Political assault on social rights is worsening inequality

Looking back to the adoption of the Universal Declaration of Human Rights 60 years ago, we can now see that, at least in the North Atlantic world, the four decades that followed World War II were the Golden Age for ordinary people, or, in the phrase of the period, for “the common man.” Of course, we all know that poverty and deprivation didn’t simply disappear, but for the vast majority this was an unprecedented moment in history.

By vigorously exercising their rights, both in civil society and in politics, ordinary people produced governments that ensured, for the first time in history, that their personal agendas, not just those of élites, influenced public policy. State-sponsored health programs, pensions, unemployment insurance, recognition of trade unions, and access to university education came to be associated with democratic citizenship. These, plus fiscal policies that were seriously progressive in personal income taxes, ensured that social and economic inequality was significantly reduced. Economic growth remained at a high level.

For many years after the war, spending in Canada on social rights remained a major commitment of most federal and provincial governments. At the federal level, Pierre Trudeau and Robert Stanfield were leaders of the Liberal and Conservative Parties when I became leader of the NDP in 1975.

Although we had serious political clashes over particular spending issues and the need for new programs, neither of these men called into question the importance of a positive role for government. Nor did they question the idea of social rights. If during the post-war Golden Age most Americans had come to think of themselves as middle class, so too did Canadians first begin to refer to each other as “sharing and caring,” for the perfectly good reason that before the war our governments had neither shared nor cared.

I believe this socially encouraged willingness to share also revealed itself in popular attitudes, which became more tolerant and favourable to openings of new opportunities and an expansion of civil rights. We were finally getting the promise of democracy best expressed by Abraham Lincoln: government of, by, and for the people.

[The “golden age,” however, began to wither in the late 1970s.] With the election of Margaret Thatcher in Britain in 1979 and Ronald Reagan a year later in the U.S., an all-out political attack on post-war citizenship was launched. Theirs was not a temporary agenda to remedy the effects of the oil shock, stagflation, demographic changes, and other economic pressures of the 1970s. Rather, it was a clear and comprehensive assault whose purpose was to change both government structures and basic thinking about the modern democratic state.

If their immediate projects were intended as remedies for the moment, their ideological ambitions were reactionary and for the long term. Their intention was for the state to reduce its regulatory obligations and also its expenditure on social programs.

The goal was not only to shift financial resources to richer individuals, but also to effect a broadly based attitudinal change in the population as a whole, so that citizens who had begun to internalize the cooperative values of the modern state would cease to do so.

In a democracy with a market economy, when social programs are reduced, institutions privatized, and economic life deregulated, the result is inexorable: the income gap widens, the cohesive impact of social rights lessens, and more of life, from the arts to the environment, is turned over to the instability and commercial values of the marketplace. Breaking the power of the trade union movement not only cuts into the “rigidities” of the labour market, but also has a net negative impact on the incomes of all workers.

In an article last year in the New Yorker, David Frum, the Canadian-born ideologue of the American right, explicitly acknowledged the ideological objectives of Reagan and Thatcher, and what he described as “the conservative movement”: “The core task,” he said, “was to stop and reverse, to some degree, the drift of democratic countries after the Second World War toward social democracy.”

If democratic electorates could be persuaded that not only certain government policies needed fixing but that government itself was the problem and that private consumption was the goal of the good life, then the possibility of a return in the future to a social rights agenda of an activist state, even when controlled by parties traditionally seen as on the left, would be significantly reduced.

There can be little doubt that the very success of universal social rights in helping to establish a higher and more secure economic level for the majority had the unintended consequence of increasing the number of working class families open to the new conservatives’ arguments.

Like most people who become accustomed to economic well-being, more were now ready to believe it was their efforts alone, not the complex social and economic agenda of the modern state, that accounted for their success. Convinced of their own virtue, more people became open to the lures of private solutions to what had once been seen as common problems. Lower taxes and market mechanisms became more attractive.

Increasingly destabilized by a labour market that was becoming global, they also became less open to paying taxes to support programs for the poor. Instead of seeing abuses of welfare and inefficiencies in government as correctable, more were now inclined to believe the rhetoric of the newly established right-wing think-tanks that they were endemic to government.

Just as the post-war creation of the welfare state with its imbedded social and economic rights had a corresponding international agenda seen in the Universal Declaration of Human Rights, so too was the attack on the welfare state complemented by vigorous political activity abroad. If the North Atlantic democracies once set the global agenda for the expansion of the concept of citizenship, so too did they now lead in its retrenchment.

