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NZ’s perverse ethnic wealth gap

Pete McKenzie traces Aotearoa's wide - and worsening - wealth gap between ethnic groups back to colonial land confiscation

A 16,000-strong mix of imperial and colonial troops invaded the Waikato on July 12, 1863.

Governor George Grey had stoked unfounded fears of Kīngitanga aggression to justify the attack – in reality, the colonial government was determined to seize fertile land near Auckland for Pākehā settlement.

Carwyn Jones, a legal scholar at Victoria University of Wellington, emphasised that, “The idea of taking land and settling settlers was a central part of the military occupation of that land. It was very much part of the battle plan, not just an afterthought.” Almost three million acres of land were confiscated from the ‘rebels’.

There is a temptation to dismiss this kind of colonial aggression as an historical inconvenience from which Aotearoa is slowly recovering. But recent research by Statistics NZ has exposed a wide wealth gap between Aotearoa’s ethnic groups which is traceable to colonial land confiscation and appears to be getting worse.

Statistics NZ began regularly examining the distribution of wealth in Aotearoa in 2015. A person’s economic wealth is the assets they own (like property, investments and savings) minus their debts and liabilities. In this context, the ‘median’ individual is the person whom half of a group is wealthier than, and the other half poorer.

In 2015, Stats NZ found that the median Pākehā had $114,000 in wealth – compared to $12,000 for the median Pasifika, $23,000 for the median Māori and $32,000 for the median Asian. While there’s an immense gap between Pākehā and all other ethnic groups, the wealth gap between the median Pākehā and Māori – $91,000 – is particularly notable.

By 2018, the wealth of the median Pākehā had grown by $24,000 to $138,000. The wealth of other ethnic groups did not increase by a similar amount: just $14,000 for the median Asian, $3,000 for the median Pasifika, and $6,000 for the median Māori. These shifts caused the wealth gap between the median Pākehā and Māori to grow by almost 17 percent to $109,000.

Economic wealth isn’t everything. As Jason Mika, an academic at Massey University who focuses on Māori entrepreneurship, observed, “If you look at a cultural definition of wealth, particularly from a Māori perspective, it encompasses a lot more than just money… [it includes] cultural and spiritual capital, identity and participation in te ao Māori, and the cultural resources that you may have within a whānau, hapū or community.”

Nevertheless, according to Max Rashbrooke, an academic focusing on inequality at Victoria University of Wellington, “It’s very difficult to maintain all the other things you want to do and draw on the other sources of wealth if you don’t have economic wealth.”

As Rashbrooke explained, “Income is the present, and wealth is the future. You use income to pay your daily bills and get through the week. Wealth gives you security for planning for the future.” It’s particularly important in an increasingly unpredictable world. “You have an asset you can draw on in tough times. A large ethnic wealth gap implies we live in a world where some people have much greater security about the future than others ... a much greater ability to plan for a good life.”

“We have an opportunity to ask whether the system is geared up to produce equitable wealth distribution between Māori and non-Māori. If these disparities are increasing, then the answer is no, it’s not. There’s something wrong with the system.”

This large and apparently expanding gap could simply be a quirk in two data points. But the Household Economic Survey, which the 2015 and 2018 data comes from, samples 8,000 households and tends to be reliable. The data is also consistent with other statistical glimmers. The 2005 Survey of Family Income and Employment, for example, showed a gap between the median Pākehā and Māori of approximately $95,800 (inflation adjusted).

At best, our wealth gap is stable. At worst, it is widening. This shouldn’t be surprising given how wealth works. Rashbrooke explained that, “If you already have wealth and you invest it, it tends to grow quickly and passively at about 4-5 percent [annually].” Given that wealth tends to create more wealth, “You have the potential for a world where, because Pākehā typically already have a lot more wealth than Māori, their wealth will accumulate a lot more quickly and those divisions will increase.”

This wealth inequality helps explain the staggering disparities in Aotearoa’s social indicators. Education is increasingly unaffordable, holding down rates of NCEA achievement and university graduation among Māori and Pasifika without significant wealth to draw on. High-quality homes, food and healthcare are out of reach, leading to higher rates of treatable illness, mental ill-health and a decade-sized disparity with Pākehā in life expectancy. Unemployment, poor jobs, social alienation and a large dose of institutional racism drives Māori and Pasifika overrepresentation in prison. These all feed into a cycle of poverty which perversely entrenches the wealth gap.

