The upcoming elections have brought the ugliest immigration policies from all the governing coalition parties. The Treaty of Waitangi, the nation’s founding document, and Māori rights are under unprecedented attack. Unemployment is surging, and those losing jobs due to the weak economy are also vilified. The support for centrist parties has shrunk, and race relations have worsened. Social cohesion is weakening. A generation of young people expresses discontent by emigrating to Australia, voting with their feet.

Populism in the USA and European countries such as the UK, Germany, France and Italy threatens democracy.

Michael Sandel, Professor of Political Philosophy at Harvard, released his book “Tyranny of Merit” in 2020. His warnings have become more relevant today. The drive for meritocracy, hard-edged me-first capitalism, rising inequality and a lack of affordable housing have affected many rich countries. The weaknesses of mainstream parties in tackling these issues have led to the rise of populism.

Meritocracy is better than aristocracy and nepotism. However, the drive towards meritocracy over the past forty years has also brought us problems. Winners forget that they benefited from a family with some wealth, access to a better education, more resources, and connections. The conviction of those who land on top is that they deserved their success, and those on the bottom deserve their fate.

Post-tax incomes of the richest 10% of New Zealanders doubled from 1980 to 2020, while middle-income incomes increased by only 40%, and the lowest 10% by 30%. The average wage could have been $14K higher if not for the 1980s/1990s reforms.

In New Zealand, the top 10% own 60% of total wealth in 2024, while the bottom 50% own only 6.7%. Housing affordability has deteriorated from 3 years’ salary in 1990 to over 6 years today. Homeownership declined from 75% in 1986 to 66% in 2023.

During the past forty years, the sense of community, the feeling of “We are in this together”, has weakened. The gap between the educated professional class in well-paid, secure jobs and the less educated working class has widened. The working class is trapped in low-income, insecure jobs. Those who reaped the economic benefits ignore the struggles of their fellow citizens.

Those on low incomes were abandoned by centre-left governments. While Roger Douglas was sacked within three years, the damaging changes he set in motion continued and accelerated for decades. The speed of changes and total disregard for workers made the changes particularly traumatic in New Zealand.

Inequalities are defended on the premise of equal opportunity. Sandel argues that even a society with perfect equal opportunities and meritocracy could have problems if the gap between the rungs is excessive. Especially, if the bottom rungs cannot support a life with dignity.

Traditional versions of political meritocracy were that the government should include moral and civic virtue. However, morals and ethics have all but disappeared for many of us. Citizens feel policies are decided by corporate lobbyists who influence politicians through donations, and money speaks louder than citizens’ voices.

Dignity of Work and Contributing

In 1968, Robert F Kennedy said, “Fellowship, community, shared patriotism … come from dignified employment at decent pay, the kind of employment that lets a man say to his community, to his family, to his country and to himself, ‘I helped to build this country’.” The workers’ discomfort is not just about the money; it’s also about not being able to contribute. It’s about the loss of social recognition and esteem that goes with producing what others value. The advice from mainstream parties to those left behind was – go to college, equip yourself to compete and win in the global economy.

The loss of jobs to technology and outsourcing has coincided with less respect for the kind of work the working class does. Those who lost have not been adequately compensated. The message that a college degree is the primary route to a decent life undermines the dignity of work and demeans those who have not been to college. A significant section of the population is losing faith in the meritocratic notion that hard work leads to success.

From the 1950s to the 1970s, those without a college degree, a butcher, a plumber or a factory worker could live a comfortable middle-class life, often on one income. Almost everyone had a job.

 Our unemployment rate was below 1% for 40 years, from 1936 to 1976, vs 4%+- in the modern era. In the current economic system, Reserve Banks target a level of unemployment as essential to keep inflation within the target band.

The level of unemployment benefits in New Zealand is much lower than in many countries. Most European countries offer an unemployment insurance benefit of 60-80% of the last salary for 1-3 years.

Since 1980, the college premium has doubled. Meritocracy has justified lavishing rewards on winners and offering meagre pay to workers without a degree. It has also reinforced the idea that the money we make reflects the value of our contribution.

Finance

Finance in recent decades has deviated from its role of providing capital for productive and socially desirable activities like building factories, roads and homes. Lord Adair Turner, chair of Britain’s Financial Services, argued that the expansion and complexity of the financial system in rich countries in the past 20-30 years hasn’t increased growth or stability.

 75% of bank funding fuels asset inflation, mainly housing. Only 15% of bank funding goes to the Manufacturing and related sectors, 11% for farming. -RBNZ May 2022

Taxes

Warren Buffett questioned: Why did he, a billionaire, pay a lower tax rate than his secretary (due to lower taxes on capital gains)? The tax system can be reconfigured to discourage speculation and reward productive labour. New Zealand is an outlier as a country with no Capital Gains Tax. Sandal proposes a sin tax on financial transactions on casino-like speculation that doesn’t help the real economy.

According to the IRD review in 2023, the richest 311 families pay 9% income tax, while a middle-wealth New Zealander pays 20%.

Inspired by the rise of a heroic few, we ask how others might escape the conditions weighing them down. Rather than repair the conditions people want to flee, we construct politics that make mobility the answer to inequality. A good society cannot be premised only on the promise of escape. We need to find ways to enable those who do not rise to flourish in place. Free to rise but also able to live a life of dignity, whether they rise or not.

We are not talking about equality of results, wealth, or incomes. But a living wage for all to live lives of decency and dignity. We need a change in course to avoid a more confrontational and uglier politics and a more divisive society.