to the <a href="https://www.oxfamamerica.org/explore/stories/billionaire-wealth-grows-by-25-billion-a-day-while-poorest-wealth-falls/">unethical wealth</a> of billionaires. And while the criticism is justified, it distracts from a broader wealth problem — including our own.</p>
<p>We should note here, one can have an income that’s large compared to the global average, and still experience significant <a href="https://www.dss.gov.au/sites/default/files/documents/09_2015/data-highlight-no-1-2014-financial-hardship_0.pdf">economic hardship</a>. For instance in Australia, the housing costs of more than one million households exceed 30% of total income – the commonly used <a href="https://www.acoss.org.au/housing-homelessness/">benchmark</a> for housing affordability.</p>
<p>Here lies a central challenge. Even if we wanted to reduce our wealth, the <a href="https://theconversation.com/when-houses-earn-more-than-jobs-how-we-lost-control-of-australian-house-prices-and-how-to-get-it-back-144076">enormous cost</a> of keeping a roof over our head prevents us from doing so. Servicing a mortgage or paying rent is one of our <a href="https://grattan.edu.au/wp-content/uploads/2018/03/901-Housing-affordability.pdf">biggest financial obligations</a>, and a key driver in the pursuit of wealth.</p>
<p>But as we’ve shown above, as personal wealth grows, so too does environmental devastation. The rule even applies to the lowest paid, who are working just to pay the rent. The industries they rely on, such as <a href="https://www.citysmart.com.au/news/unsustainable-impacts-fast-fashion/">retail</a>, <a href="https://theconversation.com/the-carbon-footprint-of-tourism-revealed-its-bigger-than-we-thought-96200">tourism</a> and <a href="https://www.theguardian.com/sustainable-business/2014/jul/25/greenwashing-hospitality-industry-water-conservation-technology-hotels">hospitality</a>, are themselves associated with environmental damage. </p>
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Read more:
<a href="https://theconversation.com/coronavirus-shows-housing-costs-leave-many-insecure-tackling-that-can-help-solve-an-even-bigger-crisis-137772">Coronavirus shows housing costs leave many insecure. Tackling that can help solve an even bigger crisis</a>
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<p><a href="https://www.ppesydney.net/content/uploads/2021/01/19_Baumann-Alexander-and-Burdon.pdf">Existing economic and social structures</a> mean stepping off this wealth-creating treadmill is almost impossible. However as we’ve <a href="https://theconversation.com/access-to-land-is-a-barrier-to-simpler-sustainable-living-public-housing-could-offer-a-way-forward-121246">written before</a>, people can be liberated from their reliance on economic growth when land - the very foundation of our security - is not commodified.</p>
<p>For social justice and ecological survival, we must urgently experiment with <a href="https://theecologist.org/2020/mar/04/towards-walden-wage">new land and housing strategies</a>, to make possible a lifestyle of reduced wealth and consumption and increased self-sufficiency. </p>
<p>This might include urban commons, such as the R-Urban project in Paris, where several hundred people co-manage land that includes a small farm for collective use, a recycling plant and cooperative eco-housing.</p>
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<img alt="" src="https://images.theconversation.com/files/333571/original/file-20200508-49579-4dc69m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/333571/original/file-20200508-49579-4dc69m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=434&fit=crop&dpr=1 600w, https://images.theconversation.com/files/333571/original/file-20200508-49579-4dc69m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=434&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/333571/original/file-20200508-49579-4dc69m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=434&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/333571/original/file-20200508-49579-4dc69m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=545&fit=crop&dpr=1 754w, https://images.theconversation.com/files/333571/original/file-20200508-49579-4dc69m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=545&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/333571/original/file-20200508-49579-4dc69m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=545&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The R-Urban project in Paris, which includes a small farm.</span>
<span class="attribution"><span class="source">Flickr</span></span>
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<p>Under a new land strategy, other ways of conserving resources could be deployed. One such example, developed by Australian academic <a href="https://theconversation.com/the-simple-life-manifesto-and-how-it-could-save-us-33081">Ted Trainer</a>, involves cutting our earnings sharply - with paid work for only two days in a week. For the rest of the working week, we would tend to community food gardens, network and share many things we currently consume individually.</p>
<p>Such a way of living could help us re-evaluate the amount of wealth we need to live well.</p>
<p>The social and ecological challenges the world faces cannot be exaggerated. New thinking and creativity is needed. And the first step in this journey is taking an honest look at whether our own wealth and consumption habits are contributing to the problem.</p>
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Read more:
<a href="https://theconversation.com/the-simple-life-manifesto-and-how-it-could-save-us-33081">The 'simple life' manifesto and how it could save us</a>
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<p><em>Clarification: this article has been updated to state that, for Australia’s richest 20% of households, the average net worth of two income-earning adults would put many in the top 1% of global wealth holders.</em></p><img src="https://counter.theconversation.com/content/151208/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alex Baumann is affiliated with the NTW project (<a href="http://www.ntwonline.weebly.com">www.ntwonline.weebly.com</a> | <a href="http://www.facebook.com/land4all">www.facebook.com/land4all</a>). This project is working on a reframing of public housing policy settings – to provide an example of of the sort of local collaborative development on public land related to the final link in this article.</span></em></p><p class="fine-print"><em><span>Samuel Alexander does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>You might be surprised to find yourself in the company of Elon Musk and Jeff Bezos in the world’s richest 1%. This has big implications for planetary survival.Alex Baumann, Casual Academic, School of Social Sciences & Psychology, Western Sydney UniversitySamuel Alexander, Research fellow, Melbourne Sustainable Society Institute, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1479822020-10-15T19:09:40Z2020-10-15T19:09:40ZNZ election 2020: 5 experts on the final debate and the campaign’s winners and losers ahead of the big decision<p>After a long and COVID-delayed campaign, New Zealand’s general election is just a day away. For the fourth and final time, Labour leader Jacinda Ardern and National Party leader Judith Collins met last night for a televised debate. With a record number of <a href="https://elections.nz/stats-and-research/2020-general-election-advance-voting-statistics/">advance votes</a> already cast, however, there is a sense of their respective fates being mostly sealed. </p>
<p>Furthermore, last night’s debate was prefaced by a final 1 News Colmar Brunton poll showing little change in the major parties’ fortunes, but a lift for Labour’s likely coalition partner the Greens.</p>
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<p>Here, our five experts respond to the debate and offer their concluding thoughts on the campaign, the performance of the leaders and parties, and the implications for New Zealand’s 53rd parliament.</p>
<h2>A generational shift</h2>
<p><strong>Richard Shaw, Professor of Politics, Massey University</strong></p>
<p>Those noises off you heard during the final leaders’ debate were the sounds of the smaller parties jostling: some for influence, some for relevance and some for survival. For all the speculation that Labour may be able to govern alone, the 15 parties contesting the election not called Labour or National matter a great deal to the eventual outcome. </p>
<p>For one thing, even if Jacinda Ardern goes to bed on Saturday night in command of a parliamentary majority (and the latest poll suggests that possibility may be slipping away), she may well try to cobble together an arrangement with the Greens and the Māori Party — assuming the first makes it to 5%, which is looking increasingly likely, and the second takes at least one of the Māori seats. </p>
<p>She will have an eye on constructing a coalition that shuts the centre-right out of power for a generation.</p>
<p>National have a small party problem of a different sort — the one where the party you have kept on life support for years suddenly flicks the switch and starts hoovering up your vote. ACT’s caucus is presently 2.3% the size of National’s — by Sunday that could balloon closer to 25%. National is in danger of becoming a smallish party itself. If that occurs the party will be looking at an extended period of rebuilding, which may include replacing Collins as leader. </p>
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Read more:
<a href="https://theconversation.com/nz-election-2020-why-gender-stereotypes-still-affect-perceptions-of-jacinda-ardern-and-judith-collins-as-leaders-147837">NZ election 2020: why gender stereotypes still affect perceptions of Jacinda Ardern and Judith Collins as leaders</a>
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<p>You could see some of these things in play in last night’s debate. Ardern largely refused to insult anyone or rule anything out in the post-election washup, other than promising she would not continue as leader if she lost. </p>
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<p>Collins played to her base and angled to bring back people who have decamped to New Zealand First or the New Conservatives. Ardern playing the long game, Collins doing her best to stave off an electoral towelling. </p>
<p>And all the while those noises off continued, particularly from a New Zealand First beginning to show signs of a rather late resurgence.</p>
<h2>A campaign of missed opportunities</h2>
<p><strong>Bronwyn Hayward, Professor of Politics, University of Canterbury</strong></p>
<p>Disasters such as a global pandemic present opportunities for radical policy shifts, but that hasn’t happen in this election campaign. Both major parties relied on the conventional idea of economic growth as the driver of future recovery: investing in growth through training and employment (Labour) or cutting taxes to boost consumer spending (National). </p>
<p>With the focus on COVID risks, there has been little opportunity for debate about our preparedness for the other, slower moving disasters facing New Zealand. Rising house prices, small business priorities and challenges facing tourism have featured often, but any real discussion of structural reform (a wealth or capital gains tax, universal basic income or services) has been shut down firmly by both major parties. </p>
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Read more:
<a href="https://theconversation.com/nz-election-2020-jacinda-ardern-promised-transformation-instead-the-times-transformed-her-142900">NZ election 2020: Jacinda Ardern promised transformation — instead, the times transformed her</a>
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<p>When this year’s 18-year-old first-time voters turn 58 their climate will be virtually unrecognisable from the one we know now. Yet a major Environment Ministry climate report released on the day went unremarked in the final debate, and there was no discussion of the wider burdens that will confront first time voters their whole lives: growing inequality, serious urban water shortages, wildfires, drought, flooding and coastal inundation. </p>
<p>Nonetheless, there were winners in this election campaign: the voters who seized the opportunity to enrol right up to election day, turning out to advance vote in their thousands, many for the first time, including Māori, young people, the homeless and prisoners serving under-three-year sentences (who regained the right they’d lost in a previous law change). </p>
<p>Political debate will only really change when their voices are heard.</p>
<h2>Landslide to Labour</h2>
<p><strong>Rawiri Taonui, Chair Te Rūnanga Māori, Ako Aotearoa (Massey University)</strong></p>
<p>Jacinda Ardern lost the first two leaders debates with over-philosophising 10-second soundbites. She won the last two on substance, principle and her word. National leader Judith Collins won the first two because she had better one-liners. She lost the third because she yelled, and the fourth because she called Ardern a liar. </p>
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<p>With ructions over Collins making “policy on the hoof” and a lack of discipline in the ranks, all has clearly not been well with National. So, some predictions:</p>
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<li><p>With two referendums and an electorate seeking reassurance, the highest voter turnout since 1999 and an increased youth vote.</p></li>
<li><p>A massive win to Labour, 58 to 62 seats and a record 15 Māori MPs. The Greens to return three Māori MPs. A post-election question — will Labour promote more Māori into senior cabinet roles? </p></li>
