It was news, not so much because of what was said, as who said it: The Conference Board of Canada released a report on rising inequality in Canada yesterday, noting that despite the fact that Canadians are better off than a generation ago, the richest 20 per cent in society are taking an ever-growing share of the economic pie, while the middle and poor are getting less. The Conference Board says that's a problem.
"High inequality raises two questions. First, what is the impact on the economic well-being of a country? The answer is that high inequality can diminish economic growth if it means that the country is not fully using the skills and capabilities of all its citizens or if it undermines social cohesion, leading to increased social tensions. Second, high inequality raises a moral question about fairness and social justice."
We agree. Wish I'd written it.
Actually, I'm glad I didn't.
It's one thing when organizations like the CCPA, journalists, and academics weigh in on the significance of rising inequality. It's quite another when the business establishment does.
In my days as a hired gun I did some contract work for the Conference Board on health economics. The inside joke is that the Conference Board is a not-for-profit organization, not for-loss. They don't do research that isn't well-funded and the money comes from probing questions that Canada's decision-makers, both public and private, are grappling with in real time. That means research on actionable issues, actions that business and governments can take.
In the case of the inequality report, the list of funders is a group of no-nonsense power-brokers, as noted on their website.
Advertising
Acklands-Grainger Inc.
Agrium Inc.
Banque Nationale du Canada
Bell Aliant
Bell Canada
Gaz Métro
GE Canada
George Weston Limited
Groupe Canam inc.
Harvard Developments Inc.
Hydro-Québec
IBM Canada Ltd.
KPMG MSLP
Nitro Microsystems
Ontario Ministry of Economic Development and Trade
Power Corporation of Canada
St. Joseph Communications
Scotiabank
Slaight Communications Inc.
Symcor Inc.
TD Bank Financial Group
Telus Corporation
The Co-operators Group Limited
The Wawanesa Mutual Insurance Company
TransAlta Corporation
Xerox Canada Ltd.
It's telling that rising inequality has been identified as a hot topic for this group.
We're watching the slow-motion train-wreck of rising inequality in the U.S. and though our levels of inequality are less extreme -- does anyone do extreme better than the U.S.? -- the rate of growth of inequality has been more rapid in Canada over the past decade than at any time in our history, and the richest 1 per cent scored almost a third of all the income growth of the decade preceding the recession. That's a bigger take than at any time on record, including the Roaring 20s. The Conference Board duly noted these trends.
There is a growing awareness that when the fruits of prosperity are so poorly shared, trouble is not far off, for the economy and for society alike. The Conference Board report is a reflection of the growing concern shown by the business press in Canada, the U.S. and the U.K. in recent months, with stories ranging from national and international income trends to firm-level eye-poppers.
At Davos this year, the World Economic Forum named rising inequality as the "most serious challenge for the world." Their survey of 580 global decision-makers led to the conclusion that "economic disparity and global governance failures both influence the evolution of many other global risks." Tackle growing inequality, and you tackle the root of much dysfunction in the world.
The serious thinkers in Canada's business establishment are waking up to the significance of these facts. Serious thinking about what to do about it cannot be far behind.
Love them or hate them, business leaders are not armchair theorists. Their success and power comes from turning thinking into doing.
Progressives may soon have some company in the search for solutions to the problem of rising inequality. Wouldn't it be something if we agree on more than just the nature of the problem?
This article was first posted on The Progressive Economics Forum.
Thanks, Armine, for your great insight, as always.
So, what solutions can we propose? I'll put my neck on the line now, and say that our public education system must once again, as happened in the late 19th and early 20th Centuries, stress training in life skills, but at the highest possible level for each student, ie., no fixed limit for any student dictated from "on high" (Eg., "No, you can't study trigonometry because you're in plumbing"). That means, in many cases, training for jobs. I know this would diminish liberal arts education for many ( eg., very little Shakespeare, Milton, Eliot, and Atwood for those who would otherwise "quit" school early), and a temporarily-reduced apparent education level for the country, but it would go a long way to fulfil the need for missing trades skills. With exception for our "elites", specially blessed by God, and who could successfully benefit from a university education, our people have to go back to making things, growing food, and building dwelling places (we really do still have a shortage of homes). During the Depression 30s, many folks returned to the farm, grew their own food, and survived, while others, like unemployed clerks, not used to working at practical things, stayed in the cities, and sometimes starved. We must learn survival skills again, but instead of guarding our door-ways with guns, as is the "red-neck" rightist attitudes for some "survivalists" in some parts of the continent, we'd co-operate, sharing skills and knowledge for us all. Hmmm .. co-operation instead of beating up on those who one thinks are threats (eg., Toronto G20 police response against non-violent protesters)
My proposal for a practical manual-work economics would be temporary, and would involve sharing skills and knowledge outside our borders with others in need, until we could get our world economies "up and running again". And each sovereign country has a set of comparative advantages too, allowing real fair trade to be established from the grass-roots up.
