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Biggest Myth About Inequality Is We Can't Fix It

Avoiding collapse requires planned positive change. Last in series Super Unequal BC.

By Andrew MacLeod 6 Feb 2014 | TheTyee.ca

Andrew MacLeod produced this series with funding from The Tyee Solutions Society in collaboration with Tides Canada Initiatives. TCI neither influences nor endorses the particular content of Tyee Solutions Society reporting. Other publications wishing to publish this story or other Tyee Solutions Society-produced articles, please see this website  for contacts and information.

MacLeod is The Tyee's Legislative bureau chief in Victoria. Find him on Twitter or reach him here.

When in a New Statesman editorial and BBC interview this fall, English actor Russell Brand called for revolution and dismissed the possibilities of democracy, the response made it clear he'd expressed something many were feeling.

The current system is delivering widening disparity and creating an underclass that's exploited, Brand said. There's no point voting because it won't make a difference, he said in the widely shared interview.

Talking with people in British Columbia about inequality, I repeatedly heard similar views expressed. One articulate young person who says the disability system has made it harder for him to get an education, find a job and move forward, said, "I don't even vote at this point because I don't think it does any good."

He noted that in the last provincial election even the NDP, which talks about fighting poverty and reducing inequality, proposed a hike in disability payments of just $20 a month, an amount so small compared to the need that it was "laughable."

Voter turnout numbers suggest many are opting out, and tuning out, of a discussion that seems to have nothing to do with them. In the May 2013, provincial election, just 56 per cent of people who were registered to vote cast a ballot. The number is even lower if you widen it to include those who were eligible to vote but not registered.

Government policy drives inequality

The thing is, governments and politicians have the power to set the rules that shape how our society turns out.

It's a point Nobel prize winner Joseph Stiglitz stressed in his 2012 book The Price of Inequality. "By understanding the origins of inequality, we can better grasp the costs and benefits of reducing it," he wrote. "Much of the inequality that exists today is a result of government policy, both what the government does and what it does not do. Government has the power to move money from the top to the bottom and the middle, or vice versa."

Linda McQuaig and Neil Brooks made a similar point in 2010 in The Trouble With Billionaires. If the rules are favouring some people over others, those rules can be tweaked to even things out, they wrote.

Writers and academics are of course unconstrained by a need to find public support for their policies, unlike politicians, making McQuaig's move from reporting to politics an interesting study.

McQuaig the writer proposed various ways to reduce inequality. They included raising the country's marginal tax rates to 60 per cent on income over $500,000 a year and to 70 per cent on income over $2.5 million.

She and her co-writer also advocated introducing an inheritance tax in Canada, like what the United States has now. The threshold for the U.S. version is set high enough that it only applies to two per cent of estates, but it raises $25 billion a year.

"The tax has little negative effect on economic activity in the country, and is considered largely benign by public finance economists. In other words, it is a levy that appears to do little damage while doing much good," they wrote.

An inheritance tax is also favoured by the Broadbent Institute, the think tank led by former NDP leader Ed Broadbent.

McQuaig's move

McQuaig ran for the NDP in a November by-election in Toronto-Centre, a campaign she ultimately lost to Liberal Chrystia Freeland. So what does Thomas Mulcair, the current leader of the NDP think of an inheritance tax?

"Categorically no," he told The Tyee during an autumn visit to Victoria, where he featured in a town hall meeting on pensions for seniors. "It's a bad idea."

Asked why it's a bad idea, he said, "First of all, it would be contrary to what planning's been done for decades and decades by individuals and families. It wouldn't produce much of a result and it would be a bureaucratic nightmare."

Similarly, during the town hall's question and answer session he talked about raising taxes on corporations, but dismissed higher rates for individual high income earners. Instead Mulcair focused on cracking down on tax evaders.

"With regards to individuals, the most important thing to do is make sure people are actually paying their taxes," he said. "The constant recourse to tax havens, tax shelters in other countries, moving money offshore and then not paying your taxes as that money grows, that's what we're going to go after."

Mulcair told The Tyee McQuaig was a strong candidate, but she is part of a team and agrees with the NDP's platform.

The failure to support an inheritance tax can't have been a surprise to McQuaig, by the way, who in her book noted that when the NDP previously floated such a policy they made a hasty retreat after receiving criticism from the media.

It also should be noted that none of the other mainstream Canadian parties support an inheritance tax or significantly raising income taxes either. The issue is, in effect, non-partisan.

