My beef with capitalism: Inequality’s a bitch

The problem with inequality

Economics is not my strong suit. Nor can I say I am particularly interested in it. I’m a micro person, not a macro person; a creative trying to get by in a capitalist world.

But even I can’t fail to note that the wealth gap is growing, not shrinking.  Yep, even here in little old New Zealand.

I like this dummy proof breakdown:

“New Zealand, which had the developed world’s biggest increase in inequality from the mid-1980s to the mid-2000s, has seen more economic damage than most. According to the OECD’s calculations, our economy grew about 30% in the last two decades – but it would have grown by 45%, or half as much again, if inequality had stayed at 1980s levels.”

Inequality matters. It’s a no-brainer. It’s a drag on the economy, and I think the saying that “you’re only as strong as your weakest link” is perhaps relevant here.

“When families lack the income they need to pay doctors’ fees and keep healthy, or to fix their car so they can travel to a new job, or to give their kids the equipment and clothes they need to succeed at school, it’s obvious that economic growth will suffer. You could argue that these are problems of poverty, not inequality, but really the two are inseparable; the reason some people have so little is that the fruits of economic growth are going largely to our richer citizens.”

As someone who ostensibly belongs to the middle class, occasionally I feel a tremendous sense of guilt that I have it so much better than many other people, and gratitude to be lucky to be where I am. But the other 99% of the time I spend fretting that we’ll never be able to really get ahead.

Bridget at Money After Graduation sums up my feelings perfectly:

“Wealth inequality is a growing, terrifying problem and I don’t want to be on the losing end of the deal. I’d rather we live in a more equal society when it comes to wealth distribution, but so long as we don’t, my singular goal is to get as far away from the bottom as possible.”

When necessities take up more of your income, you may even need to borrow to afford them. I don’t believe in ‘broke yet happy’. I think it’s something people tell themselves in order to feel better. Nice idea – in theory.

So, what are we supposed to do? Same old, I guess. Hustle, hustle, hustle.

A key piece of the inequality puzzle in New Zealand boils down to that most basic of needs: shelter. The way I see it, so much of this hinges on property – stability, security and quality of housing. The status quo is a disaster in financial terms – and in health terms, for renters.

It’s good to see that our go-to economist for all stories on renting vs buying is finally starting to discuss the pragmatic downsides of renting in New Zealand. While the actual quality of rental housing isn’t a talking point (and thus, the problem with mainstream media and the limited perspectives of the typically privileged people within it) he acknowledges New Zealand has some of the most restrictive rules in the developed world for renters.

“New Zealand is strangely different in that we have made this almost special provision around renting of residential property versus other types of renting.” – NZ Herald

“The rental market is designed for students flatters. It is no surprise that it is the young couples with children who are most unhappy.” – Stuff

But the level of chatter around the state of rental housing is growing.  Research shows that private rental housing is in worse condition than houses that are owner occupied, however, in a tight market, you have to take what you can get.

“One potential tenant, looking at a property, asked if the holes could be fixed and rodent droppings cleared before she moved in. “[The landlord] said: ‘If you don’t like it, there’s other people that want to live here’.”

Is it any wonder the typical tenancy lasts only just over a year?

Amazingly, here’s a rare mainstream newspaper editorial that hits the nail on the head.

Housing in New Zealand is not only scarce and expensive; for too many people, it is also downright unhealthy.

“Our national housing stock is of poorer quality than most OECD countries. In particular, too many houses are damp and cold – which means they contribute to our grim rates of infectious and respiratory diseases.

This is deplorable in an advanced country, and like our other housing problems, it needs to urgently change.

Extensive work has already been done, so there is no excuse for delay. Most recently, results from a pilot study on 144 rental homes showed 90 per cent failing the warrant. That number needs some qualification – some houses failed for such easily remedied reasons as flat batteries in smoke alarms. But other results were more deeply concerning – like the third of rental properties that lacked any form of fixed heating.

No-one in New Zealand should have to live in a dog of a house.”

In order for renting to life to work you need to be able to save and invest what you’re “saving” by not having a mortgage. The problem is, rents are not going anywhere except up and up.

  • Renter demand in Auckland is forecast to increase by 63% over the next 20 years and it is unclear whether “mum and dad” investors will be able to meet this demand
  • Rental affordability is a critical issue for low- middle income households in Auckland, and people who enter retirement renting are likely to face ongoing hardship

The prospect of continuing to have to pay rent throughout retirement is scary. I can kinda understand why suicide at 65 starts to look like a pragmatic option.

Recently, an acquaintance posted a photo on Facebook . In it, he and his girlfriend stood on the deck of their new house, all smiles. Of course, like all our other home-owning peers, they only managed this because their parents stumped up cash for their down payment. Heck, if mine offered, I’d swallow my pride and take the offer.

