First came the Oxfam report that the richest 85 people in the world – who could all fit on one B-Line bus – are as wealthy as the poorest 50%. Then, shocking in a lesser and different way, the former – and possibly future – U.S. Republican presidential candidate Mitt Romney said reducing income inequality should be one of the pillars of the 2016 U.S. presidential campaign.
What? Mitt Romney, the same man who in 2012 dismissed inequality concerns as “envy” and “class warfare,” now can’t deny that this has become a central issue. It’s finally getting harder to ignore inequality if you want to get elected from any side of the spectrum.
As it should. The Oxfam report, issued on the eve of the annual World Economic Forum meeting in Davos, also revealed that the top 1% had 65 times the wealth of the poorest half of the world. The imbalance is staggering.
Canada has a shabby record on inequality, ranking a lowly 12th among 17 peer countries for unequal spread of wealth. Our gap between the richest and the rest has grown faster than any country except the U.S., according to the OECD (Organization for Economic Co-operation and Development). Canada’s richest 1% have taken slightly less of all Canadian income in the past decade, but that share is way up from the 1980s.
“Since 1990, the richest group of Canadians has increased its share of total national income, while the poorest and middle-income group has lost share,” concludes the Conference Board of Canada.
We have long passed the point where the rich earn this vast wealth because of their talents and efforts. Inequality is politically created, through tax reductions, tax avoidance, low capital gains taxes, high tuition fees, protection from inheritance taxes and lobbying only the uber-rich can afford. The Oxfam report calls all this a “power grab.”
That’s why it’s so refreshing that politicians across the political spectrum are talking about grabbing some of that power back. In addition to Romney’s remarks, U.S. President Barack Obama is pledging to carve out $320 billion from the income of the extremely wealthy over the next 10 years and provide tax relief to middle-class wage earners and free education at community colleges. With 80% of those new taxes coming from the top 0.1%, this should cause no political pain.
What needs more attention is how gross income inequality undermines almost everything we strive for. U.K. writers Kate Pickett and Richard Wilkinson, authors of The Spirit Level: Why Equality is Better for Everyone, have decades of data to show that in rich countries, a smaller gap between rich and poor means a happier, healthier and more successful population. It’s not absolute levels of poverty that matter, but relative levels within a given society. Developed-world societies that have the greatest disparities of income are those that suffer from the lowest life expectancy, lowest literacy levels and the highest rates of mental illness (including drug and alcohol addiction), imprisonment, violence, lack of social mobility and lots of other ills – without exception (www.equalitytrust.org.uk). Wilkinson and others have clearly documented that more income inequality among parents leads to less economic mobility for their children.
Extreme inequality is an economic drag in other ways, according to the International Monetary Fund. It says equality is “an important ingredient in promoting and sustaining growth.” Some of the reasons are obvious: without social mobility, the skills of many are unavailable to contribute to the economy. Inequality is politically destabilizing, scaring off investors. A few rich people with pots of money don’t buy things at the rate of lower-income people who spend their whole paycheque just to survive.
It’s time to recognize the huge benefits of reducing inequality and stop pretending that today’s inexcusable levels of inequality are necessary to motivate people to work harder.
Even Mitt Romney has figured that out.
Peter Ladner ([email protected]) is a co-founder of Business in Vancouver. He is a former Vancouver city councillor and former fellow at the SFU Centre for Dialogue. He is the author of The Urban Food Revolution.
