Increasing inequality and the rise of a super-rich in Canada

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As Donald Sterling discovered last week, even billions of dollars can't spare you public humiliation when you're caught on tape making racist remarks.

For everything else, however, there's MasterCard.

Indeed, apart from the slagging the L.A. Clippers owner received from the NBA, enormous wealth can get you just about everything, while lack of resources leaves you barely able to function in society.

So the fact that there's been a massive diversion of income and wealth to those at the top in recent years seems like it should be a big deal.

And in the U.S., it's at least seen as a big deal. From inside the White House, Barack Obama has made the dramatic surge in inequality his signature issue, describing it as "the defining issue of our time."

Of course, there's intense resistance in the U.S. to doing anything about it, but the subject is at least making waves there. A powerful new book calling for a global wealth tax by French economist Thomas Piketty has become a runaway New York Times bestseller, is being hailed as a path-breaking economic treatise on a par with works by Adam Smith and Karl Marx, and has sparked a fierce policy debate.

Meanwhile, here in Canada, all is sleepy on the inequality front.

The emergence of a super-elite -- we now have roughly 70 billionaires in Canada, and scores of multi-millionaires -- attracts little media or political attention.

Far from seeing the rise of a fantastically wealthy super-elite as a defining issue, Stephen Harper sees it as no more of a problem than climate change -- that is, something to be denied, ignored and quietly adapted to.

The standard explanation for this lack of interest is that, unlike the U.S., we haven't seen a dramatic rise of money going to the top.

But this is just wrong. Of course, nobody beats the U.S. in the inequality Olympics, but we come close to owning the podium.

An OECD study released this month shows that, over the past three decades, the share of income growth going to the top 1 per cent was largest in the United States. But Canada grabbed the silver medal with a strong second, beating out ten other advanced countries in the share of income growth being snagged by its richest citizens.

This suggests we should at least be asking soul-searching questions related to how we feel about living in a plutocracy.

Certainly Piketty's 577-page treatise, Capital in the Twenty-First Century -- which has caused barely a ripple in Canada -- lays out a powerful case that modern capitalism, left to its own devices, leads to ever-rising inequality.

This may seem obvious to players of Monopoly, but it runs counter to the accepted view that industrialization, in the long run, will eventually improve the lot of the world's people, billions of whom still live in toilet-less shacks but now can aspire to playing Flappy Bird on their mobile devices.

Piketty's argument, backed up by vast international and historical data, goes like this: since income from ordinary labour grows more slowly than the return on capital (and capital is mostly owned by rich people), over time inequality becomes ever greater.

He notes that the counter-experience of the early postwar years (1945 to1975) -- when there was an outburst of equality -- was partly the result of the war-related destruction of European capital. In addition, Piketty argues, it resulted from deliberate policies, particularly the very progressive tax systems enacted by governments, most notably in the Anglo-American countries (including Canada).

Piketty points out that the top marginal tax rates of the postwar years (above 80 per cent on big incomes and inheritances) were designed to discourage the perpetuation of large fortunes, which lawmakers had come to regard as "socially unacceptable and economically unproductive."

Even Republican President Theodore Roosevelt argued in 1906 that the U.S. should place "a constantly increasing burden on the inheritance of those swollen fortunes which it is certainly of no benefit to this country to perpetuate."

The slashing of those high tax rates in recent decades has contributed greatly, Piketty notes, to today's return to inequality.

Piketty also dispels the notion that today's fortunes are the result of talent, noting that 60 to 70 per cent of them are due to inherited wealth, and that we're on track to return to a world -- like late 19th-century Europe -- dominated by inherited wealth.

Stephen Harper is no doubt hoping we'll be distracted by sports, and by reports we're doing about as well as middle-class Americans, who've been crushed by the brutal, ongoing, Wall-Street-induced recession.

Meanwhile, an immensely rich and powerful class right here in Canada is quietly amassing ever greater wealth and power to hand down to their heirs, who will be still richer and more powerful. But, go Habs, go! Why would we care? 

Winner of a National Newspaper Award, Linda McQuaig has been a reporter for the Globe and Mail, a columnist for the National Post and the Toronto Star and author of seven bestsellers, including Shooting the Hippo: Death by Deficit and other Canadian Myths and It's the Crude, Dude: War, Big Oil and the Fight for the Planet. Her most recent book (co-written with Neil Brooks) is The Trouble with Billionaires: How the Super-Rich Hijacked the World, and How We Can Take It Back.

This article is reprinted with permission from iPolitics

Photo: Curtis Perry/flickr

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