Tag Archives: income inequality

Jan 27 2016
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Economy, Employment, Wealth

The dread pirate “Wagegapper”

We could sell the snow. There's plenty of that

We could sell the snow. There’s plenty of that

Pity the poor rich man. In this economy, he just can’t catch a break. Oh sure his castle continues to glisten in the rising sun. His moat is pristine and his crocodiles are well fed. But can he actually accumulate money. . .you know, the way he used to?

According to a Bloomberg/HuffPost Canada post this past August 8, “The stock market rout gripping the world last week and today is bad news for just about anyone who uses money, but when the value of assets collapses, it’s the richest who lose the most.

“Take, for instance, Facebook founder Mark Zuckerberg, who lost $1.9 billion U.S. in a day’s trading on Friday; or Amazon co-founder Jeff Bezos, who was down $1.8 billion; or famed investor and Berkshire Hathaway head Warren Buffett, who lost $1.7 billion. And that was all last Friday – before Monday’s even wilder ride on the stock market.

“According to the Bloomberg Billionaires Index, the world’s richest 400 people lost $182 billion in wealth last week. It was the largest drop ever seen in the index, but it only launched last September. The recent drop in stock markets around the world means the world’s 400 wealthiest people have in total lost money this year, with their combined net worth at $3.98 trillion, down $75 billion from the start of the year.”
Under the circumstances, we in the Atlantic Maritimes should count ourselves lucky. We have managed to avoid such calamitous outcomes concerning money, as we don’t have any.

According to Environics Analytics two years ago, the median family income in New Brunswick was just about $57,300 – the second lowest in Canada, just ahead of Prince Edward Island. Since then, the numbers for both provinces have dropped by more than seven per cent (about the rate the central bank has reduced the cost of borrowing for businesses and consumers).

Meanwhile, unemployment in this region has spiked as wages have fallen. In fact, the Atlantic region has become a jurisdiction of “wagegappers”.

In economic terms, that simply means the more desperate an individual is for work to pay his or her bills, the more likely those with money will prey on his or her fears. This calculus drives down the cost of labour, and the vicious cycle of downward spirals ensues, further separating the moats of the rich from the slush puddles of the working poor (a class we once called bourgeois).

It’s not like we oughtn’t to have seen any of this coming. Back in 2013, Christine Saulnier and Jason Edwards of the Canadian Centre for Policy Alternatives had this to say in a widely circulated opinion piece:

“Statistics Canada released new data on high income trends in Canada with nary a mention of the Atlantic Provinces. From a Canadian comparative perspective, the data told a story that was more striking for most of the rest of the country and in particular, Alberta, Ontario, B.C. and Quebec where 92 per cent of the top 1 per cent of tax filers are found, with only 3.4 per cent in Atlantic Canada. These data reveal that the Atlantic Provinces are all significantly less equal today than they were in 1982. The trends are. . .not surprising.”

Indeed they were not, and they are not today in this region, where the income gap between the rich and the poor has widened.

Pity the wealthy for their losses of late? Absolutely.

After all, they may soon join the club around the burning barrel beyond the moat in the deep, dark woods along with the rest of us.

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Jan 27 2016
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Economy, Employment

Here we go again

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A sense of déjà vu, every once in a while, is thrilling, even titillating.

It’s as if you’ve been afforded another rare glimpse behind a barely familiar curtain where you once saw steam-punk-demi-gods, masquerading as policy makers, market traders, Bay Street bankers, and other assorted auguries decide how much money you’ll make and how long you’ll live to spend it.

But when the same, old horse entrails insist on coming round the corner once again. . .well, it all just gets so very, depressingly boring.

Hello 2016. Do you remember 2008?

Here, according the online People History, is what was preoccupying us eight years ago:

“Property prices continue to fall on both sides of the Atlantic in Europe and America causing hardship to many homeowners, and problems for financial institutions . . . Bank of America is to take over the country’s biggest mortgage lender, Countrywide Financial, which (is) rumored to be close to bankruptcy. . . Citigroup, the (United States’) largest bank, joins a number of other financial institutions and reported a fourth-quarter loss of $9.83 billion. . . President (George W.) Bush and (Congressional) House leaders agree to a $150 billion stimulus package, including rebates for most tax filers of up to $600 for individuals. . . President Bush signs the $700 billion bailout package bill . . .The Emergency Economic Stabilization Act is signed into law.”