<li><p>National in the low 30s or high 20s, meaning a drop from eight to four Māori MPs. Act returns three Māori MPs. With more Māori on the left and fewer on the right, expect an increase in racist rhetoric on kaupapa (principle or policy) such as Ihumātao, Whānau Ora and Māori representation.</p></li>
<li><p>Having completed a constructive rebuild after the debacle of 2017 and despite a racist Māori electoral option that prevents former supporters returning to the Māori roll until 2024, the Māori Party has been impressive. They may take at least one Māori electorate. If not, they have a platform for 2023.</p></li>
<li><p>New Zealand First leader Winston Peters to retire, receive a knighthood, and open a company conducting polls in future elections. As he says, accuracy is everything.</p></li>
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<h2>Are televised debates still relevant?</h2>
<p><strong>Jennifer Curtin, Professor of Politics and Policy, University of Auckland</strong></p>
<p>In 1960, the first live debate between the two major candidates for the presidency of the United States was aired on television. There were four debates, over 100 million people watched at least one, and they led to a four point increase in turnout. Political commentator Walter Lippman labelled them a “bold innovation which […] could not now be abandoned.”</p>
<p>Fast forward to New Zealand 2020, where we have witnessed four televised debates between Ardern and Collins, and several between the minor parties. While over one million viewers tuned into the first debate for at least one minute, do they still represent the “key democratic moment” that a commentator once claimed? Have we learnt anything new about what our next government will do?</p>
<p>Maybe not. The format doesn’t allow for in-depth discussion of policies, but perhaps we find out how much our leaders care about what they are selling. We now know that Collins has a capacity for quick-witted retorts, is unafraid to interject relentlessly and to swing easily between positivity and attack, although last night’s debate was calmer than previous ones. And we were reminded that while Ardern might prefer being relentlessly positive, she can be aggressive when pushed. </p>
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<p>But maybe the value of these debates is in the way they magnify the political personalities of our leaders. We have seen how Ardern and Collins respond under pressure in the spotlight, how they manage their emotions and their energy levels. After this very long campaign, we know a bit more about their character, their qualities and flaws. Perhaps that is a good enough reason for televised debates to continue.</p>
<h2>An election against the odds</h2>
<p><strong>Grant Duncan, Associate Professor for the School of People, Environment and Planning, Massey University</strong></p>
<p>An election in the midst of a sharp economic recession may sound ominous for a sitting government. Holding a free and fair election with good turnout during a global pandemic may sound impossible. But New Zealand has confounded such concerns.</p>
<p>Advance voting has been higher than ever, promising a good turnout. The governing Labour Party and Prime Minister Jacinda Ardern are leading the opinion polls, despite the economic pain. So, Ardern is likely to get a second term in office.</p>
<p>Labour’s election results have risen from 25% in 2014, to 37% in 2017 after Ardern took the helm — and now their polling points towards the mid-forties. This is quite a political feat, especially given (or is it due to?) the crises confronted this year.</p>
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Read more:
<a href="https://theconversation.com/nz-election-2020-as-the-ultimate-political-survivor-judith-collins-prepares-for-her-ultimate-test-144488">NZ election 2020: as the ultimate political survivor, Judith Collins prepares for her ultimate test</a>
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<p>The election campaign has been open and robust — with relatively little peddling of misinformation and conspiracy theories. In the final week, Collins was in attack mode, even alleging Ardern had lied about border staff testing. Yet the last debate ended on a note of mutual appreciation, with Ardern calling for our politics not to become too polarised.</p>
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<p>If anyone has cause to complain, it’s the smaller parties who struggle to be heard above the Labour versus National match. </p>
<p>For all that, in my eyes, the Electoral Commission is the winner this time. New Zealanders are enjoying a safe and fair democratic vote during an extraordinary period. Kiwis may shrug this off or take it for granted, but democracies around the world should look and learn.</p><img src="https://counter.theconversation.com/content/147982/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It was a campaign like no other, and while there were missed opportunities and lapses of judgement, the fact New Zealanders are voting in a safe and fair election is reason enough to celebrate.Richard Shaw, Professor of Politics, Massey UniversityBronwyn Hayward, Professor of Politics, University of CanterburyGrant Duncan, Associate Professor, School of People, Environment and Planning, Massey UniversityJennifer Curtin, Professor of Politics and Policy, University of Auckland, Waipapa Taumata RauRawiri Taonui, Chair, Te Rūnanga Māori, Ako Aotearoa — National Institute of Excellence in Tertiary Teaching, Massey UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1466702020-09-22T09:55:28Z2020-09-22T09:55:28ZContrasting styles, some substance: 5 experts on the first TV leaders’ debate of NZ’s election<p>Prime Minister and Labour leader Jacinda Ardern and National Party leader Judith Collins have met for the first televised debate of the 2020 election campaign. With the results of the latest 1 News-Colmar Brunton poll released only an hour earlier, there was much at stake.</p>
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<p>While down slightly on previous polls, Labour was still in a position to govern alone — comfortably so if the Greens joined them in a coalition agreement. National was still well behind, clearly bleeding votes to ACT on its right. </p>
<p>Nonetheless, the debate was a fair and largely evenly matched contest, covering the COVID-19 response, border control, health, housing, employment, income inequality and climate change.</p>
<p>Our five experts watched the debate closely for what it revealed about policy, performance and the likely tone of the campaign to come.</p>
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<h2>Genuine differences in substance and style</h2>
<p><strong>Grant Duncan, Associate Professor for the School of People, Environment and Planning, Massey University</strong></p>
<p>Leaders debates are like reality TV. “Who gets voted off the island? Jacinda or Judith?” Fun to watch, but they misrepresent how elections work. </p>
<p>In their proportional representation system, New Zealanders do not vote for prime ministers; they vote for representatives — one local representative, and one party of representatives.</p>
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Read more:
<a href="https://theconversation.com/ardern-versus-collins-ahead-of-their-first-tv-debate-how-much-will-charisma-and-eloquence-matter-145840">Ardern versus Collins: ahead of their first TV debate, how much will charisma and eloquence matter?</a>
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<p>Despite misleading impressions, however, the first debate between the leaders of the two largest parties revealed genuine differences of style and substance. The debate delivered on substantial issues, from climate change to housing the poor.</p>
<p>Collins was quick to call out “nonsense” and often looked fed-up. She criticised the Ardern government for failing to reduce material hardship for the poor, even though her own plan to “stimulate the economy” with tax cuts would most benefit middle- to higher-income earners. She would raise housing supply through reforming laws that affect developers.</p>
<p>Ardern was reserved but sincere. She acknowledged that it’s been a tough time for New Zealanders, but backed public investment in people and their well-being. She saw climate change innovation as an opportunity for farmers and agriculture, not a cost.</p>
<p>Both leaders showed substance, but different styles. National will go for stimulus through tax cuts; Labour will stimulate through raising incomes for the lowest earners. I’d call it a draw.</p>
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<h2>Big questions on climate and inequality go unanswered</h2>
<p><strong>Bronwyn Hayward, Professor of Politics, University of Canterbury</strong></p>
<p>In the 2017 TVNZ election debates, no one was asked about climate change once. Thankfully it was raised early this time by Ardern and hammered home in questions — but the answers left a lot to be desired.</p>
<p>Collins played to her base, repeating the claim that New Zealand is so small, whatever it does won’t make a difference (it will), and that farmers feel bagged by the Greens and Labour (they do). It was left to Ardern to offer more substance and collaborative pathways forward: incentives for reducing emissions, cleaning up rivers (including urban rivers). </p>
<p>But beyond a bit of banter about electric vehicles, neither leader had a policy to fundamentally reduce our transport emissions. Pumped hydro schemes may help create jobs and provide stable energy supply over dry years, but neither tackled how we will afford the costs that are coming for homes and infrastructure exposed to sea level rise. </p>
<p>COVID-19 consumes us right now but climate change hasn’t gone away and neither has inequality. Again no one really answered the question posed by head girl of Aorere College, Aigagalefili Fepulea'i Tapua'i, about the stress on low-income school communities where students have to choose between study or taking a job to help their family. </p>
<p>There were gestures towards answers. Collins made the most direct connection, saying, “My husband is Samoan and had to leave school”, but had no solution. Ardern gestured towards raising the lowest incomes but didn’t make a firm commitment beyond saying, “I am not done with child poverty.”</p>
<p>The futures of young New Zealanders hang on what happens next.</p>
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Read more:
<a href="https://theconversation.com/with-the-election-campaign-underway-can-the-law-protect-voters-from-fake-news-and-conspiracy-theories-146095">With the election campaign underway, can the law protect voters from fake news and conspiracy theories?</a>
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<h2>Ardern as hard to pin down as ever</h2>
<p><strong>Morgan Godfery, Māori Research Partnerships Manager, University of Otago</strong></p>
<p>“Optimism, and that’s what Labour will bring,” the prime minister said in her opening statement, which is strangely and typically, well, contentless. It’s part of the paradox that is Jacinda Ardern — she’s the global left’s standard bearer, the most popular New Zealand prime minister in living memory, a policy leader against the coronavirus, and yet it’s almost impossible to pin down her politics beyond that optimism. </p>
<p>Ardern promised 8,000 new homes are coming down the line, and that’s ostensibly leftist policy and politic. Yet the waiting list for public housing is 20,000 people long. Is 8,000 left enough? It’s certainly left — or centre! — enough to win. </p>
<p>Especially against a strangely flat and staggered National Party leader. People expect Judith Collins to go hard, because of course it’s a brand she cultivates, but it was a jarring juxtaposition: the hard woman (Collins) against the kind and optimistic prime minister. The advocate for a “border protection agency” (Collins) against the person who’s protected the borders (Ardern). It was hard to pin down, then, precisely what Collins was angry at. Other, of course, than the fact she’s leading the losing side.</p>
<h2>Questions remain around National’s border policy</h2>
<p><strong>Siouxsie Wiles, Associate Professor in Microbiology and Infectious Diseases, University of Auckland</strong></p>
<p>It’s no secret that I am supportive of the current government’s elimination strategy when it comes to dealing with COVID-19. The main thing I was looking to hear in the leader’s debate was a commitment from both Jacinda Ardern and Judith Collins that whatever government they lead would stick with that strategy. </p>
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Read more:
<a href="https://theconversation.com/stardust-and-substance-new-zealands-election-becomes-a-third-referendum-on-jacinda-arderns-leadership-143262">Stardust and substance: New Zealand's election becomes a 'third referendum' on Jacinda Ardern's leadership</a>
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<p>The prime minister did that and reiterated the importance of a tightly managed and controlled border. In response, Collins brought up the need for “someone to be in charge”. With a National-led government that would be the job of a new border protection agency. I’m all in favour of an agency dedicated to defending us from pandemic threats, but focusing solely on our border won’t achieve that. Any agency should have a much broader remit that also addresses what makes us vulnerable to pandemics. </p>