International trade agreements devoid of any social policy encumbrances – that is, free from any obligations of labour rights or other rights conditionality – also became the order of the day. The leading symbol of this development has been the World Trade Organization, with its rigorous adherence to the principles of laissez-faire, and regulations that protect property rights but not workers’ rights.

Even highly successful democratic capitalist economies with a different cultural heritage, like that of Japan, were put under unrelenting pressure from the United States and the United Kingdom, to abandon their distinctive state interventionist policies. During the 1990s, via the World Bank and the IMF, unrelenting pressure was placed on Third World governments to reduce spending on social rights like health, education, and housing.

By the end of the 20th century, many governments in the North Atlantic region had gone from ideology and programs based on interventionist economics and social rights to laissez-faire at home and abroad. Those who continued to support high levels of social spending – notably in Scandinavia, the Netherlands, France, German and Spain – had come under pressure to change.

Well before last fall’s crash in the global economy, most North Atlantic democracies, once the leaders in expanding the notion of citizenship, had been experiencing the freezing or abolition of social and economic entitlements, a deepening inequality, and an increasing commercialization of life’s activities.

Markedly influenced by the state’s withdrawal from its role in building democratic societies based on social rights and equality, we had transformed market-based economies once more into a market-driven societies. What President Franklin Roosevelt feared at the end of his life on a national scale in the U.S. actually happened globally: we returned to the 1920s.

Canada and the Barbarian Challenge

Where, then, does Canada fit into these developments? The legal highlight of the social concept of citizenship occurred in Canada in 1976 when we joined 34 other nations in ratifying the United Nations’ two founding Covenants (Civil and Political Rights; and Economic, Social and Cultural Rights). These covenants had been developed to add the force of international law to the principles first outlined in the Universal Declaration of Human Rights. Since their ratification in 1976, like all other North Atlantic democracies except the United States, Canada has been legally obligated to provide social and economic rights up to the level that its economic capabilities would permit. But, as we were to see, in Canada it was an international legal obligation unsupported by any domestic enforcement mechanism.

While most of continental Europe went on after 1976 to create a social charter for workers’ rights and build the world’s strongest combination of social, civil and political rights, Canada basically ignored its legal obligations for implementing social rights. Instead, it would follow the pernicious lead of Thatcher and Reagan. Neoliberalism developed and spread at both the provincial and federal levels in Canada.

Canadian neoliberals were not content simply to promote more honest, efficient, and accountable government. Like their Anglo-American counterparts, they strongly believed that government programs were not to be fixed; they were to be abolished.

Market principles were no longer to be limited to the economy, they should also permeate government operations. Budgets were not simply to be balanced, they were to be slashed. Taxation levels should be reduced and made less progressive. Artists should be left on their own, not coddled by the state.

The internationally recognized right to a trade union should not be fostered, but discouraged. Government should no longer be seen as a strong positive instrument to be used by a democratic people to ensure economic stability and help to achieve personal and creative success: instead it should be viewed as an albatross around the necks of its citizens.

In their assault on the democratic institutions that had brought a good life to so many, these neoliberal ideologues in Canada, like their soulmates elsewhere, rejected not only the political legacy of my social democratic predecessors back as far as J.S. Woodsworth, but also that of Mackenzie King, John Diefenbaker, Lester Pearson, Bob Stanfield, and Pierre Trudeau. They did exactly what President Roosevelt had warned against. They wanted a return to the 1920s when capitalism was allowed to rip and the government was encouraged simply to watch. Such was the new barbarism.

It has been said that neoliberalism had such an impact in the Anglo-American world partly because of the appeal of its leaders and partly because they won the battle of ideas. It is true that Thatcher and Reagan were forceful leaders. However, it’s laughable to pretend that the neoliberalism that came to characterize the new conventional wisdom in Canada, among both politicians and the press, in any sense reflected a triumph of critical thinking. Quite the contrary. We got the simple-minded clichés of an ideology, the kind that the great conservative thinker, Michael Oakeshott, warned about when I was a student at the London School of Economics 45 years ago.

Instead of arguments, we got slogans. Instead of policies reflecting the complex inter-connected roles of government and the economy, we got right-wing nostrums attacking the state. Instead of a robust sense of democratic citizenship, we heard much less about “citizens” and more about “taxpayers” and “consumers.”