Here, according to many others, and me, is what is preoccupying us now in the breaking days of the 16th year of the 21st century:

Property prices continue to fall across the Great White North, causing desperate, overextended homeowners to sell their stories (and, thereby, avert certain bankruptcy) to HGTV reality-show producers.

Commodity prices continue to plummet, transforming Canada into a great, vacant wasteland of missed opportunity and once-promising technological innovation (though, still, a marvellous overland runway for Maritimers suddenly heading back home as every Alberta oil and gas derrick shudders to shutter).

Of course, the banking sector in this most frigid reach of the North American continent remains strong, proud and free, even as just about every other segment of the economy is wondering where and how to boil its next egg.

Finally, Canada’s self-appointed national rag reports that Ottawa intends to “fast-track stimulus spending” over the next few months because, as one confidential government source disclosed for the Globe and Mail’s front-page story, “The (economic and fiscal) situation has deteriorated since our (election) platform last July.”

Really? No kidding, Sherlock.

This is déjà vu all over again.

It’s an undercurrent that New Brunswickers know only too well. Boom, bust, boom, bust, boom and bust again. It might as well be the market tempo that prompts our nervously tapping feet.

Bank of Canada Governor Stephen Poloz calls it an “undercurrent that will last for several years. It typically takes three or five years to adjust to a significant shift in your terms of trade, which is what we’re going through.”

In important respects, though, we are “going through” something much different than we have in the past.

In the past, a rise in commodity prices and foreign exchange rates compensated for a drop in manufactures and related exporting. Now, in this country and at this time, we face a general malaise in all engines of the economy.

Fortunately, we Maritimers know how to jump that particular shark as long as we remember how to use the lessons of history to avoid making mistakes in the future: Stay lean, nimble, innovative and fundamentally entrepreneurial.

Let’s keep our sense of déjà vu hopefully fresh.

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Jan 22 2015
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Democracy, Economy

Whose money is it anyway?

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When attempting to embarrass the filthy rich into parting with a few ducats from their dragon hordes, timing – which is, itself, the fount of all great wealth – is everything.

Oxfam knows this, which is why, on the eve of the annual World Economic Forum in Davos, Switzerland (a swank soiree for the world’s movers and shakers, or, depending on one’s political leanings, satanic masters of the dark arts), the international anti-poverty organization has released its most recent research paper on the unequal distribution of mammon across the planet. And the tale it tells might curl a philanthropically inclined billionaire’s toes.

As the summary document, Woking for the Few, plainly states, “Almost half of the world’s wealth is now owned by just one per cent of the population. The wealth of the one per cent richest people in the world amounts to $110 trillion. That’s 65 times the total wealth of the bottom half of the world’s population.”

Meanwhile, “The bottom half of the world’s population owns the same as the richest 85 people in the world. Seven out of ten people live in countries where economic inequality has increased in the last 30 years. The richest one per cent increased their share of income in 24 out of 26 countries for which we have data between 1980 and 2012. In the US, the wealthiest one per cent captured 95 percent of post-financial crisis

growth since 2009, while the bottom 90 percent became poorer.”

Oxfam allows that some inequality can be a good thing, as it tends to “drive growth and progress, rewarding those with talent, hard earned skills, and the ambition to innovate and take entrepreneurial risks.”

Overall, though, that’s not how the world is working.

“Widening inequality is creating a vicious circle where wealth and power are increasingly concentrated in the hands of a few, leaving the rest of us to fight over crumbs from the top table,” Oxfam’s Executive Director Winnie Byanyima told the Guardian this week. “In developed and developing countries alike we are increasingly living in a world where the lowest tax rates, the best health and education and the opportunity to influence are being given not just to the rich but also to their children.”

As the report points out, runaway economic inequality creates permanent upper and lower classes, which constrain the flow of capital to deserving and innovative programs and projects. That, in turn, dampens overall growth and exacerbates poverty and homelessness. It also tends to widen existing gulfs in opportunities, particularly those between women and men.