<p>Collins also raised not letting anyone board a plane to New Zealand unless they test negative. This policy will certainly stop some infectious people from being able to travel but it won’t catch all of them. I really worry it’ll discriminate against those who can’t afford to, or aren’t able to, access testing. To me this policy runs the very real risk of stranding New Zealanders overseas while not really increasing the security of our border.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1308302182240772097"}"></div></p>
<h2>Both leaders will want to lift their game</h2>
<p><strong>Richard Shaw, Professor of Politics, Massey University</strong></p>
<p>These are as much performances as debates. Ardern edged Collins on leadership performance, looking and sounding like someone with a 32% lead over her opponent in the preferred prime minister ratings and whose party has a 17% buffer over its major opposition: measured, polite and committed to staying clear of the tit-for-tat. </p>
<p>Given the polls, Collins needed to force the issue: it showed in her regular interjections (some of which were to good effect) and willingness to take the contest to Ardern (occasionally not so successfully). </p>
<p>On the issue of policy fluency (your own but also the other side’s), a close call went — perhaps, maybe — narrowly to Collins. As to eloquence — verbal dexterity and rhetorical flow — Ardern had the edge on her opponent (especially in her closing statement), although Collins in pugnacious mode had an energy that Ardern lacked. </p>
<p>These presentational dimensions of politics matter, especially at a time when voters are looking for an emotional compact with leaders. Given the context, Collins may sleep the easier of the two tonight, but both will be looking to lift things a notch or several when they next meet.</p><img src="https://counter.theconversation.com/content/146670/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bronwyn Hayward is a co-ordinating lead author of the intergovernmental Panel on Climate Change and a member of its core writing team. The views expressed here are her own.</span></em></p><p class="fine-print"><em><span>Siouxsie Wiles is a Deputy-Director of Te Pūnaha Matatini, New Zealand's Centre of Research Excellence in complex systems which receives funding from the Ministry of Business, Innovation and Employment (MBIE) for their COVID-19-related work. While not affiliated with the Labour Party, she has agreed to deliver in November the 2020 Mary Dreaver lecture. This annual lecture is held in celebration of the life and achievements of Labour MP Mary Dreaver, the first Auckland woman elected to the New Zealand Parliament. Proceeds from the event go towards supporting the campaigns of women candidates for the Labour Party in both local and national elections. </span></em></p><p class="fine-print"><em><span>Grant Duncan, Morgan Godfery, and Richard Shaw do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>From policy to performance, a panel of five political experts analyses the first televised leaders’ debate of the 2020 New Zealand election campaign.Grant Duncan, Associate Professor for the School of People, Environment and Planning, Massey UniversityBronwyn Hayward, Professor of Politics, University of CanterburyMorgan Godfery, Māori Research Partnerships Manager, University of OtagoRichard Shaw, Professor of Politics, Massey UniversitySiouxsie Wiles, Associate Professor in Microbiology and Infectious Diseases, University of Auckland, Waipapa Taumata RauLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1368182020-08-17T12:36:47Z2020-08-17T12:36:47ZKenya: how stark inequality frustrates the dreams of Nairobi’s jobless young men<p>“Today I woke up late, because there was nothing I was doing,” Wilfred* wrote in his diary. Like many of his peers, the 21-year-old lacks permanent employment, seeking small amounts of cash from odd jobs carried out in the town where he lives on the northern outskirts of the Kenyan capital, Nairobi. </p>
<blockquote>
<p>My friend called me and told me we go for a job that he was given by his neighbour. It was for cutting grass, sweeping the compound and carrying stones. It was a hard work but less money. We were paid 500 Kenya shillings (£3.60). </p>
</blockquote>
<p>In 2017, during research carried out for my doctorate in social anthropology, I had <a href="https://www.berghahnjournals.com/view/journals/social-analysis/64/1/sa640103.xml">distributed diaries</a> to a group of 12 young men aged 21 to 30 in northern Nairobi with the aim of understanding the rhythms of their lives on the economic margins. </p>
<p>Like Wilfred’s entry, these diaries revealed lives of joblessness, begging, piecemeal labour and endless searching for money, all punctuated by substance use. Many smoked cannabis and chewed <em>mũgũũka</em>, cheap khat leaves sold at 50 shillings a bag. </p>
<p>But what also emerged were their dreams of accruing vast wealth, to one day become wildly rich. As 21-year-old Henry wrote: </p>
<blockquote>
<p>Today I woke up having a good feeling of how the day is going to be a perfect day for me, having dreamt of how rich I was going to be. </p>
</blockquote>
<p>Henry’s words are a reminder that for those on the economic margins, material wealth has a powerful allure. The diaries also showed how some young men seek to access that wealth by criminal means.</p>
<h2>Kenya’s informal economy</h2>
<p>Kenya has <a href="https://www.theelephant.info/op-eds/2018/05/12/hustler-nation-jobless-youth-millennial-angst-and-the-political-economy-of-underachievement/">sometimes been described</a> as a “hustler nation”. <a href="https://www.theelephant.info/documents/kenya-national-bureau-of-statistics-economic-survey-2019/">More than 80%</a> of the population work in the informal economy, deriving incomes from hawking goods, fixing cars and working on construction sites. </p>
<p>These are often precarious and piecemeal arrangements, impermanent and low-paid –characteristic of what has been called an era of <a href="https://rai.onlinelibrary.wiley.com/doi/abs/10.1111/1467-8322.12026">jobless growth</a>, in which GDP rises without reducing unemployment. This is a problem experienced most sharply <a href="https://www.un.org/africarenewal/magazine/special-edition-youth-2017/africas-jobless-youth-cast-shadow-over-economic-growth">by the young</a>, consigned to <a href="https://read.dukeupress.edu/cssaame/article-abstract/40/1/66/164143/PropulsionsMobility-in-Southern-Urbanism?redirectedFrom=fulltext">moving around</a> in search of cash, all the while providing easy targets for <a href="https://www.theelephant.info/features/2018/02/22/the-killing-fields-of-mathare-extrajudicial-executions-and-the-grassroots-group-that-is-documenting-them/">police extortion</a>.</p>
<p>But at the same time, Kenya is also a landscape of aspiration and luxurious wealth, particularly on the outskirts of Nairobi where the city’s urban sprawl is stretching out into poorer <a href="https://en.unesco.org/events/peri-urban-landscapes-water-food-and-environmental-security">peri-urban</a> areas. Shopping malls rise out of the landscape like fortresses. </p>
<p>Gated communities and apartment blocks spring up regularly, targeted at Nairobi’s “working class” – the permanent salaried workers. It is here that poverty and wealth coexist in a landscape of inequality, in which Kenya’s rich and poor live <a href="https://qz.com/africa/846027/drone-photos-capture-the-dramatic-inequality-of-nairobis-neighborhoods/">side by side</a>. </p>
<figure class="align-center ">
<img alt="Row of luxury houses being built in Nairobi" src="https://images.theconversation.com/files/352307/original/file-20200811-22-1xh3bn9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/352307/original/file-20200811-22-1xh3bn9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/352307/original/file-20200811-22-1xh3bn9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/352307/original/file-20200811-22-1xh3bn9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/352307/original/file-20200811-22-1xh3bn9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/352307/original/file-20200811-22-1xh3bn9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/352307/original/file-20200811-22-1xh3bn9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Gated lives: luxury housing communities being built in Nairobi.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/nairobikenya212019-posh-residential-houses-under-construction-1304188948">James Karuga/Shutterstock</a></span>
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</figure>
<h2>To ‘get rich quick’</h2>
<p>It was in 2017 and 2018, while conducting fieldwork on Nairobi’s northern outskirts, that I began to take an interest in the effects of this landscape of social stratification on the desires and hopes of those living on the economic margins. <a href="https://www.berghahnjournals.com/view/journals/social-analysis/64/1/sa640103.xml">What I found</a> is that Kenya’s hustlers don’t only contend with the constant problem of making ends meet, but also with their frustrations – that they will never access the wealth they glimpse in the world around them. </p>
<p>“You know most of us guys ain’t got no patience,” Cassius, one of my interviewees and diarists, once told me. At the age of 22, he had just opened a shop opposite the main thoroughfare in his town on the outskirts of Nairobi with the help of his parents. He hoped to leave the street, where he had been hustling since leaving secondary school. </p>
<blockquote>
<p>Most of us guys see those rich guys … like I’ve got some friends living at Crystal Plaza, these apartments near the market paying 15,000 shillings rent [about £110 per month]. 15K! And I’m working the whole month to see that much. You start to lose hope.</p>
</blockquote>
<p>“We like comparing ourselves with people whose lives we can’t reach”, Iregi, a 24-year-old man from Nairobi’s northern outskirts, explained to me. We had been talking about his former life as a petty criminal, and his motivations for robbing pedestrians at night. His reasons were grounded primarily in frustration: “Why can’t I get my money from them? So you take advantage … beat up people.” </p>
<p>Cassius, who also used to dabble in petty crime, explained he had done so to be on the “level” of other wealthy young Kenyans who could enjoy lives of conspicuous consumption. Spending stolen money on alcohol in local bars allowed men like Iregi and Cassius to experience short-term abundance, but only until the following day, or when the police began searching for them. </p>
<p>Theft allowed some of these men to temporarily imagine they were richer than they really were. Such acts of rapidly accumulating money for immediate consumption underscore the stark inequalities of contemporary Kenya. They show that the economic lives of the poor are not simply structured by their limited means but by their <a href="https://fsdkenya.org/publication/kenya-financial-diaries-shilingi-kwa-shilingi-the-financial-lives-of-the-poor/">desires and aspirations</a> – that acts of crime are animated by desires to <a href="https://la-bas.org/la-bas-magazine/textes-a-l-appui/alain-badiou-penser-les-meurtres-de-masse-du-13-novembre-version-texte">imitate wealth</a> and the ease it affords.</p>
<hr>
<ul>
<li><em>All names used in this article are pseudonyms to protect the anonymity of the research participants.</em></li>
</ul><img src="https://counter.theconversation.com/content/136818/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Lockwood receives funding from the UK Economic and Social Research Council.</span></em></p>Diaries of young Kenyans in Nairobi reveal lives of joblessness and endless searching for money, all punctuated by substance use.Peter Lockwood, PhD Candidate in Anthropology, University of CambridgeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1314352020-03-20T12:12:31Z2020-03-20T12:12:31ZWe are entering a recession – but what did we learn from the last one?<figure><img src="https://images.theconversation.com/files/315322/original/file-20200213-11044-1kmgqeu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Families recovered from the Great Depression much more quickly than the Great Recession.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/photos/great-depression?agreements=pa:77130&phrase=great%20depression&sort=best#license">Bettmann/Getty Images</a></span></figcaption></figure><p>As the coronavirus <a href="https://www.cdc.gov/coronavirus/2019-ncov/healthcare-facilities/prevent-spread-in-long-term-care-facilities.html">continues to spread around the world</a>, it is abundantly clear that <a href="https://www.forbes.com/sites/richkarlgaard/2020/03/08/covid-19-and-the-economy-as-seen-from-a-technology-investment-conference/#709bcd214fc7">the global economy is entering a recession</a> – the first we’ve seen since 2008.</p>
<p><a href="https://money.cnn.com/2014/08/27/news/economy/ben-bernanke-great-depression/index.html">Some officials have compared</a> the last period of economic decline – also know as the Great Recession – to <a href="https://books.google.com/books?id=tGiktQc6yWMC&printsec=frontcover&dq=Great+Depression+best+scholar+treatment&hl=en&newbks=1&newbks_redir=0&sa=X&ved=2ahUKEwiVluLug6foAhUSVN8KHUzZDBEQ6AEwA3oECAQQAg#v=onepage&q&f=false">the Depression</a>, which began in 1929. </p>
<p>Yet it is clear that these two downturns differed not only in severity but also in the consequences they had for inequality in the United States.</p>
<p>Though the Depression was <a href="https://money.cnn.com/news/storysupplement/economy/recession_depression/">bigger and longer than the Great Recession</a>, the decades following the Great Depression substantially reduced the wealth of the rich and improved the economic security of many workers. In contrast, the Great Recession exacerbated both income and wealth inequality.</p>
