The Parallel Parliament

by Glen Pearson

Tag: financial inequality

Can Canada Afford Its Dreams? Follow the Money

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IT’S BUDGET DAY, AND ONGOING POLLING SPEAKS to significant amounts of support for the new Trudeau government. The new PM himself has hinted that he is prepared to help lead a reinvigorated progressive movement internationally. It’s still early days, but it’s difficult to deny that the initial impressions of Justin Trudeau internationally have been favourable.

To be one of the leaders of global progress, however, Trudeau has to show that his ideas work at home, and on this particular budget day that will be a tall order. We’ll hear the usual spin from politicians, economists, media pundits, and interest groups on the budget’s effects. People will debate the size of the proposed deficit, the effectiveness of investment in infrastructure, and how Canada has to get its productivity moving again.

Yet, as with the recent meetings of the World Economic Forum in Davos, all this maneuvering will be taking place against a backdrop of staggering global financial inequity. Just as in Davos, where the world’s elite heard directly from Oxfam that 62 people now control over half the world’s wealth (more than the poorest 3.5 billion people), Canada has to come to terms with the harsh reality that much of the great wealth created in this country goes to fewer and fewer people. While today’s budget will mostly involve tinkering, it’s likely that the fundamental flaws on inequity on how we handle our finances will go unaddressed.

Oxfam’s revealing study was the work of Deborah Hardoon, Sophia Ayele, and Ricardo Fuentes-Nieva. One of their main subjects of research was the increasing disconnect between workers and their earnings. In advanced nations, like Canada, the national income going to workers is falling, while that going to owners and elite executives is growing. This shouldn’t come as a surprise to any of us who have watched average wages remain stagnant at the same as corporate profits mushroom.

In the poorer countries, the same trend continues. Between 1990 and 2010, in many developing nations learned that some 40% of their workforce saw their wages grow more slowly than the national average – a tragic reality that left 200 million people mired in abject poverty despite the growing wealth of their respective nations.

Then came the intriguing revelation in the Oxfam report that $8 trillion dollars of global generated wealth remained untaxed because it was diverted to offshore savings accounts. Much of this was from countries like Canada and the United States – revenue that could have been put towards alleviating poverty or increased worker wages in advanced nations. This has remained the financial backdrop for successive Canadian governments.

We’d be making a great mistake to assume that this vast inequity in our wealth is only taking place in poorer regions of the world. It’s a reality that continues to cripple worker wages in Canada and to rob citizens of the vital investments required to prepare ourselves for a fairer economic future. Canada was built upon the model of effective wealth sharing – the only method possible to adequately manage such a large nation with a relatively small population.

This is crucible working its way through the global financial system at the time that Canada’s new government is laying out its first budget. To lead a global progressive movement means to come face-to-face with this one great conundrum: how to work toward income equality when the financial trends are heading the other way, burgeoning the gap between the rich and the poor? Countries shouldn’t become victims of their own wealth, but, indeed, be liberated by it. Budget 2016 is likely to be more about the former than the latter.

It will take a remarkable amount of courage, ingenuity, and popular support to lead a global movement that will reverse current trends. Mr. Trudeau has some time to develop that leadership by showing that it works at home. People in Canada and around the world are dissatisfied following a decade or more of austerity and the lack of investment in people and in the planet. They are eager for change and it’s this reality that has provided a window for progressivism to take on its onerous task. But should we tinker, the downward slide will continue, affirming Irish writer Oliver Goldsmith’s observation: “Ill fares the land, to hastening ills a prey. Where wealth accumulates, and men decay.”

Say the Word

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WE OFTEN ATTEMPT TO DEFINE THE WORLD WE LIVE IN by the use of a word or a phrase. We had the Stone, Iron, Industrial, Information, and now Technological Ages. When society is moving along without too many extremes, the requirement for words isn’t as essential, but when things get out-of-place or rocky we fall back on singular phrases or words to capture our predicament.

Aldous Huxley noted in his Brave New World, “Words can be like X-rays if you use them properly. They’ll go through anything. You read and you’re pierced.” Thus we got the “Roaring Twenties,” the “Depression,” the “Era of Civil Rights,” or the universal “Globalization.”