But is this what the future of our country looks like? Only the well off buying homes for their children and passing the privilege of living in a decent property on down the generations, while everyone else remains stuck in cold, damp rentals and suffering all the ill effects that poses?

Surely we can do better than that.

10 thoughts on “My beef with capitalism: Inequality’s a bitch

  • Reply Erika December 15, 2014 at 07:46

    This sounds like something you are really passionate about — maybe it’s something that you can begin working in or creating a project to advocate for? Maybe part of what you’re meant to do is help shift change around wealth distribution? Because honestly, there is enough money to go around — especially since we create the system — but you are definitely not powerless and maybe even with what you know — not being a financial guru but being passionate about this and observing — YOU can begin to affect change in this area. Just saying because as soon as I read this, I thought: sounds like she has a cause. And with that fire in her belly, I know that it could cause a lot of people to take action who wouldn’t otherwise.

  • Reply Tracey December 15, 2014 at 09:21

    Great post. Our housing situation really is the crux of the inequality issue. I personally think we need highly regulated rental agencies for private rentals run like Housing New Zealand currently is. They sign 5-year+ contracts with owners of rental properties and are in complete control of them during that period. They’re responsible for finding tenants and fixing any problems. The property owner is secure in the knowledge the property will be returned in good order and has a stable income during the contract period. Meanwhile the tenants of such properties have the security of a stable, healthy, well-maintained home. It’s win-win.

  • Reply Jayson @ Monster Piggy Bank December 16, 2014 at 00:53

    That’s why when I retire I as much as possible have something I can call a decent house. We know the burden when renting, the stress and the money that can use up our savings. A long-term plan is really what we all need, those preparing for retirement.

  • Reply Taylor Lee December 16, 2014 at 02:10

    Wow. The rental regulations in NZ seem just awful! Sorry you have to deal with that. :/

    As far as wealth inequality goes, I agree it’s really really depressing. I’ve known people basically at every level of the economic spectrum– from homeless to young bougies to working class and old money– and it’s so crazy just how much these people live in different worlds. Of opportunity, of services, of nearly everything.

  • Reply Jolanta aka Casual Traveler December 16, 2014 at 08:17

    I know nothing about the New Zealand rental or real estate market, but I can tell you that in Massachusetts, USA the average price for a single-family house within 20 miles from Boston is around $325,900 U.S. (that’s about $417,000 in your dollars), however, that’s an average. Homes closer to the city can easily cost close to or over a million. We’d never be able to own, if the home we bought weren’t a total dump and took a lot of work to renovate.

  • Reply Ciana December 16, 2014 at 22:14

    Gosh, I didn’t know that the property prices in NZ have increased so much now. It was much cheaper sometime ago… and it sounds like there’s more demand than supply. =O I honestly do think that it’s about the same around the world; in my current place, the houses are being offered on the market at a price higher than before. It’s just sad to know that the next generation may not be able to afford a pad of their own.

  • Reply Tonya@Budget and the Beach December 18, 2014 at 04:01

    “But the other 99% of the time I spend fretting that we’ll never be able to really get ahead. ” I can relate to that so much. I keep thinking I’m stabilized, but how good is that really when you think about it. 🙁

  • Reply dee December 19, 2014 at 14:38

    The one year tenancy stat was interesting…there’s something to be said about greater tenant security, and this would have huge effects on those most vulnerable i.e. the ability to have rent control and much longer tenancies. I always have a slightly worry in the back of my mind that my landlord could kick us out with no reason (which has happened before during a really stressful time). And i’ve sometimes thought about looking for another place just so i can choose where and how i live ahead of any decision being forced on me, particularly if it comes at a lousy time of year to be searching for a new place.

  • Reply Mary December 20, 2014 at 20:42

    I’m American, but I can sympathize with you. I see my children having difficulty finding a job that pays enough to buy or rent here in the mid-west. They work hard and yet—-.
    We are not well off enough to help with down payments.

    I do not want to see a re-distribution of wealth, but I think we, in many places, have lost sight of the value of workers. Even at my age, I have heard bosses say – people like you are a dime a dozen. So, you do not value me and you do not pay me well, and if business declines you expect me to not get raises or take a pay cut – but not you or other upper management – oh and let’s not forget I owe you my loyalty, but not the reverse?! That actually happened to my husband.
    If our societies valued workers as well as management, I think, worker salaries would be higher and management’s would be lower.
    I wish I had an answer or a fix.
    I don’t like the phrase redistribution of wealth – to me that implies taking from someone who “earned” it and giving to someone who did not. And I know damn well that I was loyal, did a darn good job and should have been considered to have earned a salary comensurate with my actual value to the company!

  • Reply Tony @ Trading Slugger December 21, 2014 at 17:03

    I don’t think inequality is a problem: equality of condition is communism. However, I do believe that we should have equality of opportunity. That way the winners are people who work hard and are willing to take risks.

Leave a Reply

Your email address will not be published. Required fields are marked *