<p><a href="https://www.jstor.org/stable/10.7758/9781610447508">Some scholars</a> have attributed this phenomenon to a weakened labor movement, fewer worker protections and a radicalized political right wing.</p>
<p>In our view, this account misses the dominance of Wall Street and the financial sector and overlooks its fundamental role in generating economic disparities.</p>
<p><a href="https://www.kenhoulin.info">We are experts</a> in <a href="http://www.megantobiasneely.com">income inequality</a>, and our new book, “<a href="https://global.oup.com/academic/product/divested-9780190638313">Divested: Inequality in the Age of Finance</a>,” argues that inequality from the Recession has a lot to do with how the government designed its response.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/315323/original/file-20200213-10995-wgcxbt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/315323/original/file-20200213-10995-wgcxbt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/315323/original/file-20200213-10995-wgcxbt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/315323/original/file-20200213-10995-wgcxbt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/315323/original/file-20200213-10995-wgcxbt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/315323/original/file-20200213-10995-wgcxbt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/315323/original/file-20200213-10995-wgcxbt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The Great Recession exacerbated a persistent wealth gap in the U.S.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/photos/great-recession?agreements=pa:77130&phrase=Great%20Recession&sort=best#license">Xinhua News Agency/Getty Images</a></span>
</figcaption>
</figure>
<h2>The Depression</h2>
<p>Reforms during the Great Depression restructured the financial system by restricting banks from risky investment, Wall Street from gambling with household savings and lenders from charging high or unpredictable interests.</p>
<p><a href="https://www.history.com/topics/great-depression/new-deal">The New Deal</a>, a series of government programs created after the Great Depression, took a bottom-up approach and brought governmental resources directly to unemployed workers. </p>
<p>On the other hand, the regulatory policies since the financial crisis that began in 2008 were largely designed to restore a financial order that, for decades, has been channeling resources from the rest of the economy to the top.</p>
<p>In other words, the recent recovery was largely focused on finance. Governmental stimuli, particularly a <a href="https://www.nytimes.com/2008/10/09/business/economy/10fed.html">mass injection of credit</a>, first went to banks and large corporations, in the hope that the credit eventually would trickle down to families in need.</p>
<p>The conventional wisdom was that banks knew how to put the credit into best use. And so, to stimulate economic growth, the Federal Reserve increased the supply of money to banks <a href="https://www.latimes.com/business/la-fi-federal-reserve-stimulus-20170710-htmlstory.html">by purchasing treasury and mortgage-backed securities</a>.</p>
<p>But the stimulus didn’t work the way the government intended. The banks prioritized their own interests over those of the public. Instead of lending the money out to homebuyers and small businesses at historically low interest rates, they deposited the funds and waited for interest rates to rise.</p>
<p>Similarly, corporations did not use the easy credit to increase wages or create jobs. Rather, they borrowed to <a href="https://taxfoundation.org/economics-stock-buybacks/">buy their own stock</a> and channeled earnings to top executives and shareholders.</p>
<p>As a result, the “banks and corporations first” principle created a highly unequal recovery.</p>
<h2>Who lost in 2009?</h2>
<p>The financial crisis wiped out almost three-quarters of financial sector profits, but the sector had fully recovered by mid-2009, as we covered in our book.</p>
<p>Its profits continued to grow in the following years. By 2017, the sector made 80% more than before the financial crisis. Profit growth was much slower in the nonfinancial sector.</p>
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<p>Companies outside of the financial sector were more profitable because they had fewer employees and lower wage costs. Payroll expenses dropped 4% during the recession and remained low during the recovery.</p>
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<p><a href="https://www.nytimes.com/2013/03/29/business/daily-stock-market-activity.html?searchResultPosition=2">The stock market fully recovered from the crisis in 2013</a>, a year when the unemployment rate was as high as 8% and the single-family mortgage delinquency still hovered above 10%. </p>
<p>Median household wealth, in the meantime, had yet to recoup from the nosedive during the Great Recession.</p>
<p>The <a href="https://theconversation.com/african-americans-economic-setbacks-from-the-great-recession-are-ongoing-and-could-be-repeated-109612">racial wealth gap only widened</a>, as well. While the median household wealth of all households dropped around 25% after the burst of real estate bubble, white households recovered at a much faster pace.</p>
<p>By 2016, black households had about <a href="https://global.oup.com/academic/product/divested-9780190638313">30% less wealth than before the crash</a>, compared to 14% for white families.</p>
<p>As the government debates a stimulus package, officials can either decide to continue the “trickle-down” approach to first protect banks, corporations and their investors with monetary stimuli.</p>
<p>Or, they can learn from the New Deal and bring governmental support directly to the most fragile communities and families.</p>
<p>[<em>Get facts about coronavirus and the latest research.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=upper-coronavirus-facts">Sign up for our newsletter.</a>]</p><img src="https://counter.theconversation.com/content/131435/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ken-Hou Lin receives funding from the National Institutes of Health, the Bill & Melinda Gates Foundation, the Joyce Foundation, and the Institute for New Economic Thinking. </span></em></p><p class="fine-print"><em><span>Megan Neely does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>While the Great Depression reduced inequality and closed the racial wealth gap, the Great Recession of 2009 did the opposite.Ken-Hou Lin, Associate Professor of Sociology, The University of Texas at AustinMegan Neely, Postdoctoral Researcher, Stanford UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1231382019-09-17T12:48:56Z2019-09-17T12:48:56ZReparations are essential to eliminating the substantial wealth gap between black and white Americans<figure><img src="https://images.theconversation.com/files/292683/original/file-20190916-19068-igbrok.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Sens. Elizabeth Warren and Kamala Harris are among the 2020 presidential hopefuls in favor of reparations. </span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Election-2020-Debate/7d9da05d13d740eeaeb36b1586b95984/134/0">AP Photo/David J. Phillip</a></span></figcaption></figure><p>Four hundred years ago, <a href="https://www.nytimes.com/interactive/2019/08/14/magazine/1619-america-slavery.html">America’s first enslaved Africans arrived</a> in Virginia. </p>
<p>Centuries later, black Americans have managed to accumulate some wealth, but it still pales in comparison to that of whites. This racial wealth gap is a result not only of the horrors of slavery but also policies – such as <a href="https://theconversation.com/us/topics/jim-crow-18120">Jim Crow laws</a>, <a href="https://theconversation.com/why-wealth-equality-remains-out-of-reach-for-black-americans-111483">redlining</a> and <a href="https://www.naacp.org/criminal-justice-fact-sheet/">modern-day mass incarceration</a> – that followed. </p>
<p>The average white family with at least one working adult over 25 years old owned more than <a href="https://www.americanprogress.org/issues/race/reports/2018/02/21/447051/systematic-inequality">nine times as much total wealth</a> as a black one in 2016. </p>
<p>As a <a href="https://scholar.google.com/citations?user=xhht0KcAAAAJ&hl=en&oi=ao">scholar of wealth inequality</a> and its causes, I believe the promise of equal opportunity for all remains unfulfilled as long as this massive gulf persists. A <a href="https://www.vox.com/policy-and-politics/2019/7/11/20690710/pete-buttigieg-douglass-plan-systemic-racism-black-voters">variety of proposals have been suggested</a> by Democratic candidates for president and others to close this gap, such as eliminating housing discrimination and making college free for all. </p>
<p>Two colleagues and I <a href="https://www.americanprogress.org/issues/race/reports/2019/08/07/473117/simulating-progressive-proposals-affect-racial-wealth-gap/">created an economic simulator</a> to model the impact of five of the most ambitious proposals. Our results show why reparations that directly target African Americans are likely the only way to eliminate it. </p>
<h2>Why wealth matters</h2>
<p>This wealth gap matters a lot because it means African Americans have far fewer opportunities to get ahead and less economic security. </p>
<p>Wealth is what allows families to start a business, send their children to college, switch jobs when new opportunities arise, buy a house and retire comfortably. It’s also what helps people get through unexpected financial hits, such as a layoff, medical emergency or simply a leaky roof. </p>
<p>Although whites generally have more wealth than every other racial and ethnic group, the gap between them and African Americans is particularly large. </p>
<p>For example, the average white family had <a href="https://www.americanprogress.org/issues/race/reports/2018/02/21/447051/systematic-inequality/">US$935,584 in wealth in 2016</a>, compared with $102,477 for blacks and <a href="https://www.americanprogress.org/issues/race/reports/2018/12/05/461823/job-not-enough/">$176,635 for Latino households</a>. </p>
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<p>Importantly, this gap between African Americans and whites persists <a href="https://www.bostonfed.org/publications/one-time-pubs/color-of-wealth.aspx">even when we account for education</a>. And the <a href="https://www.americanprogress.org/issues/race/reports/2018/02/21/447051/systematic-inequality/">gap worsens with age</a>. African Americans are much worse prepared for retirement, for instance, than whites are.</p>
<h2>Five proposals to reduce the gap</h2>
<p>My colleagues <a href="https://www.americanprogress.org/about/staff/solomon-danyelle/bio/">Danyelle Solomon</a>, <a href="https://www.americanprogress.org/about/staff/maxwell-connor/bio/">Connor Maxwell</a> and I put together a <a href="https://www.americanprogress.org/issues/race/reports/2019/08/07/473117/simulating-progressive-proposals-affect-racial-wealth-gap/">simulation model</a> to examine the effectiveness of five proposals offered by <a href="https://www.vox.com/policy-and-politics/2019/7/11/20690710/pete-buttigieg-douglass-plan-systemic-racism-black-voters">Democratic candidates</a> and <a href="https://www.americanprogress.org/issues/ext/2016/01/28/130136/improving-americans-retirement-outcomes-through-the-national-savings-plan/">progressive experts</a> to close the racial wealth gap. </p>
<ol>
<li><p>The creation of “<a href="https://www.washingtonpost.com/politics/cory-booker-wants-a-baby-bond-for-every-us-child-would-it-work/2019/08/15/35003f16-b88b-11e9-bad6-609f75bfd97f_story.html">baby bonds</a>,” which involve the government opening an interest-bearing account for every child born in the U.S. and adding new funds annually until the age of 18</p></li>
<li><p>Elimination of housing segregation and <a href="https://www.cnn.com/2019/07/06/politics/kamala-harris-black-homeownership-plan-racial-wealth-gap/index.html">mortgage market discrimination</a> such as redlining</p></li>
<li><p><a href="https://www.vox.com/2019/4/22/18509196/elizabeth-warren-debt-free-college">Making college tuition free</a> for everyone and eliminating existing student debt</p></li>
<li><p>Creating universal <a href="https://www.edd.ca.gov/employers/calsavers.htm">retirement savings plans</a> that are low cost and low risk, which would disproportionately benefit families of color </p></li>
<li><p>Effective enforcement of <a href="https://consumerfed.org/press_release/consumer-advocates-from-around-the-nation-to-meet-today-congress-to-urge-stronger-consumer-financial-protections/">consumer finance regulations</a> to eliminate predatory interest rates and fees, and ensure <a href="https://elizabethwarren.com/plans/wall-street/?mkwid=so1a1I3xB%7Cpcrid%7C367767426195%7Cpkw%7Celizabeth%20warren%7Cpmt%7Cp%7Cpdv%7Cc%7Cslid%7C%7Cproduct%7C%7Cpgrid%7C71352540229%7Cptaid%7Ckwd-171777258%7C&pgrid=71352540229&ptaid=kwd-171777258&source=WFP2019-LB-GS-NAT&subsource=71352540229-elizabeth%20warren-p-367767426195&refcode=WFP2019-LB-GS-NAT&refcode2=71352540229-elizabeth%20warren-p-367767426195&utm_source=Google&utm_campaign=WFP2019-LB-GS-NAT&utm_term=elizabeth%20warren-367767426195&utm_medium=Search&gclid=CjwKCAjw5fzrBRASEiwAD2OSV9YLfobSgW2yMqkCaSQ9Z_kxMp_uvmT0c18_N1dG3Hf-qFB1z0u6sBoCzcYQAvD_BwE">equal access to affordable</a> financial products. </p></li>
</ol>
<p>We modeled how each plan would affect the earnings and savings of people starting out their careers in 2020, at age 25, until retirement 40 years later. Importantly, we used the broadest possible versions of these proposals in our model, which meant that the impact on the racial wealth gap would likely be larger than the actual plans put forth by the politicians. </p>
