Stop backsliding, put Canada back on road to equality
There has never been a better time in recent history when the core democratic value of equality can be seen as both an ethical and practical option. Governments in advanced democracies around the world have been forced by the current prolonged economic crisis to openly acknowledge that the dominant political and economic ideology has been a failure. Its system of values, with the minimal role assigned to government, has been proven by experience to be disastrously wrong, both in terms of stability and social justice.
Even governments and economists openly on the right of the political spectrum have been compelled by history to acknowledge they were at least partially mistaken. So, if ever there was a time for discussing the relevance of alternative values to practical politics and to the daily lives of Canadians, it’s now.
In the 1930s, when Canadians faced dire economic circumstances supported by a dysfunctional ideology, they made important changes in both. I hope we can do the same.
I graduated from university half a century ago. For the first half of the period since then, we Canadians were busy creating one of the most productive and equitable societies in the world. We ensured that high economic growth rates were accompanied by a wide-ranging set of social entitlements. Under prodding by social democratic parties, and in continental Europe also by Christian Democrats, it came to be understood that, left to its own devices, capitalism would be inherently unstable and produce a distribution of goods and services that was profoundly unfair. If citizens in the North Atlantic democracies were to have half a chance at a life of dignity, governments believed they had to act.
Here in Canada, we were part of this widespread political and economic change. While pushed by the CCF and the NDP, the other federal parties in varying degrees came to share in this shift in ideology and practice. For both ethical reasons and the functional need for stability, an expanding role for government and increasing equality became national practice. Left behind was the belief that individuals and the economy should be left to fend for themselves. In its place was the model of democracy best expressed by Abraham Lincoln: government not only by and of the people, but also for the people.
What emerged from this thinking was a Canada characterized by a wide range of new social and economic rights: government pensions, universal health care, trade union rights, comprehensive unemployment insurance, the expectation that every boy and girl with ability could go to university — and all were paid for by adequate levels of progressive taxation. Achieving more equality in our everyday lives, we became a nation of greater social cohesion, and started to describe ourselves as “sharing and caring.”
This higher level of social and economic equality, symbolized by our signing on to the International Covenant on Economic, Social and Cultural Rights in the mid-1970s, also produced greater tolerance and a reaching out to provide new freedoms — to women, to First Nations, to gays, to ethnic minorities, and to the artistic community. These freedoms were best illustrated by the civil society activism and political leadership that led to the provisions of our new Charter of Rights and Freedoms.
Whether put in place by political parties self-described as social democratic or by other political formations, this post-war combination of political, civil, social, and economic rights aimed at citizens’ equality came to be known by social policy experts and the general intellectual community as the social democratic alternative to the pre-war minimal-state market-based system.
However, long before the 2008 crash in the global economy, Canada and many other Western countries had undergone an ideological and material reversal. Writing last year in the New Yorker magazine, David Frum, the Canadian-born ideologue of the American right, asserted that the conservative (small “c”) revolution launched by Margaret Thatcher and Ronald Reagan in the 1980s had as its purpose the rolling back of the “social democratic” model I have just described.
In Canada, the reversal first took place in open ideological form in Ontario when the Harris government turned its back on the red Toryism of Bill Davis. It came to be joined at the federal level not only by the Reform Party and the Conservatives, but also by the market-driven Liberal party of the 1990s. This became apparent in the middle of that decade, after the deficit had been overcome and surpluses restored.
Federal programs were not fixed; they were abolished. Budgets were not simply reduced; they were slashed. Artists and the CBC were cut loose and encouraged to rely more on the market. Income taxes needed for the restoration of social programs were not only cut, but also made less progressive. During that decade, the number of poor children in Canada increased almost every year, while the rich continued to get richer.
In marked contrast to continental Europe, environmental reform never got established; national housing programs disappeared, and post-secondary education spending was slashed.
Reflecting the ideological shift at the time, the Minister of Finance, Paul Martin, actually boasted that government spending as a proportion of GDP had been reduced to the level of 1951. During the 1990s and continuing since, virtually all the real growth in market-based income has gone to the top 10% of Canadians. Instead of increasing taxes on the rich to compensate for this — as Bill Clinton did in the U.S. — the Liberal government severely reduced capital gains taxes and carved 9 percentage points off income taxes for the wealthiest.
