Why the 99 per cent still matter in Canadian politics

January 17, 2013

A year after the Occupy movement focused public attention on the income, wealth and opportunity gap between the top 1 per cent and the 99 per cent, the issue is attracting the attention of conservatives in Canada.

Quite simply, they want the problem to go away. So they’re intent on a simple message: chill out, Canada, inequality isn’t the problem.

Two reports — one by the Fraser Institute, the other by TD Economics — illustrate the attempt to spin the issues as nothing to worry about.

They also have another thing in common. Their results don’t support the headlines they gave their own reports. The Fraser Institute study purported to demonstrate that economic mobility is still strong in Canada. In reality, it only demonstrated mobility at the bottom end of the income scale. People tend to move back and forth between poverty and the middle class, but less so at the top end of the income scale where the Horatio Alger myth resides.

TD got a lot of mileage from its claim that income inequality in Canada hadn’t changed since 1998. In fact, the report showed income inequality remained steady in the 2000s, but that it had continued to widen at the bottom and the top of the income distribution — precisely the concern of the Occupy protests.

The TD results contrasted sharply with the more balanced view of the Conference Board, which gave Canada a “C” for income inequality among OECD countries, making the point that Canada looks good only in comparison with the United States, which displays among the most extreme inequality in the OECD.

The objective is clearly to bury the issue politically by presenting it as an arcane debate about statistics that has no real-world significance. The debate may indeed be dry; the consequences of the trends it reveals for our society are anything but.

Why? Because in the long run, the real-life problems caused by worsening inequality of income and wealth diminish our collective hope for better opportunities and threaten the foundations of liberal democratic middle-class societies like Canada. 

One of the hallmarks of liberal democracies post-Second World War has been the shared sense that we are all in this together. The breadth of the middle class meant that while there are differences in the way people live, people could still remain connected to one another in fluid social relationships. The middle class has been the glue that binds.

As income inequality worsens, Canadians have become increasingly polarized. We’re divided between a tiny but immensely powerful elite that consumes a wildly disproportionate share of society’s resources and the rest of us.

We are losing that connectedness. We tend not to live in the same neighbourhoods, and when we do, figurative and literal gates that separate us mean that we might as well be living on different planets.

Our kids don’t go to the same schools. They don’t study the same things in college or university. They move into the workforce with wildly disparate life expectations and graduate with wildly different debt burdens.

Those at the top of the scale lead healthier lives. When they need health care, they capitalize on connections. They enjoy the resources to go elsewhere to get to the head of the line. They even live longer.

Most middle-income Canadians live under a lot of stress over how they are going to manage retirement. For many, the reality is that the “golden years” are actually working years.

The rich also have completely different ideas from the rest of Canadians about the meaning of economic security. A survey done by Environics for the Canadian Centre for Policy Alternatives before the recession of 2008-09 found that roughly half of Canadians viewed themselves as being one or two missed paycheques away from real economic distress.

Quite a contrast from an environment in which the toughest decision may be how to spend the annual bonus or the most tax-efficient way to generate income from capital.

The disparities are so great that increasingly we simply have no idea how the other 1 per cent lives. The elite has orbited into a different world from the one inhabited by most Canadians.

Wealth carries with it immense power. The disconnected super-rich have levered their economic clout into political power, altering the public policy landscape to suit their interests.

It becomes most obvious in the debate over where we should draw the line between what is public and what is private, and the related issue of where the money should come from to pay for what is public.

Over the past 20 years, we have seen a dramatic shift away from the public toward the private. That has been reflected in a dramatic decline in fiscal capacity — our ability to pay for the things we consume and provide for the public good.

There has also been a dramatic shift in the share of those costs borne by different social groups: Elite Canadians are paying less at the same time they are castigating our public programs. They also happen to be largely insulated from the impact of the decline of public service in Canada. They don’t feel our pain.

Most Canadians, however, are affected by reduced investments in education, which has long been cast as the ticket to income mobility. The majority are affected by inflation in tuition. But those at the top of the income scale have choices. They can pay the higher fees. They can avoid the consequences of under-investment by sending their kids to private schools or to private universities in the United States.

The rest of us have to live with the consequences.

And the richest of the rich have the ultimate social choice. They can choose what society to be part of.

Thanks to global economic integration and the greater mobility that goes with it, those with means can choose which country to live in, which country to earn their living in, which country to send their children to school in, and which country to pay their taxes in, and there is no need for those countries to be the same. They have similar options in terms of gated communities and private programs tailored to those with deep pockets.

This matters at an individual level, because it says to the 99 per cent that the system isn’t fair. The physical and social infrastructure that makes our society work depends on everyone contributing their fair share of the cost, so that the majority benefits from this collective investment in one another.

It would be unwise for those who are benefiting from growing inequality to adopt the complacency encouraged by reports like those of the TD Bank and the Fraser Institute.

If we have learned anything from the Arab Spring and the European responses to deadening austerity, it is that the consequences of a breakdown of social cohesion can be unpredictable. And that can create widespread social unrest that no one can escape — not even the gated 1 per cent.

Hugh Mackenzie is an economist with the Canadian Centre for Policy Alternative’sGrowing Gap project

This commentary was originally published in the Toronto Star.