<p>We found that baby bonds led to the single largest effect. They would close 24% of the gap by the time people retire. The other policies had much more modest effects, with effective financial regulation having the smallest impact. It would only shrink the gap by 1.5%. </p>
<p>Even if all five proposals were enacted next year, blacks would still possess just 52% of the wealth owned by whites by by 2060, leaving a gap of more than $1 million.</p>
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<h2>A 400-year head start</h2>
<p>The proposals we simulated are progressive and disproportionately help African Americans, and there are good reasons to pursue each policy to help close the black-white wealth gap. </p>
<p>But every one of them also offers assistance to white families, who have a 400-year head start building wealth in America. Our research suggests to eliminate the gap altogether requires <a href="https://www.nytimes.com/2019/05/23/business/economy/reparations-slavery.html">pursuing policies</a> that exclusively target African Americans and help them build up enough wealth to match that of whites. </p>
<p>In other words, some form of reparations – whether in the form of lump sum transfers or <a href="http://cas2.umkc.edu/ECON/economics/faculty/Forstater/688/Reading/Black%20Political%20Economy/EconomicsReparations.pdf">creating funds</a> that help blacks buy homes or start a business – needs to be part of the debate. </p>
<p>[ <em>You’re smart and curious about the world. So are The Conversation’s authors and editors.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=youresmart">You can read us daily by subscribing to our newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/123138/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christian Weller is a Senior Fellow at the Center for American Progress, which published the simulation discussed in this article. </span></em></p>Several presidential hopefuls have offered proposals to close the racial wealth gap, from baby bonds to reparations. A simulation suggests policies short of direct aid to blacks won’t do the trick.Christian Weller, Professor of Public Policy and Public Affairs, UMass BostonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1217312019-08-20T20:05:55Z2019-08-20T20:05:55ZWhat the Bureau of Statistics didn’t highlight: our continuing upward redistribution of wealth<p>The results of the latest Australian Bureau of Statistics biennial survey of income and wealth have met with an uneven response, perhaps in part due to a slipshod <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/6523.0%7E2017-18%7EMedia%20Release%7EInequality%20stable%20since%202013%E2%80%9314%20(Media%20Release)%7E20">press release</a>.</p>
<p>Released with the data on July 12, it was headed: “<a href="https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/6523.0%7E2017-18%7EMedia%20Release%7EInequality%20stable%20since%202013%E2%80%9314%20(Media%20Release)%7E20">Inequality stable since 2013-14</a>”. </p>
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<a href="https://images.theconversation.com/files/288651/original/file-20190820-123741-km5hhq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/288651/original/file-20190820-123741-km5hhq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/288651/original/file-20190820-123741-km5hhq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=265&fit=crop&dpr=1 600w, https://images.theconversation.com/files/288651/original/file-20190820-123741-km5hhq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=265&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/288651/original/file-20190820-123741-km5hhq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=265&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/288651/original/file-20190820-123741-km5hhq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=333&fit=crop&dpr=1 754w, https://images.theconversation.com/files/288651/original/file-20190820-123741-km5hhq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=333&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/288651/original/file-20190820-123741-km5hhq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=333&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>It began:</p>
<blockquote>
<p>Income inequality has remained stable in Australia while income growth has been slow, according to new information released by the Australian Bureau of Statistics today.</p>
</blockquote>
<p>Oddly, the press release didn’t include data to back up its conclusion. That was left for reporters and analysts to find, diving into the trove of more detailed information assembled by the bureau, from which a somewhat different picture emerged, particularly for wealth.</p>
<p>Writing for the <a href="https://www.abc.net.au/news/2019-07-12/household-income-and-wealth-abs-data-shows-rich-are-richer/11302696">ABC</a>, Stephen Long and Michael Janda noted that average (mean) household wealth has been climbing quickly whereas typical (median) household wealth has not, implying that the rich are getting richer much more quickly than Australians in the middle.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/inequality-is-growing-but-it-is-also-changing-as-australias-super-rich-evolve-119925">Inequality is growing, but it is also changing as Australia's super rich evolve</a>
</strong>
</em>
</p>
<hr>
<p>They also noted an increase in the so-called <a href="https://theconversation.com/heres-why-its-so-hard-to-say-whether-inequality-is-going-up-or-down-81618">Gini coefficient</a>, commonly used by the bureau and others to measure inequality.</p>
<p>And they noted that the “ultrawealthy” were probably under-counted in the survey, as is to be expected in essentially voluntary random surveys.</p>
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<a href="https://images.theconversation.com/files/288649/original/file-20190820-123710-4h12d6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/288649/original/file-20190820-123710-4h12d6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/288649/original/file-20190820-123710-4h12d6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=269&fit=crop&dpr=1 600w, https://images.theconversation.com/files/288649/original/file-20190820-123710-4h12d6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=269&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/288649/original/file-20190820-123710-4h12d6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=269&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/288649/original/file-20190820-123710-4h12d6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=339&fit=crop&dpr=1 754w, https://images.theconversation.com/files/288649/original/file-20190820-123710-4h12d6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=339&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/288649/original/file-20190820-123710-4h12d6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=339&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>In the <a href="https://www.smh.com.au/politics/federal/revealed-the-households-with-surging-wealth-and-the-households-standing-still-20190712-p526js.html">Sydney Morning Herald and Age</a>, Shane Wright and Eryk Bagshaw tracked the trends since 2003-04, when the bureau began its income and wealth survey.</p>
<p>Examining “quintiles” (which divide Australia’s households into five equally sized groups, in this case from least wealthy to most wealthy), they found an increasingly divided society.</p>
<p>Their captions read: “The wealthiest 20% have left the rest behind” and “<a href="https://www.smh.com.au/politics/federal/revealed-the-households-with-surging-wealth-and-the-households-standing-still-20190712-p526js.html">The rich are getting richer</a>”.</p>
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<p>Both sets of journalists were right not to accept the bureau’s sunny headline. </p>
<p>According to the bureau’s own data, over the four years since 2013-14, the top 20% of households increased their share of the nation’s private wealth from 62.1% to 63.4%. Their share was 59% in the first survey back in 2003-04. </p>
<p>The wealth share of every other quintile fell. </p>
<p>The share of the second wealthiest quintile fell from 20.5% to 20.4%; the share of the middle quintile from 11.4% to 11.1%; the share of the second poorest quintile from 5.1% to 4.5%; and the share of the bottom quintile from 0.9% to 0.7%.</p>
<p>That is not a picture of stable inequality.</p>
<p>It is more reasonably described as a picture of gradually increasing inequality, of the kind we would expect given the underlying dynamics of modern Australian capitalism.</p>
<h2>Unchecked, things will get worse</h2>
<p>In the absence of deliberate redistribution, the inequalities associated with accumulated wealth tend to increase over time.</p>
<p>Unless actively restrained, the trends identified (but not publicised) by the bureau suggest that Australia will become increasingly unequal. </p>
<p>Yet there is more to the story than correctly describing the data presented.</p>
<p>There is also what’s missing. The survey does not present a figure for total household wealth. This means we don’t know how much wealth it didn’t find.</p>
<h2>An increasing amount of wealth is missing…</h2>
<p>We will get a good idea in about a year when the bureau reconciles its income and wealth survey with the Australian National Accounts.</p>
<p>Previous reconciliations suggest that wealth missed is growing.</p>
<p>The gap between wealth identified in the survey and the national accounts climbed from about 5% in 2013-14 to 8% in 2015-16. That 2015-16 figure amounts to A$626 billion, which is a lot of missing wealth – considerably more than the total wealth of the poorest 40% of households.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/inequality-in-the-oecd-is-at-a-record-high-and-society-is-suffering-as-a-result-119962">Inequality in the OECD is at a record high – and society is suffering as a result</a>
</strong>
</em>
</p>
<hr>
<p>The discrepancies appear to be associated with understatements of the value of property assets, loans, shares, trusts, and other equities of the type mainly held by wealthy Australians.</p>
<h2>…and the ultrawealthy are invisible</h2>
<p>The bureau’s released data ignores the distribution of wealth at the very top. </p>
<p>The data is reported in quintiles (fifths) and percentiles a decile apart, but inequality is likely to be growing the fastest at the very top where the data isn’t reported.</p>
<p>The so-called P90/P10 ratio provides a clue. This is the ratio of the wealth of the households 10% from the top of the wealth distribution and the wealth of the households 10% from the bottom. In other words, it compares the quite rich with the quite poor.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/dont-believe-what-they-say-about-inequality-some-of-us-are-worse-off-102332">Don't believe what they say about inequality. Some of us are worse off</a>
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<p>The latest survey shows that the wealth of a household 10% from the top is 71 times the wealth of a household 10% from the bottom, up from 52 times in 2013-14, and 45 times when the survey began back in 2003-04.</p>
<p>It means the gains of households at the halfway point of the top 20% have been bigger than those of the top 20% as a whole, suggesting increasing inequality within the top 20%, which is likely to more extreme within the top 1%.</p>
<h2>We really need to know</h2>
<p>Statistics are windows on change. Despite our criticisms, the bureau’s biennial income and wealth survey gives us the best view of inequality we’ve got, but large areas remain foggy. </p>
<p>In research for the <a href="https://evatt.org.au/papers/wealth-inequality-australia-2012-present.html">Evatt Foundation</a>, we have used data from the Bureau of Statistics, Organisation for Economic Co-operation and Development and national accounts to estimate that, for the first time in more than half a century, the richest 10% of households own more than half of Australia’s private wealth.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/theres-a-reason-youre-feeling-no-better-off-than-10-years-ago-heres-what-hilda-says-about-well-being-121098">There's a reason you're feeling no better off than 10 years ago. Here's what HILDA says about well-being</a>
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<hr>
<p>The Evatt Foundation’s results seem to stand up well, but governments should really be producing better data themselves. </p>
<p>Inequality and its <a href="http://politybooks.com/bookdetail/?isbn=9781509528646">harmful effects</a> on economic output and stability are growing. We owe it to ourselves to find out by how much.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/its-not-just-the-abs-its-also-the-productivity-commission-downplaying-the-growth-in-inequality-104135">It's not just the ABS. It's also the Productivity Commission downplaying the growth in inequality</a>
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</em>
</p>
