It seems that success in Australia doesn't necessarily come from hard work, that hard work supposedly being rewarded. For most of the wealthy it comes from simply manipulating the system.
Their conclusion? "Almost all the 200 richest Australians look like the beneficiaries of political favours rather than innovators or superstars."
Of the 200 richest Australians, 61 derived their wealth from property, 23 from command of natural resources and 19 from organising investments. Property moguls, mining magnates and bankers who make a living by gaming government rules and regulations.
"About half of our super-rich spend their efforts on activities where local political decisions determine the winners: decisions about who gets to build which property where, who gets access to favourable mining concessions, and so on," the economists say.
Standard economic theory says that, in most cases, wages reflect the relative marginal productivity of workers. The story goes that technological advantages have increased the value of certain skills, particularly of the tertiary educated. Low-income earners get replaced by machines, but highly-educated workers know how to operate them.
On this theory, rising income inequality is the result of natural market forces and no concern for economists.
The alternative theory, is that income is the results of rent-seeking, whereby the rich get rich by seeking special favours through the political system.
According to Fritjers and Foster, only five of the richest Australians could be identified as true innovators, by inventing new machines like solar panels.
People get rich in Australia largely by manipulating the system rather than true innovation.
"The possibility that increased inequality has been driven by changes in the allocation of political favours lends strength to the argument that economists should seriously examine political power and group behaviour."
Something is rotten in Australia's supposed egalitarian state. more
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