 In New Zealand we used to be one of the most equal societies in the world, in fact perhaps the most equal amongst the rich countries, but right now or in the last few years we're about tenth from the bottom of the 34 OECD countries. We're in the top half of inequality. We actually had the biggest increase in inequality from the 1980s and through the 1990s of any of the 34 rich countries. The wealth gap has probably stabilised a bit. The global financial crisis actually generated a bit of a dip in the pockets of the wealthy, the rontiers, but the income distribution hasn't shown any signs of returning to greater equality. So it's sort of up there, unequal, probably fairly stable. The causes and reasons for increased inequality are obviously very interesting and reasonably complex, part because they differ between countries. The big increases in inequality were mainly in the Anglo countries, the UK, the US, New Zealand, Canada and Australia. And if you want to sort of say where did it actually happen the most, I mean inequality could increase because the poorer are getting poorer, or because the rich are getting richer, or both. It's actually been both. At one end of the distribution the very well off people, the top 1% of the population in terms of income have seen their shares at least double in those countries in the last 20 years or so, the last 25 years. And at the other end there's been at best a stagnation of the incomes for the lower 25% or so. In terms of where did it happen, it happened at both ends of the income distribution. The middle classes have sort of hung in there a bit, they haven't gained much grant or lost much grant. I think the reason that the top 1% share has exploded more than double, especially in the US and the UK, is two things going to that. One of which we've got in New Zealand and one of which we haven't. The thing we have got in New Zealand is that top pay in big businesses and in government has gone up a lot. CEO pay has increased enormously. In the United States of America the chief executive officers of the big corporations 30 years ago earned about 30 times the wage of a shop floor worker in their firm. Now it's more like 300 times or 400 times. So that's a huge increase and they've of course bought up the salaries of all their executive vice presidents with that. They could ask why that happened as well. We've had that in New Zealand, in government, in public sector and private sector. Perhaps not quite so much, but we've had it. What we haven't had in New Zealand, and that's the other sort of third or so of the increase in US and UK top pay, is the finance sector, or what's called the other finance sector. The people who got us into such a mess in the global financial crisis, that's just a playground for top salaries and not just for managers, but for traders and professionals as well. New Zealand, we don't have much of an other finance sector. So perhaps one of the reasons that our top 1% share is about 9% now, whereas it's 23% in the United States and I think about 18% in the UK, is that they have a Wall Street and a City of London and we don't. Why should we be concerned about this increase in inequality in our countries? Some people aren't, some people are celebrating it. Some people, and that really goes back to how it happened, it really started to happen, especially in New Zealand, UK and the US, with the sort of neoliberal, as we now call it, revolution or counter-revolution against the welfare state, which had sort of ruled the social democracy, welfare state-types politics had been the story of the first quarter century after the war, and that was a period of decreasing inequality, high economic growth, but actually the fruits of economic growth being more than equally shared, if you like, in that sense. And some people got a bit tired of this and said, well, the unions are getting too powerful, income taxes are too high, the incentives for the entrepreneurial classes are sort of being diluted. We need to stop this and with Thatcher and Britain and Reagan in the United States and Roger Douglas and then Ruth Richardson in New Zealand, they did stop it. They cut income tax rates a lot. They weakened labour market institutions, especially the union movement. They deregulated and liberalised and privatised and the desired effect of that was achieved, that the income distribution widened. So it happened, it was meant to happen in the countries where it did happen, I think, but was it a good thing or has it gone too far? Well, some people will say it wasn't a good thing in the first place, that the old welfare state wasn't broken, didn't need to be fixed. Others would say, well, perhaps it had gone a bit far, the welfare state, social democracy, but maybe we've gone too far in the other direction now and what we're facing now is the situation where possibly inequality is getting to the point where social cohesion is threatened and even, if you like, right-wing commentators and business people like Warren Buffett and many others are getting worried about that. Is it outcomes or processes that really matter about inequality? Does it matter if outcomes are unequal, if everyone's got a reasonably fair chance of getting the good outcome, you know, of upward social mobility if they start from a poor family and are doing well for themselves? Is it a bad thing to have wide divisions if everyone's got a fair chance of getting them, like lotto? You can't get anything fairer than lotto, you can't get anything less involving skill than lotto, it's pure luck. People win $23 million, as someone did last year, I think, and nobody makes a fuss, nobody says this is outrageous, they should have it taken away from, they go off and buy a lotto ticket. So it's sort of at least best ambivalent attitude towards high incomes if the process is seen to be fair. A lot of New Zealanders don't seem to be too worried about the process. Half of New Zealanders in a fairly recent poll international comparison said when asked should government in your country in New Zealand be doing more to reduce inequality, disagree. And that actually put us right at the extreme, even more so more than the United States. So it seems that a lot of New Zealanders, perhaps half of us, aren't too fussed about it at all. I would say that most people would agree, whatever their politics, that equality of opportunity is really quite important. Horizontal equity, if you like. You don't want a kid or a young person having worse prospects in life because their family background was unlucky, unfavourable, poor. So I think most of us would think that poverty is a problem if it exists, and it does exist in New Zealand. Low incomes, poor households, bad conditions for bringing up kids and stuff like that. But where the differences would come, I think, would probably be in, well, if you give people a fair go, as far as you need to go, and it's up to them after that, or do we have to look at the outcomes as well and be a bit worried that the outcomes have become too unequal. People are worrying that this level of inequality, even if it doesn't increase any more, is not sustainable socially in the long run. They point to signs of lack or disintegrating cohesion in social life, a sense that New Zealanders aren't all in it together anymore as we used to be when my generation grew up, and worries that, although this might be OK at the moment or not causing great problems, that in the long run it really could have serious consequences for our society and our economy. If you try to look for signs of what inequality does, the most interesting one that I know of is that it correlates quite strongly with decrease in trust across countries. The countries which are the most unequal and have seen the biggest increases in inequality are less likely. People in those countries are less likely to trust strangers, which is what trust is all about. That could be a red flag marking a loss of social cohesion, and that could have very serious long run consequences.