Slowly, inexorably, a new term is consistently showing up in conversations and media venues that is remarkable for its ability to draw together, into a kind of rough consensus, voices that heretofore remained divided by ideological fences. That next word is “Inequality,” and it’s about ready to become the caption of our era, our footstep in history’s timeline.

“Inequality” hardly requires much context anymore because we have been living it every day, not just in developing nations, but in what once seemed the endlessly prosperous Western countries, like our own. The amount of commentary it has received in the United States and Britain has placed it front and centre in any coffee shop or policy discussion. Canada is quickly catching up the longer it takes prosperity to return to our national life.

Perhaps it won’t. Our hard-earned reputation, mostly established in previous times, appears to be eroding as the economic gap between the rich and the rest is opening up a tear in the Canadian fabric. The real issue is not so much about how much wealth the top 1% has acquired in recent years but the amount not gained by the rest. There is something wrong; we can sense it but look in vain for any serious political or economic leadership to shrink that chasm.

It is repeatedly said that this past recession is still leaving its fingerprints all over our present life. Research by numerous groups, including the International Monetary Fund, point to the real possibility that growing income inequality actually delays any economic recovery and also shortens the periods of prosperity that follow downturns. As we wait in vain for our economy to bounce back from a recession that supposedly ended a while ago, perhaps we would be better to ask why so little is happening, and if part of that reason is the economic inequality in this country, then the sooner we get at some kind of solution the better off we will all be. But first we have to talk about it in all seriousness. – what its persistence presence means to our national life and the future of our children. Should we persist on this path, the word “equality” will eventually be removed from our national lexicon.

In the movie, Ender’s Game, one of the main characters makes an astute observation: “There are times when the world is rearranging itself, and at times like that, the right words can change the world.” The opposite is also true: the wrong words can diminish us – “inequality” perhaps being the prime example.

Pitchfork Democracy

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THE DAVOS MEETINGS HAVE CONCLUDED AND, as always, we await the results. Warnings were coming from everywhere prior to the exclusive sessions – possible recessions, the lowering price of oil, global inequality. But as far back as last summer, one of those in the world’s most elite financial club was already sounding the alarm at various levels.

Nick Hanauer helped launch 30 businesses, including Amazon, owns a bank, his own plane, a huge yacht, and qualifies, not as a member of the 1%, but of the .01%. He says that one of his keenest strengths is to possess a kind of instinctive sense of what the future will bring.

What is his sense picking up now? “I see pitchforks,” he states confidently.

“Our problem is that inequality is at historically high levels and getting worse every day. Our country (the U.S.) is rapidly becoming less a capitalist society and more a feudal society. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution.”

Did the folks at Davos hear this message? It seems likely, and from numerous sources. The problem is that many of those who attended the World Economic Forum last week are of the investment kind. They attend because they sincerely want to hear of the problems in order to know where to place their funds. They aren’t out to solve the problems, but to stay clear of the greatest risk to their resources. Hanauer knows this reality and so put his challenge in plain terms: “And so I have a message for my fellow filthy rich, for all of us who live our gated bubble world: Wake up, people. It won’t last.”

Many in the financial order actually appreciate his forthrightness and candour, but figure they can avoid the troubles he speaks of. What they don’t comprehend is that Hanaeur is saying this great challenge before them isn’t financial but democratic and human. Just so they wouldn’t misinterpret him, he defined it for them:

“If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this didn’t see the pitchforks eventually come out. There are no counterexamples. None. It’s not if, it’s when.”

We’ll explore more regarding his reasonings in the next post, but for now the contrast between his language and that used in Davos is profound, even exasperating. The jargon largely used in Davos is of the corporate style – technical and vaguely antiseptic. While organizations like Oxfam were providing a clear contrast, speaking with pathos and urgency, the prevailing language is always one of neutrality and a morally numbing kind of objectivity. It focuses on the great problems of the day by analyzing their implications rather than solving their harsh realities. Yes, the great needs of the world are there – poverty, women’s rights, climate change, poor governance, even greed – but they are gathered effectively on the outside, looking in. The fundamental driving force of meetings like those in Davos is how to grow prosperity in order to overcome these problems rather than clearly solving them in human terms.