These nostrums, plus potboiler summaries of editorials taken from the Economist, provided the social and economic guidebook for the Reform Party, the first federal party to take up a neoliberal agenda.

What were these nostrums?

1. To have higher national productivity, we must have lower taxes and less government.
2. To attack poverty and lessen the impact of inequality, we must let the market grow on its own.
3. To improve our competitiveness in an increasingly global marketplace, we must deregulate the economy and reduce or eliminate our costly universal social programs.
4. To improve the level of voluntary participation in civil society, the level of government must be cut back.

Not a single one of these claims is true. When you look at the evidence in Canada or abroad, a very different picture emerges.

During the 1990s, Austria, Germany, and the Netherlands (among others) kept the high level of taxes needed to maintain strong social programs. Did their productivity go down? No. It equalled or exceeded that of the United States and Canada. Indeed, within the United States, contrary to what establishment economists forecast, when Clinton increased taxes on the rich, productivity began to improve.

In spite of claims that poverty and inequality would be looked after by leaving the economy to grow on its own, during the 1990s the opposite occurred. High levels of economic growth in Canada were actually accompanied by a widening gap between poor or average families and the rich. During this ten-year period, while the number and percentage of poor children in Canada went up almost every year, four Western European countries virtually eliminated child poverty.

Instead of universal social programs reducing a nation’s economic competitiveness, they often improve it. The so-called Asian Tiger nations carefully applied this understanding in building their dynamic economies.

Here in Canada, our own public spending on universal health care costs the economy less per capita in comparison with private spending on health insurance in the United States, even though their higher level of spending still leaves at least 40 million Americans without coverage of any kind.

Instead of going up when governments slashed billions of dollars from social programs during the 1990s, voluntarism in Canada underwent a serious decline by the end of the decade. In fact, levels of trust and citizen participation in society and politics are much stronger in Scandinavian states than in other countries. The Scandinavians have the strongest mix of universal and equalizing social programs. Not coincidentally, they also have better across-the-board health outcomes in part directly related to their higher levels of income equality.

In Canada, the ideological attack on social rights arrived in Ottawa with the Reform Party in the 1990s, but would be picked up and implemented by the Liberals. Reform’s Preston Manning led the charge, promoting low taxes, market deregulation, and an onslaught on social programs. His neoliberal package – balanced budgets plus the minimal state, means-tested social programs, low taxes, privatization, and unregulated capitalism – was the central agenda of Reform.

Unfortunately, after the Liberals returned to power in 1993, under the leadership of Jean Chrétien and Paul Martin, neoliberalism soon became the operational framework for governing. To deal with the deficit, they slashed social spending and related transfers to the provinces by billions of dollars, introduced market principles to public sector management, and embarked on their own privatization agenda.

Paul Martin actually said his 1995 budget constituted a redefinition of government and boasted that, relative to the size of the economy, program spending would be lower than at any time since 1951.

When surpluses returned sooner than expected, instead of restoring social rights spending on housing, post-secondary education and unemployment insurance to their previous levels, the Liberal government provided billions in regressive tax cuts and a reduction in the debt.

In the provinces, Ralph Klein in Alberta and Mike Harris in Ontario had started dismantling social rights and delegitimizing the state, combining neoliberal rhetoric with income tax cuts and serious reductions in public spending in health, education, welfare, and the environment. Harris added to this by making access to the right to a trade union more difficult to achieve.

While the Liberals were in power in Ottawa, between 2003 and 2006, revenues as a percentage of GDP declined by nearly 4 percentage points, mainly as a result of federal and provincial tax cuts. In sharp contrast, in both European countries and the U.S. during the same period, government revenue as a percentage of GDP actually rose (from 32.8% to 34.2% in the U.S.). And while revenues were dropping in Canada, so too was spending, going from 53.3% down to 39.5%, not much above the U.S. (36.5%), making this country the weakest welfare state in the North Atlantic region.

Behind these figures can be seen the massive Canadian reductions in funding for health care, post-secondary education, affordable housing, environment protection, and infrastructure, the negative consequences of which we are still living with.

Between 1980 and 2006, Canada steadily reneged on the obligations that had resulted from ratifying the UN Covenant on Economic, Social and Cultural Rights. Instead of sustaining or expanding on clearly affordable social rights and equality in citizenship, as was done in continental Europe, we did the opposite. We did so, not because of economic necessity, but because our political leaders, driven by neoliberal thinking, made the wrong decisions.