Central to Aotearoa’s wealth gap is a rift in property and home ownership, usually the largest source of wealth for individuals. According to the 2013 Census, while 56.8 percent of Pākehā owned their own home, just 34.8 percent of Asians, 28.2 percent of Māori and 18.5 percent of Pasifika did.

The low rate of home and property ownership for Māori, who once cared for the entire whenua, is telling. Just 5 percent of Aotearoa is now Māori freehold or customary land – land which has never left Māori guardianship. According to Jones, “It’s hard to see these disparities outside of the context of significant land alienation ... that undoubtedly would have had a significant impact on the economic situation of Māori over generations.”

That alienation took place in various ways. Successive governments confiscated land from iwi during and after the New Zealand Wars. At other times, land was taken from Māori through unjustifiable sales. Jones pointed to Ngāi Tahu as an example. “[They] sold 34 million acres to the Crown for under 15,000 pounds, which equates to a fraction of a penny per acre.” Often, Jones emphasised, these sales were forced. “Where I’m from, in the Wairoa area, there was a large ‘land sale’, which the Crown has now acknowledged was essentially a confiscation. The Crown said either you sell this land to us or we confiscate it.”

As a result, per Mika, “The control of the productive elements of the economy – of land and everything that comes with it – is not equitably distributed. It’s quite the reverse of what it was in the early 1800s.”

Treaty settlements were intended to rectify this inequity, but Mika – with Jones and Rashbrooke – is emphatic that the settlements are insufficient. “If you look at the quantums involved in Treaty settlements in terms of the return of land and the value of those assets that were lost, it’s only a small part of what was lost.”

Importantly, not all settlements are equal. Ngāi Tahu and Waikato-Tainui were able to invest and accrue interest on their large settlements of approximately $170 million to rapidly develop an economic base. By 2018, it was estimated that Ngāi Tahu controlled assets worth over $1.8 billion. Other iwi, explained Jones, are “working with a much smaller settlement value – I’m thinking of down to the $5m level. Even if you’re dealing with smaller population size, it’s still not enough money to provide any significant community transformation in terms of sustainable economic wealth.”

There are potential solutions to this inequality crisis. One idea gaining popularity in America, which has an even worse ethnic wealth gap, is ‘baby bonds’. The main proponent of the idea, Senator Cory Booker, proposed giving each newborn child a savings account with USD$1,000. The government would then annually contribute an additional US$2,000 for children from low-income households. Through compounding interest, by age 18 every child would have a substantial nest egg, and otherwise poor children would receive approximately US$46,000 – which would entirely close the wealth gap between young White and Black Americans.

A smaller-scale version has already been implemented by Ngāi Tahu. Through its Whai Rawa program, each newborn receives $100. For every $1 subsequently deposited into the newborn’s savings account, Ngāi Tahu contributes $4 (to an annually determined maximum) until the child reaches 16. The savings can be used for tertiary education, buying a home, or retirement. Since it first set up Whai Rawa and a similar (but less generous) scheme for adults, Ngāi Tahu has paid out $43 million to its members.

Rashbrooke believes the government should support such schemes. “[T]here’s a strong ethical argument for allowing Ngāi Tahu and other iwi to determine how to invest that money, but with a greater contribution from the public purse overall to recognise the legacy of colonisation.”

Jones agreed, but emphasised that Ngāi Tahu had a running start. “[Programs like Whai Rawa are] very difficult if you’re working with a much smaller amount of money. Ngāi Tahu is 20 years in. Most post-settlement groups are really just beginning on that journey.” According to Jones, more support is necessary to get other iwi into a place where such schemes are possible.

To do that, Aotearoa must first confront the deep-rooted wealth disparities that have been with us since the beginning of the colonial experiment. As Mika observed, “We have an opportunity to ask whether the system is geared up to produce equitable wealth distribution between Māori and non-Māori. If these disparities are increasing, then the answer is no, it’s not. There’s something wrong with the system.”

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