What’s more, the research reports, “In many countries, extreme economic inequality is worrying because of the pernicious impact that wealth concentrations can have on equal political representation. When wealth captures government policymaking, the rules bend to favor the rich, often to the detriment of everyone else. The consequences include the erosion of democratic governance, the pulling apart of social cohesion, and the vanishing of equal opportunities for all.

“Unless bold political solutions are instituted to curb the influence of wealth on politics, governments will work for the interests of the rich, while economic and political inequalities continue to rise. As US Supreme Court Justice Louis Brandeis famously said, ‘We may have democracy, or we may have wealth concentrated in the hands of the few, but we cannot have both.’”

The question, of course, is: How much more concentrated can the world’s wealth become before any notions of democracy or, for that matter, market capitalism – which theoretically, at least, encourages fair and open competition – become quaintly invalid.

Still, many who perch at the right end of the political spectrum prefer to propagate the specious argument that fortune favours, by and large, the talented, hard-working, well-educated, and courageous, (not, as is more often the case, the entitled, corrupt and protected).

The rest of us shouldn’t envy hordes of wealth, but celebrate them as beacons of hope and inspiration: There, but for the failure of our own character, go we.

If only that were true. And Oxfam is not the only, or even most influential, voice pointing out the patently obvious on this subject.

“Through the tax code, there has been class warfare waged, and my class has won,” Warren Buffett ruefully observed in 2011 It’s been a rout.”

Of course, as the third-richest man on the planet, he can afford to be embarrassed.

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Jun 16 2014
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Government, Politics, Society

When some are more equal than others

 

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It is one of Liberal Leader Justin Trudeau’s favorite yakking points. NDP Leader Thomas Mulcair bangs on about it every chance he gets. Even Canada’s esteemed Prime Minister Stephen Harper has raised the subject, albeit delicately, in public from time to time.

Now the worthy Organization for Economic Co-operation and Development has jumped into the fray in its first country report on the Great White North in two years: Canada is, indeed, a nation of unequal opportunity and in all the ways that matter.

While “Canadians enjoy high levels of well-being and social progress” and though all of the country’s “component scores exceed the OECD average,” the report also concludes that “disposable income inequality has increased by considerably more in Canada since 1995 (11 per cent) than in other countries with data (2 per cent) to a level that is now 12th highest in the OECD.” 

What’s more, “in an era of high commodity prices has created wide regional economic disparities, while much of the public revenues from non-renewable 

resource extraction are spent on current government programmes, rather than being saved for the benefit of future generations. Incomes have risen in resource-rich provinces, but the resulting currency appreciation has placed pressures on manufacturing.”

The nation’s traditional mechanism for redistributing wealth from have to have-not provinces, federal equalization transfers, “only partially offset inter-provincial disparities in fiscal capacity.”

Housing is a special concern, says the organization. Prices in major cities, especially Vancouver and Toronto, are preposterously out of sync with the asset wealth that underpins homes and condominiums there, raising the specter of a market bubble and subsequent crash. 

If that happens, only banks and other lenders will prosper, thanks to Canada’s uniquely generous mortgage insurance system which guarantees institutions 100 per cent payback in the event of loan default – a circumstance that if repeated often enough would, itself, accelerate the widening gap between the rich and the rest of us poor schlubs.

Still, whenever politicians and pundits grumble about income inequality – which U.S. President Barack Obama has termed the “greatest threat” to contemporary society – other members of the chattering class are sure to point out that sour grapes never helped anyone, rich or poor.

Unerringly, they cleave to arguments that justify, legitimize or merely accept disparity as a fact of life. 

Writing in the Washington Post earlier this year, economist Joann Weiner cited four reasons why Mr. Obama is sort of stuck. 

First, America  is a “Great Gatsby” nation where “the rich stay rich and the poor stay poor.” Second, “winning the ‘birth lottery’ is the biggest factor in determining” one’s like pay grade in life. Third, birds of a feather flock together; rich, educated, people marry other rich, educated people. And fourth, the uneducated are unlikely to reverse their fortunes because college has become too expensive to pursue. 

Ironically, though, these conditions, which hamper efforts to inject the system with greater equity, are themselves the product the widening disparity that first appeared in the late 1970s thanks to what former U.S. Labour Secretary Robert Reich and others have identified as two concurrent developments: the appearance of spectacular, new business technologies; and a wholesale assault on private unions.