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<img src="https://counter.theconversation.com/content/121731/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Christopher Sheil is President of the Evatt Foundation affiliated with the University of Sydney.</span></em></p><p class="fine-print"><em><span>Emeritus Professor Frank Stilwell is Vice-President of the Evatt Foundation, affiliated with The University of Sydney.</span></em></p>Better data would tell us more about the ultrawealthy, but they really do seem to be growing more wealthy, more quickly, than the rest of us.Christopher Sheil, Visiting Senior Fellow in History, UNSW SydneyFrank Stilwell, Emeritus Professor, Department of Political Economy, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1093572019-02-08T11:32:05Z2019-02-08T11:32:05ZLópez Obrador clashes with courts after vowing ‘poverty’ for Mexican government<figure><img src="https://images.theconversation.com/files/257819/original/file-20190207-174880-ydnlpm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">López Obrader wants to cut salaries for all government workers in Mexico, including himself.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Mexico-Fuel-Theft/af44b632456944778936c2f4902a0db6/60/0">AP Photo/Rebecca Blackwell</a></span></figcaption></figure><p>It’s rare for presidents to advocate for poverty, but that’s just what <a href="https://theconversation.com/andres-manuel-lopez-obrador-was-elected-to-transform-mexico-can-he-do-it-99176">Mexican President Andrés Manuel López Obrador</a> is doing.</p>
<p>At a press conference on Feb. 1, López Obrador said his government would embrace what he called “<a href="https://lopezobrador.org.mx/2019/02/01/version-estenografica-de-la-conferencia-de-prensa-matutina-del-presidente-andres-manuel-lopez-obrador-36/">Franciscan poverty</a>” if it would “transfer funds to the people” and achieve “development, jobs and welfare.” </p>
<p>Francis of Assisi was a Catholic saint who <a href="https://www.friarsofstfrancis.org/the-spirit-of-poverty-of-st-francis-of-assisi/">disdained material wealth</a> to follow Christ as a poor man.</p>
<p>López Obrador’s poverty vow is more bureaucratic than religious. As part of an ambitious effort to fight poverty and reduce government corruption, the president proposed to cut the salaries of public officials, including his own, <a href="https://www.animalpolitico.com/2018/07/amlo-austeridad-corrupcion-puntos/">slash federal budgets</a> and <a href="https://expansion.mx/finanzas-personales/2018/08/01/eres-empleado-de-confianza-asi-te-afectaran-las-decisiones-de-amlo">lay off 70 percent of non-unionized federal workers</a>. An estimated <a href="https://twitter.com/Viri_Rios/status/1018880589850701824">276,290</a> public employees will lose their jobs.</p>
<p>After lawsuits were filed by <a href="https://www.excelsior.com.mx/nacional/la-corte-congela-el-tope-a-salarios-pese-a-resistencia-habra-austeridad-delgado/1283451">opposition political parties</a> and Mexico’s <a href="http://www.cndh.org.mx/sites/all/doc/Acciones/Acc_Inc_2018_105.pdf">National Human Rights Commission</a>, the Supreme Court in December <a href="https://www.scjn.gob.mx/sites/default/files/acuerdos_controversias_constit/documento/2018-12-07/ACU%207-12-18%20ISDAI%20105-18.pdf">granted a temporary suspension</a> of López Obrador’s new <a href="http://www.diputados.gob.mx/LeyesBiblio/pdf/LFRemSP_051118.pdf">Federal Law of Public Servant Salaries</a>. </p>
<p>Saying that even austerity budgets must guarantee the basic functioning of the government, Justice Alberto Pérez Dayán said López Obrador’s plan cannot go into effect until the Supreme Court rules on its constitutionality. </p>
<p>The decision has set up a standoff between the president and the courts, with Mexico’s federal budget and <a href="https://www.proceso.com.mx/570407/el-pueblo-se-cansa-de-tanta-pinche-transa-dice-amlo-confirma-intervencion-ante-scjn-video">judicial independence</a> hanging in the balance.</p>
<h2>Reducing inequality, one tree at a time</h2>
<p>López Obrador and his leftist Morena Party won a <a href="https://centralelectoral.ine.mx/2018/07/08/confirma-ine-resultados-de-eleccion-presidencial-2018/">landslide victory</a> in Mexico’s 2018 general election on promises that they would transform Mexico, empowering the underprivileged in a country with gaping inequality.</p>
<p>Since taking office on Dec. 1, López Obrador has suggested creating some 20,000 jobs in fruit production and wood harvesting by <a href="https://www.excelsior.com.mx/nacional/lopez-obrador-vuelve-a-sus-origenes-presenta-en-tabasco-sembrando-vida/1293984">planting trees</a> on a million acres of land in rural southern Mexico. He has also proposed paying <a href="https://www.excelsior.com.mx/nacional/busca-lopez-obrador-llegar-a-85-millones-de-apoyos-a-adultos-mayores/1289997">small monthly pensions of up to 2,550 pesos</a> – around US$134 – to Mexicans above the age of 68 and to people with <a href="https://lopezobrador.org.mx/2018/12/20/destinara-gobierno-presupuesto-historico-para-personas-con-discapacidad-en-2019-presidente-de-mexico/">disabilities</a> who lack social security benefits.</p>
<p>Leftist governments usually fund social programs like this by raising taxes on the wealthy. López Obrador says he <a href="https://expansion.mx/economia/2018/11/26/estas-son-las-12-promesas-economicas-de-amlo">won’t do that</a>. Instead, his administration hopes to recover public funds by cracking down on <a href="https://books.google.com.mx/books?redir_esc=y&id=0-zmDQAAQBAJ&q=corrupcion#v=onepage&q=corrupci%C3%B3n&f=false">rampant corruption</a> and saving money with <a href="https://elpais.com/internacional/2018/07/16/actualidad/1531708329_222187.html">fiscal austerity</a>. That’s where the salary cuts and mass layoffs come into play.</p>
<p>López Obrador is an <a href="https://lopezobrador.org.mx/2017/11/04/asamblea-informativa-en-susticacan-zacatecas/">admirer of Benito Juárez</a>, the indigenous president who ruled Mexico from 1858 to 1872. Juárez extolled the virtues of selfless public service, <a href="http://www.biblioteca.tv/artman2/publish/1852_153/Discurso_pronunciado_por_Benito_Ju_rez_gobernador_del_estado_de_Oaxaca_ante_la_X_Legislatura_al_abrir_el_primer_periodo_de_sus_sesiones_ordinarias.shtml">saying</a> public servants should “devote themselves to work assiduously while resigning to live in … honorable modesty.”</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/257823/original/file-20190207-174851-1bz67cx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/257823/original/file-20190207-174851-1bz67cx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/257823/original/file-20190207-174851-1bz67cx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/257823/original/file-20190207-174851-1bz67cx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/257823/original/file-20190207-174851-1bz67cx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/257823/original/file-20190207-174851-1bz67cx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/257823/original/file-20190207-174851-1bz67cx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/257823/original/file-20190207-174851-1bz67cx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The Los Pinos presidential palace in Mexico City is now open to the public.</span>
<span class="attribution"><a class="source" href="https://upload.wikimedia.org/wikipedia/commons/e/ea/Los_Pinos%2C_Mexico_2018.jpg">Drkgk/Wikimedia</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>López Obrador flies commercial and has refused to take up residence in the Los Pinos presidential palace, turning it into a cultural center. </p>
<p>He also set his salary at a “<a href="https://www.bloomberg.com/news/articles/2018-12-11/amlo-eyes-salary-of-mexico-supreme-court-head-in-austerity-push">moderate</a>” 108,000 pesos, about <a href="http://www.eluniversal.com.mx/english/amlo-slash-60-his-salary">$5,700 a month</a> – roughly $68,400 a year. That’s 60 percent less than his predecessor, Enrique Peña Nieto, who earned <a href="https://adnpolitico.com/presidencia/2018/07/15/lopez-obrador-fija-en-108-000-el-tope-de-sueldos-para-funcionarios-en-mexico">the equivalent of $14,200 a month</a> in 2018.</p>
<p>The wage gap between average workers and the Mexican head of state was the highest in the world last year, according to a <a href="https://www.ig.com/uk/forex/research/pay-check#/salary">report by the IG Group</a>, a British financial services company. On average, Mexican workers earn around $15,311 a year. </p>
<p>López Obrador’s voluntary pay cut has drastically reduced the difference between his income and <a href="https://www.efe.com/efe/english/life/mexican-households-have-an-average-of-3-8-members-843-in-monthly-income/50000263-2666718">everyone else’s</a>.</p>
<h2>Attacks on the judiciary</h2>
<p>Since <a href="http://www.diputados.gob.mx/LeyesBiblio/pdf/1_270818.pdf">the Mexican Constitution</a> mandates that no public official should make more than the president, however, López Obrador has also effectively capped wages for all government employees. </p>
<p>To his mind, that’s a good thing.</p>
<p>The days of having “a rich government with a poor population” are over, the president <a href="https://aristeguinoticias.com/0812/mexico/quienes-deberian-impartir-justicia-estan-dando-un-mal-ejemplo-amlo/">told a crowd</a> in December. He was speaking in the western state of Nayarit, pledging aid for victims of a recent hurricane. </p>
<p>In the same speech, López Obrador attacked the Supreme Court’s decision to suspend his pay cut plan, accusing Mexican judges – not just Justice Pérez Dayán – of selfishly wanting to keep their salaries and benefits intact. </p>
<p>In fact, <a href="http://www.diputados.gob.mx/LeyesBiblio/pdf/1_270818.pdf">Article 94 of the Mexican Constitution</a> explicitly prohibits reducing the salary of judges at any time during their appointment, a guarantee of judicial independence that <a href="http://www.ordenjuridico.gob.mx/Constitucion/1857.pdf">dates back to 1857</a>.</p>
<p>In 2018, Supreme Court justices earned <a href="https://www.eluniversal.com.mx/nacion/ministros-aceptan-reducir-25-sus-salarios">269,215 pesos</a> – around $14,000 a month. </p>
<p>The Supreme Court has since <a href="https://www.eluniversal.com.mx/nacion/ministros-aceptan-reducir-25-sus-salarios">agreed</a> to take a 25 percent pay cut “in accordance with the new policy of austerity that the presidency has demanded of the Supreme Court of Justice.” That puts their 2019 salaries at about $10,500 a month, not including benefits. </p>
<p>In adopting this measure, the Supreme Court also clarified that, as an independent branch of government directly protected by the Constitution, the judiciary is not bound by the salary standards established by López Obrador. The justices will decide how to implement austerity within the court system. </p>
<h2>Judicial battles ahead</h2>
<p>The Supreme Court is expected to make a definitive ruling on the <a href="https://eljuegodelacorte.nexos.com.mx/?p=9321">two lawsuits challenging the constitutionality</a> of the Federal Law of Public Servant Salaries some time this year. </p>
<p>Over <a href="https://www.eluniversal.com.mx/nacion/mas-de-20-mil-piden-amparo-contra-la-ley-de-salarios">20,000 public servants have also filed individual complaints</a> in federal courts, saying salary cuts violate their labor rights. Under Mexican law, <a href="http://sjf.scjn.gob.mx/sjfsist/Documentos/Tesis/257/257483.pdf">legislation is deemed retrospective</a> – and thus unconstitutional – if it affects the vested rights of individuals. Employers, including the federal government, cannot unilaterally reduce their employees’ wages.</p>
<p>At least <a href="https://elfinanciero.com.mx/nacional/en-38-dias-12-mil-817-trabajadores-despedidos-o-en-vias-de-serlo">12,817 Mexican public servants</a> have already been laid off under López Obrador’s austerity plan. Many of those who have kept their jobs have seen their <a href="https://www.eluniversal.com.mx/cartera/cero-prestaciones-burocratas-eventuales-y-por-honorarios">social security benefits and vacation time</a> eliminated under the new law.</p>
<p>Beyond its questionable constitutionality, López Obrador’s de facto salary cap on public servants does not take into account the expertise, seniority or skills required of high-level positions. Less than $5,700 a month is simply insufficient payment for the most highly skilled workers, Mexican constitutional <a href="http://www.enciclopediagro.org/index.php/indices/indice-de-biografias/102-arteaga-nava-elisur">expert</a> Elisur Arteaga told the newspaper <a href="https://www.razon.com.mx/mexico/juristas-ley-de-salarios-al-vapor-habra-amparos/">La Razon</a> last year. He expects talent will flee the government for the private sector.</p>
<p>Nobody in Mexico thought that transforming the country would be easy when they voted López Obrador into office. To <a href="https://elpais.com/elpais/2018/11/28/opinion/1543428474_358305.html">paraphrase Mexican pundit Jesús Silva-Herzog</a>, fixing Mexico’s bloated and corrupt government was work for a surgeon with a scalpel. </p>
<p>López Obrador, it’s becoming clear, prefers a machete.</p><img src="https://counter.theconversation.com/content/109357/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>In 2002, Luis Gómez Romero contributed to a constitutional amendment aimed at establishing that no public servant can receive remuneration higher than that established of the President of Mexico, which later became law.</span></em></p>Mexico’s new president has reduced his own salary and demanded that all federal workers
– including lawmakers and judges – take a massive pay cut, too. That may be illegal.Luis Gómez Romero, Senior Lecturer in Human Rights, Constitutional Law and Legal Theory, University of WollongongLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1006202018-08-06T15:10:49Z2018-08-06T15:10:49ZPoverty in modern Britain: despite the march of history, much remains the same<figure><img src="https://images.theconversation.com/files/230773/original/file-20180806-191038-15na5rq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The cash machine doesn't work for everyone.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/301238456">Elena Rostunova/Shutterstock</a></span></figcaption></figure><p>Having studied the social, political and economic history of 20th-century Britain it’s clear that much has changed, for example technology, political reform, and social and cultural movements. But I’ve also learned how much remains the same even after a century of progress, and how easily changes for the better can be reversed.</p>