The scale of the increase in inequality, beginning in the last decade of the 20th century, is immense. Remember that was the best decade of economic growth in 40 years, a period during which the trickle-down soothsayers said everyone would benefit from it. Between 1998 and 2007, the average wage of full-time workers went up from $33,000 to $40,000, but that was less than the rate of inflation. In contrast, during the same period, the top 1% of Canadians increased their share of total income by 100%, and the compensation of the top 100 CEOs went from an annual average of $3.5 million to $10.4 million — up 300%.
The vast majority of Canadians have actually seen a downward shift in their share of the national income that they worked to create. Seventy percent of Canadian households have a smaller share now than they had at the end of the 1990s. Apart from the elderly, the bottom 50% of Canadians actually have lower after-tax incomes than their equivalents in the 1980s.
The present federal government has simply continued its predecessors’ onslaught on equality. As a consequence of the continuing underfunding of social spending and irresponsible and unfair tax cuts, it came as no surprise when we were criticized by the United Nations for failing to live up to our obligations under the Covenant on Economic, Social and Cultural Rights. This was followed by an OECD report showing that the level of inequality in Canada is now among the worst in the OECD. This in turn was confirmed recently by the Conference Board of Canada.
In continental western Europe, where increases in inequality in general have been less severe, in April of 2008 (six months before the crash) finance ministers at the European Union meeting in Brussels, with the exception of the British Chancellor, committed themselves to taking action to deal with inequality. It was the same group of continental Europeans who took the lead at the last G-20 meeting to curb the outrageous salaries and bonuses of the super-rich.
* * *
This, then, was the legacy of recent federal governments leading into the economic crisis that befell us in the fall of 2008. While we Canadians can congratulate ourselves on the relatively healthy structure of our financial institutions, we must not allow this to obscure the other, deeper democratic problem — the alarming increase in inequality that is now being openly debated in Western Europe.
In fostering this inequality in Canada, what our recent federal governments have done is not only to reject the political legacy of the CCF and the NDP, but also that of Lester Pearson, John Diefenbaker, Pierre Trudeau, and Bob Stanfield — all of whom came to see the importance of social programs and the use of government as a stabilizing and equalizing force in the economy.
Under the leadership of my parents’ generation, we Canadians began to transform ourselves in the 20th century – a transformation that was reflected to some extent in all of our political parties. Under various political labels, as a nation we had embarked on the social democratic journey which combines a regulated and efficient market-based economy with strong social and fiscal policies aimed at overcoming poverty and achieving greater equality. In the process, we Canadians also became more tolerant and more cohesive. Sharing and caring was not only a slogan; it was characteristic Canadian Behaviour.
It is this journey that has been dangerously undermined — not by inherent forces in the economy, but by willful decisions made by politicians.
The progressive politics of my generation were driven by an equality agenda because of ethical considerations, and also concern for macro-economic stability. However, we now have recent and clear evidence that more than stability and ethical concerns about equality is at stake. More equal societies are not simply more stable and just; they are also healthier in virtually every respect for everyone in them.
Bringing together data from a large number of international studies (UN, World Bank, U.S. Census, Statistics Canada) two leading British epidemiologists, Richard Wilkinson and Kate Pickett, in their book, The Spirit Level, published last year and reviewed in the June 2009 issue of The CCPA Monitor, show the society-wide positive social consequences of more equality.
As a result of their comprehensive analysis of data from dozens of countries, we now know that ethics and practical benefits come together: that equality works.
Their research has shown that more equal nations like Sweden, Norway, and Denmark are better off in almost every way. Their citizens are healthier, live longer, have fewer teenage pregnancies, are more law-abiding, participate more in civic projects, and are more trusting of their neighbours. Contrary to those who claim freedom is sacrificed with more equality, the opposite is true. With more equality comes a greater flourishing of the kind of responsible individualism and citizenship favoured by the great liberal John Stuart Mill.
Transcending any differences in religion, language, and culture, it is the higher degree of equality that makes those nations so much better off than the U.S. or the U.K., which are now among the most unequal. I repeat and emphasize that, once a certain minimum level of wealth is reached in a country, the evidence shows it is not more growth, but more equality, that leads to a better quality of life for everyone.
Wilkinson and Pickett’s work demonstrates that unequal societies are not only unfair; they are also dysfunctional. The status-related insecurity and anxiety produced by unequal societies promotes more isolation, social estrangement, and negative health outcomes than in societies that are more equal. Not just the poor, but everyone is worse off. Rich and highly educated British and Americans do worse than their equivalents in more equal societies. Furthermore, the evidence also indicates that more inequality leads to higher levels of consumerism, which further depletes the planet’s resources.