Nothing better illustrates our federal government’s continuing indifference to inequality than what happened to income shares and income tax policy during the major period of economic growth, between 1995 and 2004. During this period, virtually all of the income growth went to the top 20% of income earners. The incomes of the vast majority remained stagnant. During those Liberal years, instead of increasing taxes on upper-income groups to compensate for the lack of equity in the market distribution of growing national income, the Liberals actually reduced the degree of progressivity in the income tax structure.

One-third of the value of the tax cuts in 2000 went to the top 5% of taxpayers. The rate for 95% of taxpayers fell by only 1 point, but for the top 1% per cent it fell by 2% – and for the richest Canadians, those with an income average in 2004 of $5.9 million – it fell nine percentage points, from 42% to 31%. Last October’s OECD report confirmed that, between 1995 and 2005, inequality in Canada grew much more rapidly than in most OECD countries. The report specifically emphasized the role played in this rise of inequality by lower spending on family and unemployment benefits compared to other OECD countries. Is it any wonder that we Canadians have returned to levels of inequality not seen since the 1920s?

Since 1990, it has been apparent in North America, Britain, and most of Western Europe that average families have not been reaping the benefits of globalized trade. Widespread and growing income inequality has now been confirmed by a number of studies. The top fifth of earners are getting virtually all the income benefits from globalization. Average families might ask, if the richest 20% are getting the income benefits from globalization, why shouldn’t they be paying a greater share of the income tax burden? Instead of abolishing national housing programs and cutting back on doctors and nurses, why shouldn’t the rich pay more in taxes?

Instead, by and large, in the Anglo-American world governments have moved in a regressive direction. In Britain, New Labour, in comparison with continental Europe, has maintained a low tax and low social service policy. According to the October 2008 OECD report, after 10 years of a New Labour government, the gap between rich and poor in the United Kingdom remains greater than in the large majority of OECD countries. Indeed, while inequality remains high, the tax system has been made even more favourable to the rich.

In the U.S., Bush picked up where Reagan had left off, with another round of susbstantial tax cuts favouring the richest Americans. Here in Canada, to no one’s surprise, the Harper government simply continued the Liberal government’s economic policy of favouring regressive tax cuts over social spending. Canada’s top 100 CEOs, whose annual income averaged $10 million in 2007 (up 20%) need not worry about federal taxes. Nor need they fear the recent cap put on CEO salaries by President Obama.

The architects of the modern democratic state knew very well that a commitment to equal social rights is the philosophical source from which flows universal access to health services, education, pensions and housing. When market-based incomes are balanced by such rights, we all can lay claim to the life of dignity laid out in the Universal Declaration of Human Rights 60 years ago. We also know that such rights are essential to social cohesion. And with public funding for the arts and the environment, a richer and more civilized life is also possible. Our experience has shown all this to be true. However, our experience has also shown that these benefits depend on sufficient taxes being paid by all of us.

It also means that those whose incomes have benefited most from changes in the globalized economy should be paying even more. Those many politicians, editorial writers and academics who continue to promote the “neoliberal, low-tax, minimum state” should be compelled to acknowledge that in doing so they are also promoting inequality, more poverty, worse health, poorer education – and, over time, an increase in social conflict. We should categorically reject this barbarism from the past.

I say these things in full recognition that the current economic crisis has led conservative governments at home and abroad to make changes in budgetary practices. Having been compelled by the force of history to see the horrible consequences of systematic deregulation, particularly in the financial sector, even from Wall Street in New York and the City in London, we now have calls for reform from the very people who created the disaster. We should be aware, however, that, with the possible exception of Barack Obama, these Johnny-come-lately “reformers,” including governments, are calling simply for short-term stimulus and changes in financial institutions. Nowhere else, and notably not in Canada, are there politicians in power who understand that what’s required is not simply more national and global transparency and accountability in the financial sector.

Yes, we need such reforms. Yes, we need pragmatic regulation of financial sectors. But, as I have been arguing, we need much more, notably here in Canada. We need once more to see the necessity of strong, positive intervention by government in the distributional struggle of the marketplace. Only this can provide both economic growth and the social rights that are the foundation for the ideal of equal citizenship embodied in the Universal Declaration of Human Rights. We need the confidence, passion, and intelligence to put an end to barbarism.

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(Ed Broadbent is a former federal leader of the New Democratic Party. This essay was adapted from the Avie Bennett Historica Lecture he delivered at York University, Toronto, on Feb. 19.)