<p>The turn of the century in 1900 is a good point to start because it was when major social inequalities became the prominent, urgent political issues they have remained ever since. The trade union movement was increasingly militant, challenging inequalities of income. The Labour party was founded, with a central mission to eliminate the disadvantages of working class people. And women demanded, with increasing determination, the vote and other legal rights and opportunities, partially gaining the vote in 1918.</p>
<h2>Racism</h2>
<p>Racism and anti-racism were prominent, particularly antisemitism directed at the thousands of Jewish refugees who fled persecution in Russia. They congregated in cities, especially in east London, and soon made substantial contributions to the economy. But then, as now, <a href="https://www.haaretz.com/jewish/.premium-1905-as-eastern-european-jews-pour-in-u-k-enacts-aliens-act-1.5423217">immigrants were accused</a> of taking jobs and homes from British people, disrupting communities and culture, and reducing living standards. </p>
<p>This led to the first restrictions on immigration to the UK under the <a href="https://www.jewishvirtuallibrary.org/aliens-act">Aliens Act 1905</a>. To remain, immigrants would have to show that they could support themselves and their dependants “decently”, and could “speak, read and write English reasonably well”. The Conservative prime minister, Arthur Balfour, told parliament at the time: “We have the right to keep out everybody who does not add to … the industrial, social and intellectual strength of the community” - which sounds familiar.</p>
<p>The Aliens Act did not apply to immigrants from the <a href="http://www.bbc.co.uk/guides/zcnmtfr#zqrf34j">vast and still expanding British Empire</a>, including those from the Caribbean, Africa and South or East Asia. People born within the empire had always been defined as citizens of the United Kingdom with full legal resident rights. This remained the case until 1962, although until the recent Windrush Scandal <a href="https://theconversation.com/windrush-scandal-a-historian-on-why-destroying-archives-is-never-a-good-idea-95481">this had been generally forgotten</a> including, evidently, by the Home Office. </p>
<p>But it is not novel for migrants from empire and the Commonwealth to suffer discrimination, including for lacking documentation when required. Even in the early 20th century between the wars, if they came to official notice, for example by claiming unemployment benefit, they could be <a href="https://www.theguardian.com/uk/2002/jun/08/immigration.immigrationandpublicservices">expelled from the country</a> if they could not prove their place of birth. This was often difficult for poor people who did not routinely have, and could not could easily afford, birth certificates.</p>
<p>Recent <a href="https://www.google.co.uk/search?num=20&q=anti+semitism&tbm=nws">accusations of antisemitism</a> suggest that racism has not diminished in the past century. Indeed <a href="https://www.migrationpolicy.org/article/united-kingdom-reluctant-country-immigration">restrictions on immigrants have increased</a> since the 1960s and expressions and incidents of racist intolerance continue despite a succession of anti-discrimination laws since 1968.</p>
<h2>The working poor</h2>
<p>Awareness of the abject conditions in which the urban poor lived around 1900 was brought to light in pioneering works of fact and fiction: Arthur Morrison’s novel A Child of the Jago (1896), set in London’s East End, Jack London’s record of his time living in the same districts, <a href="http://www.victorianweb.org/genre/slumfiction/jacklondon.html">People of the Abyss</a> (1903), and the painstaking street-by-street surveys of Charles Booth in <a href="https://booth.lse.ac.uk/">London</a> and Seebohm Rowntree in <a href="http://www.yorkpress.co.uk/features/history/articles/4702608.Seebohm_Rowntree___s_pioneering_work_on_poverty_in_York/">York</a> (1889–1903). These revealed alarming poverty, even among people in full-time work – not just the “idle layabouts” or “undeserving poor” of right-wing mythology. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/230297/original/file-20180801-136667-4kdohx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/230297/original/file-20180801-136667-4kdohx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/230297/original/file-20180801-136667-4kdohx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/230297/original/file-20180801-136667-4kdohx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/230297/original/file-20180801-136667-4kdohx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/230297/original/file-20180801-136667-4kdohx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/230297/original/file-20180801-136667-4kdohx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Extract of Charles Booth’s poverty maps showing the Old Nichol slum (darkest shaded areas), the setting for the novel A Child of the Jago.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Poverty_map_old_nichol_1889.jpg">Charles Booth's Labour and Life of the People/Wikimedia Commons</a></span>
</figcaption>
</figure>
<p>Leo Chiozza Money, an Italian immigrant economist and Liberal politician, revealed in <a href="https://archive.org/details/richesandpovert00monegoog">Riches and Poverty</a> (1905) that income and wealth was concentrated in very few hands: two thirds of private wealth rested with 17,000 property holders out of a population of 44.4m, of whom 90% left no recorded property at death.</p>
<p>Demands for reform grew: the first steps of the modern welfare state, including the introduction of free school meals in 1906, old age pensions in 1908, and National Insurance in 1911.</p>
<h2>What has really changed?</h2>
<p>Gathering these findings into my new book, <a href="http://admin.cambridge.org/academic/subjects/history/twentieth-century-british-history/divided-kingdom-history-britain-1900-present?format=PB">Divided Kingdom: A History of Britain, 1900 to the Present</a>, I was shocked by the similarity between the level and causes of poverty at that time and now. Rowntree had found a quarter of people in the fairly typical city of York living in poverty, 52% of them in families with at least one full-time worker on inadequate pay. He defined poverty as having sufficient income for essentials of food, clothing, fuel, but no more. </p>
<p>The Rowntree Foundation (created in his honour) has published <a href="https://www.jrf.org.uk/report/uk-poverty-causes-costs-and-solutions">surveys</a> showing that in 2015-16, about 20% of the UK population lived in poverty, 60% in households including an inadequately paid full-time worker. The Resolution Foundation <a href="https://www.resolutionfoundation.org/publications/the-living-standards-audit-2018/">recently published</a> similar figures for 2017-18, which showed that around 23% of the British population (excluding Northern Ireland) and 33% of children live in poverty.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/230755/original/file-20180806-191022-9qidfd.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/230755/original/file-20180806-191022-9qidfd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/230755/original/file-20180806-191022-9qidfd.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=488&fit=crop&dpr=1 600w, https://images.theconversation.com/files/230755/original/file-20180806-191022-9qidfd.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=488&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/230755/original/file-20180806-191022-9qidfd.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=488&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/230755/original/file-20180806-191022-9qidfd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=614&fit=crop&dpr=1 754w, https://images.theconversation.com/files/230755/original/file-20180806-191022-9qidfd.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=614&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/230755/original/file-20180806-191022-9qidfd.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=614&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Poverty in the UK has remained relatively unchanged over 25 years, and persistent poverty has proven persistently hard to dislodge.</span>
<span class="attribution"><a class="source" href="https://www.ifs.org.uk/tools_and_resources/incomes_in_uk">IFS</a></span>
</figcaption>
</figure>
<p>Our society is much wealthier now than in 1900. The definition of poverty is less stringent, defined by the <a href="http://www.poverty.ac.uk/definitions-poverty/income-threshold-approach">internationally agreed standard</a> of income below 60% of national median income, since the life chances of those living so far below the average standards of modern society are severely restricted. </p>
<p>But these official figures exclude the large and growing numbers of homeless people living rough on the streets or in hostels – tens of thousands certainly, though exact figures are uncertain. And the <a href="https://theconversation.com/food-bank-use-is-at-a-record-high-heres-what-we-know-about-the-people-using-them-57683">growing use of food banks</a> – unheard of in Britain until recently – should prompt us to ask how many people truly are living in absolute poverty comparable with the 1900s. </p>
<p>The welfare state led to improved living standards and the gradual reduction of wealth and income inequality, reaching its narrowest point in the 1970s when (in contrast to the denigration the decade so often receives) welfare services and benefits were also at their peak, and affordable council housing was still being built. But in part due to the erosion of the welfare state and the sale of council housing without being replaced, poverty and inequality have grown since 1979, although the <a href="https://www.ifs.org.uk/publications/6738">shifts were more gradual</a> under the New Labour governments of 1997-2010 than before or since. Today we see a return of the stigmatisation of supposed “shirkers” on benefits, despite many of them being in underpaid work.</p>
<p>Surveys that revealed poverty and inequality in the early 20th century brought the welfare state into being. A century later, similar levels of poverty with similar causes now follow its decline. After all the change and hope, and all the wealth generated in the 20th century, too often it was short-lived, and century-old problems remain or have now returned.</p><img src="https://counter.theconversation.com/content/100620/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Pat Thane does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Lots of things have happened in a century, but poverty has proven persistently hard to treat.Pat Thane, Research Professor in Contemporary British History, King's College LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/942082018-04-30T10:46:06Z2018-04-30T10:46:06Z3 vital ways to measure how much a university education is worth<figure><img src="https://images.theconversation.com/files/212698/original/file-20180329-189807-ptiqgs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The U.S. continues to wrestle with questions about the value of a college degree.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/education-money-concept-hand-holding-graduation-420132469?src=3bmI7mw6H3BMg6IX9p0b3w-1-98">ByEmo/Shutterstock.com</a></span></figcaption></figure><p><em>Editor’s note: Today we begin a new series in which we ask the leaders of our country’s colleges and universities to address some of the most pressing issues in higher education</em>.</p>
<p>The past several years have seen increased calls for colleges and universities to demonstrate their value to students, families and taxpayers. And the pressure has come from both sides of the political spectrum. Barack Obama, for example, didn’t mince his words <a href="https://obamawhitehouse.archives.gov/the-press-office/2012/01/27/remarks-president-college-affordability-ann-arbor-michigan">when he spoke</a> a few years ago on the University of Michigan campus: “We are putting colleges on notice…you can’t assume that you’ll just jack up tuition every single year. If you can’t stop tuition from going up, then the funding you get from taxpayers each year will go down. We should push colleges to do better.” </p>
<p>So how is a would-be student or a tax-paying citizen to decide the value of a given university or degree? There is certainly no shortage of tools that have been developed to help in this regard.</p>
<p>The federal <a href="https://www.ed.gov/news/press-releases/fact-sheet-obama-administration-announces-release-new-scorecard-data">College Scorecard,</a> for example, is meant to “help students choose a school that is well-suited to meet their needs, priced affordably, and is consistent with their educational and career goals.”</p>
<p>Various magazines put together college rankings. There have been <a href="http://www.aei.org/publication/degrees-of-opportunity-lessons-learned-from-state-level-data-on-postsecondary-earnings-outcomes/">efforts at the state level</a> to show what graduates of a given institution or program can expect to earn. And some colleges and universities are working to provide those <a href="https://seekut.utsystem.edu/seekuttool">data</a> themselves.</p>