As a country, Canada is somewhere in the middle of the pack, but, as the OECD and Conference Board reports have shown, we’re going backwards. We’re becoming more unequal more rapidly than most of the countries studied. The implications are clear. Once we are firmly out of the current crisis, if we continue promoting only more growth and not more equality, we will continue to foster only more negatives in health and social behaviour.
Such a policy could hardly be more dysfunctional. Low wages, low social benefits, low spending on health care and education are not only ethically unfair for the poor whose market-based incomes are the lowest and whose human potential to flourish they deny. But, because such policies maintain or increase inequality and exacerbate social tensions and anxiety in general, they are also bad for everyone else. In contrast, more equality benefits all classes: lower, middle and upper.
* * *
Child poverty in Toronto or in Montreal or Vancouver is little different from what it was 20 years ago, when Parliament said it should be abolished within a decade. Every day, thousands of unemployed men and women are being denied EI benefits; all across Canada, middle-income families are re-mortgaging their homes so their kids can go to university; and in every community seniors are being forced back to work because their pensions have been wiped out since our OAS and CPP are now inadequate. Based on recent evidence, the policy implications are clear: More growth alone won’t fix Canada, but sharing our money and resources, as other democracies have shown, can make a huge difference.
I have long believed that the best kind of democratic politics is that which combines both idealism and practicality. People like to be inspired, but, before they vote, they need to be persuaded. Only when the ideal is seen to be real does idealism work in the real world of politics. In the 1960s, Canadians liked the idea that health care should be a right and not a privilege. But they were persuaded to vote for a party promising a public universal system only after they were convinced it was a practical answer to their medical problems. Democratic citizens will support even radical change when they are convinced that those promising it can make it work.
We have known for a long time that inequality is bad for those directly affected by it — the unemployed, poor kids, anxious seniors, over-burdened families. But, in thinking beyond the current crisis, we now also know that inequality harms us all. In recent decades, many Canadians who have become members of the middle class in income and expectations have not readily seen themselves as beneficiaries of new social initiatives aimed at equality. Many are afraid that they will pay, but that only others will benefit.
For those of us, however, who believe in equality as the core democratic value, the task is perhaps easier now than it once was. Because of the new evidence, we can show the middle-class majority that equality-building measures do indeed directly benefit them and their children.
In most respects, all will be better off with a more equal Canada: a Canada characterized not only by better health outcomes for everyone, but also by less violence, more citizen engagement, fewer teenage pregnancies, more voluntarism, and less consumerism.
Surely this is the Canada we all desire.
From Periclean Athens to the 21st century, liberty and equality have been seen as the essence of democracy. Given that we now know the positive impact more equality can have on the quality of life for all Canadians, and since inequality is getting worse, all democrats should speak out. This trend must be reversed. To say that in recent decades it is only the rich who have virtually enjoyed all the real gains in income is to speak the truth. To say that they should now be paying more of the tax burden is neither class envy nor theft; it is a call for justice. We must get back on the road to building a more equal Canada.
We now need a comprehensive reform of taxation. But let me give you an example of how we might start now. There are approximately 180,000 Canadians who are in the highest income tax category and who make more than $250,000 a year. This group, on average, has a taxable income (including capital gains income) of about $600,000. By increasing their tax rate from 29% to 35%, we could generate an extra $3.7 billion a year, which would be more than is needed to double the National Child Benefit Supplement for low-income families. This would bring the total child benefit close to $5,000, a sum that the Caledon Institute has said would make a major dent in child poverty.
With just this single move, we would reduce inequality and take the lives of thousands of children out of a state of misery. It is only one example of what can be done to get us back on the path to a more equal Canada.
Our overall task is to restore the dream of social justice. But it isn’t just a dream. We know that it’s both ideal and possible to create a Canada that is healthier in every respect — a Canada with more involvement by our citizens; a Canada where neighbours are seen as friends, not competitors; a Canada where babies born on the same day in Alberta and New Brunswick will have equal opportunities in life.
Our task is to show and persuade Canadians that, with more equality, this kind of Canada is possible.
—-
(Ed Broadbent is a former federal leader of the New Democratic Party.)
