On June 17, the Parliamentary Budget Office (PBO) released a technical report that substantively revises all previous estimates of what it means to be wealthy in Canada. The top 1% own a quarter of all personal wealth in the country, while well over half is held by the top 10 per cent.
These findings move Canada from the middle of the OECD pack, to ranking as the fourth most unequal advanced capitalist country, still well behind the U.S. but almost tied with the Netherlands and Germany. In the one competition where we should never want to be a contender, we are now a medal hopeful!
Where do these new figures come from?
To measure income inequality governments can access tax records. Measuring wealth is not so easy.
Statistics Canada conducts a survey of financial security (SFS) every three years and in 2016 a "representative" sample of 12,000 families were asked about their assets and liabilities. Fewer than three-quarters responded, so how representative this survey is remains a matter of conjecture.
Consistent with patterns elsewhere, our wealthiest families declined to participate. This became a problem for the PBO when it was called upon to assess the NDP's wealth tax proposal. Based on the SFS, the PBO could not provide an accurate assessment, hence this report.
The PBO adopted the most widely-used method. They analysed the 100 wealthiest families according to Canadian Business and then created a "synthetic" database of 16,000 families to link these exceptionally rich people to those represented in SFS. In making up this data, the PBO applied the Pareto distribution, which holds that the top fifth of a population can be assumed to have four-fifths of the wealth, and national balance sheets (NBS), which establish the values of all the different types of assets and liabilities in Canada.
Because the available data date from 2016, to update to 2019 the PBO assumed constant growth rates in both values and people. Despite the booming stock market and the arrival of a million new residents, for three years the rich did not get richer, nor the poor poorer.
It also reconciled the survey data with the NBS by deducting $435 billion in financial assets and $845 billion in non-financial assets, while adding $294 billion in liabilities. As this suggests, in all likelihood, the PBO underestimates the wealth at the very top of Canadian society, all-the-more-so as no accounting was made for assets held off-shore to avoid or evade taxation.
What are the new estimates?
How wealth is shared in Canada differs markedly from what we have long been told. Not only does the wealth held by the top 1% almost double, these roughly 170,000 families now have a greater net worth than the middling ranks.
People between the 40th and 80th percentiles used to be credited with almost a third of the net wealth in the country; now they are revealed to be holders of only a quarter. The declines for those from the 99th to the 80th percentile increase as we go down the scale, but wealth has collapsed at the bottom, where their very limited assets have been halved.
The PBO's estimates allow us to see for the first time the distribution of wealth within the top 1% where there is a very marked disparity. The top one per cent of this 1% -- that is 1,600 families -- each possess an average net wealth of $408.7 million, whereas the 79,800 families who comprise the bottom half of the top 1% have to get by on an average of $7.5 million each.
The scale of difference between those at the very top and the 6.1 million Canadian families who compose the 40 per cent at the bottom is simply too large to graph. Indeed, it is so large that it is almost impossible to grasp. In the words of Phil Ochs, it is "a distance only money can measure." On average, the 1,600 families who make up the top 0.01 per cent have $20,046.59 in net wealth for every dollar held by those in the bottom 40 per cent. This social and economic chasm is why we can have a finance minister who could "forget" that he owns a chateau in France.
Why has it come to this?
In 2015, the Trudeau Liberals promised a return to evidence-based decision-making in government. Gone were the days when the government would deliberately cobble Statistics Canada.
In response to decades of concern about growing inequality, the Liberals promised to defend the interests of the middle class and to help those not yet middle class to become so. No mandate, however, was ever given to Statistics Canada to properly evaluate wealth inequality.
Five years on and inequality is at an all-time high. The situation for the vast majority of Canadians has deteriorated very substantially. In this context, hats off to the PBO. I am sure that it would have been easier to let sleeping dogs lie, for this really is a case of the tail wagging the dog.
For the past month, hundreds of thousands of Canadians have taken to the streets to protest systemic racism. This unprecedented movement for social justice directly challenges the complex web of deeply-rooted inequalities that define Canadian society by asking why, 187 years after the abolition of slavery in Canada, does racism continue to flourish? As an historian, my short answer is that as new forms of socio-economic, gender and national inequality developed since the mid-19th century, white settler society built on and expanded already existing forms of racism.
Central to those inequality-generating processes have been the three over-arching economic policies of the federal government: the National Policy, 1879-1933; an integrated North American strategy, 1939-1976; and neo-liberal globalization, 1980 to the present. Each of these differing strategies favoured the accumulation of wealth by particular social groups in particular regions at the expense of others.
The National Policy of building a transcontinental railway and resettling the Prairies, financed by protective tariffs favouring central Canadian manufacturing, is well-known. Its cornerstone not-so-much: the massive dispossession of the Indigenous peoples of Western Canada through the numbered treaties and the imposition throughout the country of the Indian Act.
Residential schools were to follow, and this first fully articulated Apartheid regime in the British Empire was buttressed by a new and highly racialized immigration policy that closed the doors to people of colour until the 1960s. While at the other end of the spectrum, the highly concentrated Canadian capital market remains this period's other lasting achievement.
As Canada geared up for the Second World War, the long-held Liberal dream of an integrated North American market became a real possibility. Its centre piece would be the auto pact, which guaranteed Ontario secondary manufacturing a major piece of the biggest post-war pie.
But its foundations lay elsewhere: in the financing by Toronto of mining and resource development in northern Canada, and in acceptance of a mass income tax regime in exchange for collective bargaining rights. Toronto remains the world's leading capital market for new mining issues, while a key asset for those just below the really wealthy is the $2.4 trillion held in pension funds, primarily by unionized workers.
Canada was among the first to endorse the "Washington consensus" of privatization, free-trade, "just-in-time" globalized production, and a massive shift into services. This was not, however, the result of any external imposition. It followed closely the recommendations of Pierre Trudeau's two major royal commissions on corporate concentration (1975) and on our economic future (1982).
The massive exploitation of the tar sands and expanded international presence of Canadian mining companies underscores the continued centrality of ecological destruction at the heart of all three of these long-term strategies. This current one, however, is financed by a new fiscal regime based on a shift to consumer-based taxes, a slashing of already low corporate taxation, and a dramatically less progressive income tax.
This manufactured-in-Canada austerity justified the Chrétien/Martin government cutting a third of health and education spending in mid-1990s, which set the stage for 85 per cent of our COVID-19 deaths occurring in long-term care facilities.
As this policy option was being planned in Ottawa, analysis of the 1981 census proved that poverty in Canada was highly gendered and increasingly racialized.
This ugly reality experienced in multicultural Canada was confirmed by the first post-Harper census in 2016. Every major "visible minority" (save for Filipinos where women were often the economic migrants) now lives in poverty at two to three times the rates for white Canadians.
The failure to act on the evidence then helped create the conditions for the spectacularly unequal Canada of today. Fortunately for the Liberals, the Harper interlude camouflages the remarkable continuity in leadership and policy choices of the past 40 years.
These choices compounded earlier inequities, while generating quite unprecedented ones taking us further and further away from any form of a "just society." Thanks to the PBO, we now know on whose behalf the government has been working all these years.
Robert Sweeny is a Governor-General Award-winning Canadian historian. A co-founder of the Montreal Business History Project, he developed the country's first undergraduate course in the history of inequality, while teaching at Memorial University of Newfoundland. An Emeritus Professor at MUN, he recently moved back to Montréal with Élizabeth-Anne Malischewski, where he is a professeur associé at UQAM.
Image: Lewis Parsons/Unsplash
Graphics: Submitted by author.
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