<p>So we asked our panel of presidents – from the University of Michigan, University of Oregon and The Ohio State University: If you had to devise just one tool or metric to help the general public assess the value of a particular college or degree, what would it be and why?</p>
<h2>Greater life expectancy</h2>
<p><strong>Michael Drake, president of The Ohio State University</strong> </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/216688/original/file-20180427-135840-5dgkkv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/216688/original/file-20180427-135840-5dgkkv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=789&fit=crop&dpr=1 600w, https://images.theconversation.com/files/216688/original/file-20180427-135840-5dgkkv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=789&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/216688/original/file-20180427-135840-5dgkkv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=789&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/216688/original/file-20180427-135840-5dgkkv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=991&fit=crop&dpr=1 754w, https://images.theconversation.com/files/216688/original/file-20180427-135840-5dgkkv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=991&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/216688/original/file-20180427-135840-5dgkkv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=991&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Michael Drake, president of The Ohio State University.</span>
<span class="attribution"><a class="source" href="https://president.osu.edu/presidents/drake/">The Ohio State University</a></span>
</figcaption>
</figure>
<p>When I ask individuals if they want their own children to attend college, the answer is, overwhelmingly, yes. The <a href="https://apnews.com/28d286cd8fa746f58ad18f79e73b19f1/pay-gap-between-college-grads-and-everyone-else-record">evidence is clear</a>. College graduates are more likely to be employed and more likely to earn more than those without degrees. <a href="https://www.collegetransitions.com/wp-content/uploads/2014/05/hout-returns-to-college-education.pdf">Studies</a> also indicate that people with college degrees have higher levels of happiness and engagement, better health and longer lives.</p>
<p>Wow.</p>
<p>If living a longer, healthier and happier life is a good thing, then, yes, college is worth it.</p>
<p>A four-year degree is not necessarily the best path for everyone, of course. Many people find their lives are enhanced by earning a two-year or technical degree. For others, none of these options is the perfect choice. But if there is one data point I want to highlight, it is the correlation between a college education and greater life expectancy. In fact, <a href="https://www.luminafoundation.org/files/resources/its-not-just-the-money.pdf">one study</a> suggests that those who attend college live, on average, seven years longer.</p>
<p>Last year was <a href="https://www.cdc.gov/nchs/products/databriefs/db293.htm">the second year in a row</a> that average life expectancy in the U.S. went down. But greater mortality didn’t affect all Americans equally. Studies point to <a href="https://jamanetwork.com/journals/jama/article-abstract/2513561?redirect=true">a growing gap in life expectancy</a> between rich and poor. Higher education may, in other words, be part of the solution to this problem.</p>
<p>This is just one of the reasons that so many of our country’s institutions of higher learning are focused on the question of how to make sure more Americans have access to a quality – and affordable – college education.</p>
<p>Since December 2016, the <a href="https://americantalentinitiative.org/">American Talent Initiative</a>, a coalition of 100 (and counting) colleges and universities, has been working to educate 50,000 additional lower-income students by 2025. In another initiative, the 11 public universities in the <a href="http://www.theuia.org/#home">University Innovation Alliance</a> are committed to producing more U.S. graduates and have, over the past three years, increased their <a href="https://www.insidehighered.com/news/2017/09/25/research-universities-partner-increase-low-income-student-graduation">number of low-income graduates by 24.7 percent</a>.</p>
<p>As educators, we must continue to increase pathways to the American Dream — a journey that includes health, happiness, long life and, very often, a college degree.</p>
<h2>Social mobility</h2>
<p><strong>Michael Schill, president of the University of Oregon</strong></p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/216724/original/file-20180428-135840-9e14xh.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/216724/original/file-20180428-135840-9e14xh.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=605&fit=crop&dpr=1 600w, https://images.theconversation.com/files/216724/original/file-20180428-135840-9e14xh.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=605&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/216724/original/file-20180428-135840-9e14xh.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=605&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/216724/original/file-20180428-135840-9e14xh.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=761&fit=crop&dpr=1 754w, https://images.theconversation.com/files/216724/original/file-20180428-135840-9e14xh.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=761&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/216724/original/file-20180428-135840-9e14xh.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=761&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Michael Schill, president of the University of Oregon.</span>
<span class="attribution"><a class="source" href="https://around.uoregon.edu/content/president-schill-outlines-plan-boost-research-academics">University of Oregon</a>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>While it is impossible to devise only one indicator to describe the value of a university, I would suggest that a good place to begin would be the number of first-generation students it admits and the rate at which they graduate.</p>
<p>As a first-generation college student myself, I may be somewhat biased, but I believe that our generation will be judged by how well we enhance the opportunities for social mobility among our citizens. And despite some skepticism about the value of higher education on the part of pundits and politicians, it is <a href="https://president.uoregon.edu/content/oregon-commitment-student-access-and-success#Degree_value">well-documented</a> that there is no better way for young people to achieve the “American Dream” than by getting a college degree.</p>
<p>Note that my metric is really two – first-generation enrollment numbers and graduation rates. The simple fact is that students who go to college and don’t receive a degree may well be in worse shape economically than those who don’t go at all. They will have invested time and money, yet without a diploma will not achieve the economic returns from that investment. Moreover, <a href="https://theconversation.com/is-student-loan-debt-really-a-crisis-44069">many are hobbled by student loans</a> without the economic wherewithal to repay them.</p>
<p>It is easy for universities, colleges and community colleges to admit large numbers of students from modest backgrounds. That happened in the for-profit sector. However, the <a href="https://nces.ed.gov/programs/coe/indicator_ctr.asp">graduation rate</a> at for-profit institutions is only 23 percent, compared to the 59 percent rate overall. The hard part is to support students so that they can succeed.</p>
<p>First-generation students make up a third of college undergraduates in the United States. They are <a href="https://nces.ed.gov/pubs2018/2018009.pdf">more likely</a> to be minorities and to come from low-income households, and are far less likely to graduate than their peers who had one or more parent attend college. We can do better.</p>
<p>Part of the solution is for more <a href="https://nces.ed.gov/pubs2018/2018009.pdf">universities to provide more adequate need-based financial assistance</a>, but even that isn’t enough. College can be a confusing experience for first-generation kids, both in terms of learning how to succeed academically and “fitting in” socially. Real value will accrue to students and American society only if we can provide them with appropriate advising and counseling so that they not only get in, but persist and flourish.</p>
<h2>Freedom</h2>
<p><strong>Mark Schlissel, president of the University of Michigan</strong> </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/216689/original/file-20180427-135817-1ulc5yp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/216689/original/file-20180427-135817-1ulc5yp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=808&fit=crop&dpr=1 600w, https://images.theconversation.com/files/216689/original/file-20180427-135817-1ulc5yp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=808&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/216689/original/file-20180427-135817-1ulc5yp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=808&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/216689/original/file-20180427-135817-1ulc5yp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1015&fit=crop&dpr=1 754w, https://images.theconversation.com/files/216689/original/file-20180427-135817-1ulc5yp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1015&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/216689/original/file-20180427-135817-1ulc5yp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1015&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Mark S. Schlissel, president of the University of Michigan.</span>
<span class="attribution"><a class="source" href="https://record.umich.edu/articles/inauguration-events-mark-installation-president-schlissel">University of Michigan</a></span>
</figcaption>
</figure>
<p>To devise one metric to help the public assess our value, we need to challenge ourselves the same way we challenge students in our classrooms and labs. Let’s first determine the right question to ask. What are our students looking for in life and how can a college degree change the quality and trajectory of their lives?</p>
<p>Higher education gives graduates the best opportunity to pursue their ambitions, change careers, define and solve complex problems, and persuade and lead others. College graduates enjoy higher salaries, qualify for further levels of education and are at a lower risk of ending up in jobs that become obsolete. Moreover, they lead richer and fuller lives – <a href="https://www.luminafoundation.org/files/resources/its-not-just-the-money.pdf">happier</a>, healthier, <a href="https://cew.georgetown.edu/cew-reports/the-college-payoff/">wealthier</a> and <a href="https://www.prb.org/us-educational-attainment-mortality/">longer</a>.</p>
<p>Each of these outcomes is a component of the value of a college education, yet none of them alone fairly captures its full value. In considering these metrics together, in the context of our question, I believe that one very important concept emerges.</p>
<p>That concept is freedom.</p>
<p>Freedom’s link to education has long been a quintessential American value. As the educator and philosopher <a href="https://books.google.com/books?id=djiexeXoOwQC&pg=PA229&lpg=PA229&dq=%E2%80%9CWe+naturally+associate+democracy,+to+be+sure,+with+freedom+of+action,+but+freedom+of+action+without+freed+capacity+of+thought+behind+it+is+only+chaos.%E2%80%9D&source=bl&ots=0H6bPqARz-&sig=r22wWN8apkzM7py_uySyuqMUHkE&hl=en&sa=X&ved=0ahUKEwj4hpWjq9vaAhWLTd8KHdSSALQQ6AEIMjAC#v=onepage&q=%E2%80%9CWe%20naturally%20associate%20democracy%2C%20to%20be%20sure%2C%20with%20freedom%20of%20action%2C%20but%20freedom%20of%20action%20without%20freed%20capacity%20of%20thought%20behind%20it%20is%20only%20chaos.%E2%80%9D&f=false">John Dewey wrote</a> at the beginning of the 20th century, “We naturally associate democracy, to be sure, with freedom of action, but freedom of action without freed capacity of thought behind it is only chaos.”</p>
<p>At its best, higher education gives us the freedom to make decisions based on our values, desires, human talents and willingness to work hard. We are free to choose our own path.</p>
<p>Education takes freedom beyond its status as a legal right and elevates it into a lifetime of choices. It’s the trajectory of those lives, changed by the opportunities available through a college education, that I am most interested in measuring.</p>
<p>The American public rightfully expects higher education to serve as an enabler of prosperity and equality. I would devise a metric that captures higher education’s greatest potential: to enhance the freedom of an individual graduate in a nation founded on constitutionally guaranteed rights of life, liberty and the pursuit of happiness.</p>
<p><em>Editor’s note: The Ohio State University is a member of the University Innovation Alliance. The University of Michigan and The Ohio State University are members of the American Talent Initiative.</em></p><img src="https://counter.theconversation.com/content/94208/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The presidents of the University of Michigan, the University of Oregon and The Ohio State University offer three ways to judge the value of a college education.Mark S. Schlissel, President, University of MichiganMichael H. Schill, President, University of OregonMichael V. Drake, President, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.