We will need professional and management elites to organize and guide this process, but can we not give it a try?
Sincerely,
Hal Ade
Gatineau (Aylmer), QC
I completely agree with the premice that growing inequality will eventually ruin the economy, and is the most serious problem we face today. So what do we do about it?
Clearly, the income taxation system has the best potential to correct the imbalance in incomes without reducing incentives to produce goods, services, and jobs. We had it fundamentally correct when a progressive system of taxation was established, with rates increasing as income increased. The problem is that this system was eroded over the years through the successful campaigns of lobbyists and special interests representing the wealthy elites and the corporatocracy.
Our ceos are now taking home outrageous compensation packages which are even designed to reward failure with "golden parachutes". The many examples of this waste abound and even include our Crown Corporations, eg. Ontario Hydro - Elanor Clitherow. Despite little actual growth in the value of one share of its stock, Gord Nixon was paid about $15 million last year for his stewardship over the Royal Bank.
In fact, the average ceo of the top 500 comanies in North America was paid 28 times what the world's most important and most stressed ceo, the US President, is paid. They use each other as exemplars in setting compensation rates and justify this by claiming there is a strong competition for talent. Their actual performance leads me to question that justification.
What's making things worse is that their pay scales are influencing the public sector, our not-for-profits and charities to also pay excessive amounts to their ceos. The historic ratios of 10-12 times average earnings are long gone, with average ceo compensation now even reaching as much as 600 times average earnings.
We need more income tax brackets, allowing for a rate of say 33% at $250,000, 37% at $500,000, 41% at $1,000,000, 45% at $ 5,000,000 and 51% at $10,000,000. Together with these rates, we need all loopholes to be closed, leaving only exemptions for RRSP contributions, CPP & EI contributions, college and university tuitions, and a basic personal exemption set at LICO (the poverty line). Capital gains in excess of $1,000,000 should be taxed at the maximum marginal tax rate.
The wealthy and our ceos seem to have no shame, and definitly no gratitude for the opportunity to be wealthy that our country provides them. This is why a more fair tax system is the only practical solution to the threat of even greater future disparity in the distribution of our economic pie.
Yalnizyan is dreaming in Technicolor if she thinks big business is going to get behind any kind of income redistribution program. They're not interested in "moral questions about fairness and social justice" unless there's a profit to be made - and there isn't. And their main concern is that social tensions could "diminish economic growth" - meaning they could interfere with the continuing flow of their obscene profits.
They aren't interested in progressive tax reform, improved social benefits, higher minimum wages, massive funding for public housing, or anything else that would tend to reduce inequality. The only solutions from that crowd to the threat of social unrest will be punitive labour laws, building more prisons, and beefing up police and "national security" forces.
Oh, yes, and proposals to turn our schools into job training centres rather than places of educational excellence will be high on the neoliberal agenda for dealing with growing social inequality. Hal Ade of Gatineau will be delighted, no doubt.
This article is way too gushing about the Conference Board of Canada and the World Economic Forum. As M. Spector points out -- they are concerned about diminished economic growth above all, due to not using all the skills of it citizens or increased social unrest.
Translation: When there is too much inequality it becomes more obvious how the system is set-up to benefit the few at the top. People stop trying to get ahead and stop playing the game (they realize it's pointless) -- so all the skills of the citizens are not being used to perpetuate the economy. And those disillusioned people are more likely to be unhappy with the status quo and agitate for change (Translation: social unrest).
The deeper root of the problem is that the dominant economic system is based on the accumulation of wealth for a few at the top. More education so we can play the game better is not the solution... Changing the game is a better way forward.
A.Y. would do more to help the cause by not writing these kinds of articles that give the impression the Conference Board of Canada does anything helpful for the public in general.