The former lowered labour costs, while the latter undermined wages and job security. Consequently, as Mr. Reich notes on his blog, “We are heading back to levels of inequality not seen since the Gilded Age of the late 19th century. The pertinent question is not whether income and wealth inequality is good or bad. It is at what point do these inequalities become so great as to pose a serious threat to our economy, our ideal of equal opportunity and our democracy.”

In fact, the best practical reason why everyone, from the improbably wealthy to the grudgingly poor, should worry about disparities in wealth and income is economic. Without a sturdy middle class around to keep buying the stuff rich people’s factories make, the whole game implodes.

Progressives among us are certainly not inured to the status quo. They note with confidence various fixes, including universal early childhood education to provide economically disadvantaged kids with the same start in life as their wealthy counterparts. 

The real question is whether our collective Trudeaus, Mulcairs and Harpers will ever be ready to put their money where their mouths are.

 

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May 08 2014
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Media, Wealth

When our knowledge is unequal to our opinion

 

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Whenever a columnist, book reviewer or any other species of gum-flapper, who’s paid to pontificate windily about the world’s state of affairs, writes something like, “I don’t know much about this subject, but that’s never stopped me before,” I usually take that as a helpful invitation to stop reading.

Occasionally, though, curiosity gets the better of me. 

So it was the other morning when I stumbled across a line in Margaret Wente’s latest attempt to speak for the common man from her lofty perch, at the Globe and Mail,  as one of Canada’s best-known columnists.

In her diatribe against “liberal policy elites” who are snapping up copies of French economist Thomas Piketty’s new book about the growing divide between those who have and those who have not in western societies, Mrs. Wente declared, “I’m not qualified to analyze Mr. Piketty’s work (Capital in the Twenty-First Century), which even critics have described as ‘brilliant’. My question is why now?”

Her answer was transparently deflective: “The progressive elites have been completely captured by the declinist narrative. . .There’s just one problem with this. Although highly educated social progressives are alarmed by the scenario, hardly anybody else is.”

She then “proves” her point by quoting surveys that show that regular folk – you know, “real” people – couldn’t give a toss about so-called income inequality. In fact, what Joe and Jane Public care most about is government incompetence and waste.

Now, there’s a straw man if ever one came tumbling out of the opinion pages of Canada’s national newspaper. 

Ms. Wente may not like “policy elites”. She may have reasons to distrust them. But that doesn’t mean they’re wrong about the deleterious socio-economic effects of the ever-widening gulf between the rich and rest. 

Equally, the apparent sanguinity of the general public doesn’t automatically denote that the average man and woman on the street is right. In fact, it doesn’t even go to the root of the problem.

Has it occurred to Ms. Wente that one reason why middle earners are more ticked off with governments than rich people is that they recognize how tax policies,  which were supposed to protect the common interest, have effectively accelerated the concentration of wealth among the one per cent?   

Besides, asking someone directly whether he’s worried about income and wealth inequities is like asking a farmer whether he’s concerned about crop failure. Sure, in a general sort of way. But it’s not real until it happens, up close and personal. And in this regard, data trumps anecdote every time. 

Earlier this year, a formerly confidential government report (made public through an Access to Information request by Canadian Press) declared that “the Canadian dream is a myth more than a reality.”

In fact, its findings pointed to “a middle class that isn’t growing in the marketplace, is increasingly indebted though it has a relatively modest standard of living, and is less likely to move to higher income (i.e., the middle class is no springboard to higher incomes).”

Other findings included:

“Over 1993-2007, there has been a slight hollowing out of the middle class, and the face of the middle class has changed considerably. Couples without young children and unattached individuals now account for most middle-class families.”

Meanwhile, “although middle-income families experienced a good progression in after-tax income, the same cannot be said of their earnings. In particular, the wages of middle-income workers have stagnate. . .Although the middle class holds a relatively fair share of the ‘wealth pie’, higher-income families have far greater nest eggs. Furthermore, wealth is not equally divided among middle-income families, with those headed by younger individuals being at a disadvantage.”

Compared with other western nations, Canada actually fares pretty well. But for how long? 

