Prosperity needs help getting shared

Lana Payne lanapaynenl@gmail.com
Published on January 9, 2016
Lana Payne

A nation will not survive morally or economically when so few have so much and so many have so little. — Bernie Sanders, candidate for the Democratic nomination for president of the United States.

A nation will not survive morally or economically when so few have so much and so many have so little. — Bernie Sanders, candidate for the Democratic nomination for president of the United States.

Markets alone don’t reduce income inequality, not even when the economy is chugging away at full speed. – Armine Yalnizyan, economist with the Canadian Centre for Policy Alternatives (CCPA).

Rising inequality and climate change are arguably the two greatest and most pressing issues of our generation. We will be judged by what we do, or don’t do, as societies, nations and the planet about each of them.

For weeks late last year, many world leaders were intensely focused on dealing with the latter during the Paris Climate Change Conference where 195 countries worked on a plan to curb global warming.

While the deal reached is far from perfect, some would correctly argue inadequate, it is a giant step forward. After all, there is a deal and this was far from assured.

Tackling inequality is another matter. No such global plan exists and yet it has been the subject of much hand-wringing, study and debate.

The International Monetary Fund now admits that inequality harms economic growth. In addition, many scholars and leaders have said it seriously impairs democracy when so much of the wealth our world generates is held by the few.

Redistribution measures have taken a beating, replaced with government policies that actually have made inequality worse. Decades of unfair or regressive taxation that benefit the rich, unfair trade agreements that are more about investor rights than trade and other economic policies have also contributed to the problem.

A sustained attack on the one societal institution that forces wealth to be shared — unions and collective bargaining has in no small measure contributed to inequality. Indeed the assault on the rights of workers and unions and the deterioration of the so-called middle class has been in tandem with the growth in income inequality.

The evidence is jarring.

The annual report of Canadian Centre for Policy Alternatives (CCPA) on the earnings of Canada’s top CEOs highlighted again this year that CEO pay is recession proof.

In 2014, Canada’s top 100 CEOs earn 184 times the pay of an average Canadian worker, and 400 times more than someone working full-time and earning minimum wage.

In the United States, CEOs made an astonishing 303 times more than the average American worker.

More and more of the income pie is going to the top one per cent — who are soaking up a bigger and bigger share of the benefits of productivity.

According to the Economic Policy Institute in the United States, decades of stagnant wages despite the fact that people are working more productively has become a serious economic problem for the country.

Simply, prosperity needs help getting shared.

Prosperity gets shared when forces such as strong trade unions through collective bargaining and governments through taxation and redistribution policies make it happen. Markets alone, as many economists have argued, do not do this.

For example, if markets delivered fairness and distributed productivity gains, minimum wage in Canada would have been above $16 an hour in 2012, and in the U.S. it would be standing at $18 an hour. Instead workers who toil for the lowest of wages earn substantially less than this.

Stagnant wages for workers mean there is less demand for goods and services. And this lack of demand is, according to Nobel-Prize winning economist Joseph Stiglitz, contributing to what he calls the great global malaise. “Those at the top spend far less than those at the bottom. Money moves up, demand goes down.”

Stiglitz says in addition to income inequality, fiscal austerity has also played a significant role in slumping economic growth.

Surprisingly, tackling inequality has gained champions from the most unlikely of places.

Super-rich Nick Hanauer, a U.S. tech entrepreneur, has been advocating for a $15 minimum wage since 2012.

In an interview with The Atlantic, he said: “A guy like me — a very successful capitalist, somebody who knows all the rich people — is the best face for the message of reforming capitalism, right? I’m the one who can say, ‘It doesn’t have to be that way,’  When they say that the better profits are, the better it will be for everybody, I’m the one who can say ‘That’s a lie.’ ”

He concluded that: “The other side thinks that growth produces a thriving middle class. That’s not true. That’s wrong and backwards. A thriving middle class is the source of growth in a technological, capitalist economy. Investing in the middle class is the most pro-business thing you can do.”

And yet, we have no plan in Canada or the United States to do so. No real plan to lift those living in poverty out and into the so-called middle class.  

The upside is at least the problem of inequality has been identified.  Like climate change, it has its deniers. But we must forge ahead. The next step, as with climate change, is to develop a plan to deal with it. Let’s get on with it.

Lana Payne is the Atlantic

director for Unifor. She can be reached by email at lanapaynenl@gmail.com. Twitter: @lanampayne