Inequality: The issue of our times

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When someone affirms that the free market creates wealth, and to ignore this is wrong, note that this is code for the status-quo-is-good, all is well with the existing order, there is nothing to be concerned about, just let the powers-that-be get on with it.

In the real world there are things that markets cannot do well, notably, provide education, housing or health care, to take three examples that have been recognized for decades. There are things markets do badly, such as self-regulate, and things they cannot do at all, such as prevent financial manias, crashes and frauds.

And there are direct consequences for citizens of embracing a market economy: they spew out inequality, which is the issue of our times in Canada. What is needed badly now is a political campaign to do something about it.

In the 1960s, foreign ownership became the most politically prominent issue; in the 1970s it was inflation; in the 1980s it was continental free trade; in the 1990s it was debt and deficits. In case you missed it, the right has raised the issues that mattered in the last three decades of the past century. Not since the foreign ownership debate has the left had an issue become central to every day politics, despite brave efforts to raise jobs, access to public services, the environment and the status of women up to that point in popular consciousness where they trump other considerations.

Inequality is hard to escape. Downtown, the Bentleys, Jags and BMWs drive by the street people pushing supermarket baskets full of refuse. In the country, farm incomes decline as agricultural production increases. Factory farms create wealth for shareholders abroad, and promote rural poverty.

Canada's income security system is broken, and needs to be fixed. Not even the Toronto Star editorial board seems to have noticed the problem is much wider than the working poor, and the solution greater than an earned income tax credit — aka a handout — so that lousy employers can continue to pay poverty wages.

In the market economy, price competition is the organizing principle. Flexible prices allocate resources for production, and determine what gets consumed. The market then creates winners and losers. Without a robust social contract — the winners agree to compensate the losers — inequalities accelerate.

In the 1980s, increasing inequality before taxes and social spending were compensated by after-tax transfers. In the 1990s, after-tax and transfer inequality increased. In this decade, government action reduces the number of poor by one-third in B.C., one-half in Quebec, and three-quarters in France.

The right argued effectively in the 1990s that government spending had to be reduced in order to fight the deficit. This was a hoax; the real reason was to reduce access to U.I., and unemployment benefits so as to shift power away from workers in a serious recession caused by high interest rates and free trade.

Wages are low because the income security system has been re-jigged, especially by the federal Liberals in the 1995 budget, to favour employers. The provinces followed along, cutting social benefits, denying access to welfare, and now, people have to work for a pittance, or look for charity.When the numbers of destitute grow so large as to invite comment from travel magazines — avoid Vancouver, the poor are everywhere, including the Fairmont Hotel lavatories — the response is to talk about mental illness or drugs, not inadequate income support.

The best research shows that mental disorders inevitably appear when people do not have a place to sleep, wash or enough to eat.Getting the federal Parliament to make a commitment: no Canadian shall do without, would be a starting point to re-establishing a social contract based on agreement to reduce inequalities.

By any measure, minimum wages, welfare payments, unemployment assistance have all declined since at least the inflationary period of the 1970s. All these programs need dramatic improvements.

As is rarely noted, without income, people cannot participate in the market economy. The transfer of income from rich to poor creates markets; however few upper income individuals wish us to embrace this truth.

The global economy is the all-purpose excuse for allowing the wealthy to take away more and more, and pay less and less.

The standard economic view of income distribution is that it is a micro-economic issue: we are paid according to what return we produce. Whether we work by the hour, or advance risk capital, we get what we earn.

Looking at the figures put a lie to this assumption. In the U.S. more and more income is going to the top one per cent of the top one per cent; recently all income gains have gone to this group.

In fact, as should be obvious, income distribution is a macro-economic question. Who gets what is about politics, not just market economics.Yes, people decide what is wealth, and people, not the so-called free market, create it, and destroy it.

The standard economic measure, GDP (Gross Domestic Product), fails to account for the quality of life, ignores the environmental consequences of what is produced, and is blind to equality issues. Fairy tales about free markets cannot cover up that something is terribly wrong with the status quo.

Putting together a coalition to reduce income equalities in Canada is the pressing task of today. What was made wrong by the political system, can be remade by politics.

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