The economics of rampant income inequality is not an issue of pocketbook envy. Disparities in the currency that makes everyone’s world go round generate disparities in every avenue of life, from education to health care and, eventually, to the consumer sectors that sustain all goods and service-producing industries.

Although I am one of those gum-flappers who gets paid to pontificate windily, this time you can trust me.

I actually do know a little something about these things.

 

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Feb 04 2014
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Politics, Society

The political issues that dare not speak their names

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They were, until recently, sleeper issues – incipient tempests snoozing away until their moments in prime time arrived which, as it happens, was just the other day.

Greet the two cri de coeur of the common era: income inequality in one protest line and privacy rights in the other. Both are getting a lot of ink – both figurative and literal – these days.

Google “income” and “wage” and “inequality” and “gap” in any combination you like and 144 million references become available within a fraction of a second. Most recently from the mosh pit of opinion on the subject is a USA Today piece about Americans who “grapple with income inequality” even as they debate the “government’s role in the economy.”

There’s Bloomberg’s Income Inequality News, replete with “Income Inequality Photos” and “Income Inequality Videos” and a piece that chastises President Barack Obama for supporting fairer income distribution while pushing for international trade deals, such as NAFTA, that many economists blame for the wage gap.

And there’s this of local interest from the web pages of Statistics Canada , courtesy of the Huffington Post last week:

“StatsCan’s data shows some large differences in the degree of income inequality between provinces, with the Maritime provinces registering the lowest concentrations of income among high earners, while the country’s economic powerhouses – Ontario, Alberta and British Columbia – registered the highest. . .The share of income going to the top one per cent in Alberta was nearly 17 per cent, compared to around 12 per cent in Ontario and around five per cent in the Maritime provinces.”

Meanwhile, Canada’s Interim Privacy Commissioner Chantal Bernier has added her voice to the roaring multitude’s on the increasingly sophisticated, increasingly unaccountable, cohorts of spies, spooks and creeps who are steadily eroding any

reasonable expectation of privacy among the world’s citizenry.

“Revelations surfacing over the past months have raised questions among many Canadians about privacy in the context of national security,” she wrote in her report to Parliament last week. “While a certain level of secrecy is necessary within intelligence activities, so is accountability within a democracy. Given our mission to protect and promote privacy, and our responsibility to provide advice to Parliament, we are putting forward some recommendations and ideas for Parliamentarians to consider on these important issues.”

One of these ideas is to require Communication Security Establishment Canada (CSEC) to “make public more detailed, current, statistical information about its operations regarding privacy protection, and submit an annual report on its work to Parliament, as does the Canadian Security Intelligence Service (CSIS).”

Of course, to hardcore conspiracists, that’s like taking a convicted fraud’s unaudited financial statements at face value.

Still, Ms. Bernier remained undeterred. In an interview with the Globe and Mail, she insisted her report was a rallying cry for clarity and accountability. What’s more, she said, “When you look at our recommendations, quite a few are low-hanging fruit. Quite a few could be implemented immediately.”

Which is why quite a few of them probably won’t. The same goes for any meaningful government response on income inequality.

The respective issues are, in fact, two sides of the same coin. Each boils down to rough conceptions of fairness and justice. Each posits villains and victims. Each’s mythology depends on the noble travails of the plucky little guy who must endure the hob-nailed boots of the powerful elite’s henchmen.

Those are marvelous messages for governments with pretensions of  progressivism to exploit. Indeed, Barack Obama and his quasi-crusading band of faint-hearted social democrats are all over the income-disparity and big-brother issues in the U.S., alternately making the former the subject of the 2014 state of the union address and the latter the handmaiden for stinging rebukes of the National Security Agency.

Not so for the Government of Canada. Late last year, one of its committees quietly shelved an extensive report that measured income inequality across the country. At the same time, Ottawa continued to support the work of its spy agencies despite a gathering lobby of both expert and public opinion against many of their practices.

True reform, of course, is a messy business. And few governments, despite their pretensions to high-minded purpose, are temperamentally inclined and logistically equipped to render the society they temporarily govern any fairer or more just than it was before they rode into power.

Still, the sleepers have awoken, and soon political leaders may have no other choice than to share the spotlight with them in the prime time of the world’s attention.

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