Just one other thought. If, as presented at the Swiss village last week, over half of the world’s wealth is about to be owned by the 1%, how can we expect them to tackle the great challenges of the age if it would necessarily cut into their profits if more effective measures at reducing inequality were to be undertaken?

This is where Hanauer is helpful, because he speaks from inside the gates, reminding his peers that if they have the most of the wealth, then they will have to apply themselves to the solutions. If democracy is not merely about deregulation, supportive corporate legislation, or access to hordes of capital, but angry citizens coming together, then a day of reckoning might indeed be on the horizon, the modern equivalent of pitchforks everywhere.

How Much Isn’t Enough?

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THE NEWS JUST KEEPS ROLLING OUT, and for Americans especially an important time has arrived. We consistently hear now that the United States has an economy getting stronger by the day and that citizens can look forward to a more robust future.

And then a study appears in the Washington Post that brings a dose of reality. The Southern Education Foundation reports that for the first time over 50% of American children come from low-income households in 2013. Back in 1986, the number was 32%, moving ever upwards to 42% in 2006, just prior to the great economic recession. The bottom has fallen out for thousands of more families since that recession, so that the numbers is about to reach 51%.

At first I thought these numbers can’t be correct because, if they were, surely the media would be all over them. Kent McGuire, of the Southern Education Foundation, put it starkly: “The fact is, we’ve had growing inequality in the country for many years. It didn’t happen overnight. Now we are a nation disinclined to invest in our young people.” He goes on to state to the Washington Post that the country has reached a “watershed moment.”

In recent weeks, President Obama has opened a new political and economic front, offering new initiatives to support the middle-class. Part of his incentive came from the Southern Education Foundation report. He is recognizing that an increasing number of families are falling out of the lower portions of the middle-class and landing squarely in poverty.

It all sounds timely, and makes sense. But no sooner was the Foundation’s report made public than another bit of information emerged that reveals just how difficult this fight is going to be. The highly credible international organization, OXFAM, informed us yesterday that by next year, over 50% of global wealth will be owned by the 1% financial elite. The 80 richest people on the planet have the same wealth as 3.5 billion people.

This was all over the news yesterday, serving as a kind of “aha” moment for world leaders about to meet at the World Economic Summit in Switzerland this week. The political and economic elite meet there every year, announcing plans to make the global economy more fair, and yet it doesn’t happen. In fact, it’s going the other way.

Winnie Byanyima, executive director of OXFAM, is as bold a champion as any you will ever meet. She’s heading to Davos to unveil the details of the report and challenge world leaders to stop pretending that they are concerned about inequality and get on with dealing with it. She puts it plainly:

“Do we really want to live in a world where the 1% own more than the rest of us combined? The scale of global inequality is simply staggering; and despite the issues shooting up the global agenda, the gap between the richest and rising fast. It’s time our global leaders took on the powerful vested interests that stand in the way of a fairer and more prosperous world.”

This dynamic woman will be co-chairing the Davos forum and won’t be denied, in part because the majority of those falling ever farther behind are the world’s woman. This is a global challenge and Byanyima is placing it front and centre on the global stage later this week.

But she released it now because President Obama is about to unveil his plans for the empowerment of the middle-class tonight, in his State of the Union speech.

There is no longer the need to keep talking about global inequality; there is now a clear consensus and the time has come to act. That’s why Bank of England governor, and Canadian, Mark Carney, recently stated that the capitalism is doomed if ethics continue to vanish, or why the Lancet stated that Canada is losing its knack for global citizenship and in the process is losing the battle against poverty and healthcare at home – especially among aboriginal populations.

A half-century ago, another president of the U.S. stood up to give his State of the Union speech in the same place Obama will tonight. John Kennedy spotted this problem of global inequality and reminded the American people what would happen if they didn’t take it seriously. “If a free society cannot help the many who are poor, it cannot save the few who are rich.” This is the challenge now before us. Growing poverty and inequality says something about us as citizens, and what we will tolerate. At home, Canada is losing this battle, and internationally our voice against poverty has been diminished. Perhaps people like Winnie Byanyima can help us pull back from the brink.

How much isn’t enough for the global elite? Half the world’s wealth doesn’t seem to do it for them. It’s time to take them on before they, and us, lose the battle altogether.

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