And indeed, there's political appetite to do things that would actually make inequality worse. At the recent ruling federal Conservative Party convention delegates debated resolutions supporting tax cuts for the rich, restrictions on unions and collective bargaining and cuts to public pensions.

The Broadbent Institute argues that an expensive government proposal to allow income splitting would mainly benefit the top five per cent of families, with the bottom 86 per cent seeing no benefit at all.

Positive vision needed: activist

There's a reason Russell Brand's comments about people not voting resonated, said author, scientist and activist Chris Shaw, who volunteered as a medic at last year's Occupy protest in Vancouver, but stresses he is speaking for himself and is not a spokesperson for the movement. "I think the vast bulk of people who don't vote think there's no purpose. Nothing changes."

At a civic level, for example, little seems to change in Vancouver whether the city elects the right-wing Non Partisan Association, moderate Larry Campbell or left-wing Vision Vancouver, said Shaw. "Why get up and go do that?"

The same could be said federally in Canada or nationally in the United States, he said. "People who are at the disadvantaged end of that inequality ladder [see voting] is not going to make any difference," he said. "We don't really live in a democracy... We elect constitutional dictatorships in Canada."

People saw something expressed by the Occupy movement that's missing in politics, Shaw said. "Occupy did, for awhile, provide a very broad tent for a lot of alternative political and social movements," he said. "They were right. Something is wrong."

While the movement was incredibly successful at raising awareness of inequality, it failed to sell a positive vision, said Shaw. "That was never really articulated anywhere, what the world looks like when we win," he said. "It's good to be outraged and strike out against what's wrong, but where's your positive vision?"

582px version of 2-Average-after-tax-income-adjusted-610px.jpg
Caption: Source: Iglika Ivanova, Canadian Centre for Policy Alternatives, Vancouver Office.

It's clear, Shaw added, that more is needed than a small shift in the current system. "We've been tweaking things for a long time and if the inequalities are growing, as I believe they are, tweaking is not an option."

Inequality is a big problem, but it's not going to be solved by growing the economy, he said. "The problem is not just redistributing the stuff so more people have more trash."

What's needed is a rational approach to limit growth and stop consumer culture, he said. Leaders need to be looking at ways to make communities as resilient against possible future disasters as possible, he said. That includes focusing on food security, building systems from the grass roots and strengthening local economies.

Shaw's not exactly hopeful, however: "I think we're going to thunder in really hard and society as we know it will take a big turn."

The collapse is coming, but if we're smart about it we may be able to delay it, he said.

Others, by the way, thought it was worth holding onto what we've got right in B.C. and in Canada. "I'm not a revolutionary," said Paul Summerville, a former investment banker who has run for office with the NDP provincially and the Liberals federally. "Smart tweaking is the way to go."

Challenge for progressives

As outgoing leader of the B.C. NDP, Adrian Dix has some room to reflect on the opportunities and the challenges growing inequality presents for leaders of progressive parties.

"Growing inequality is an argument for social democratic policies, but also a political challenge for social democrats," he said during an interview in his office. "We're seeing this in election results around the world, that as inequality grows, people's desire to participate in the political process, those that aren't benefiting from it, is less and their cynicism is more."

In 2011 Dix campaigned for the leadership of the NDP on a platform that put addressing inequality at the forefront. A year ago, when polls showed him with a solid lead heading into May's provincial election, he still named it as his number one priority.

To illustrate the challenge, he gave an example from the provincial election. The BC Liberals promised a one-time $1,200 grant to go into a family's RESP account when a child turned six. The NDP argued the grants would help people who were least in need and instead proposed using the money to support early childhood education for everyone.

Six months after losing the election, Dix observed that the people who would benefit from the Liberals' approach turned out to vote for them. Those that would have done better under the NDP plan either didn't pay close enough attention to realize, didn't turn out to vote or were cynical about government's ability to make a difference, he said.

Put another way, well-off people who are benefiting from inequality are much more likely to vote than are those who are struggling to get by with low incomes.

As inequality grows, so does cynicism, Dix said. "Convincing people change is possible in a society that's heading that direction is a difficult thing."

On the other hand, he argued he had some success with other policies that addressed inequality. While his idea to raise taxes on corporations and high income earners were initially dismissed by his opponents and the media, he said, "Two years later they essentially adopted my position."

Raising those taxes was a reversal of 12 years of public policy in B.C., he said. "I campaigned on it, engaged on it, and won the debate."

Ultimately inequality hurts economic growth and is bad for society, Dix said, predicting that over the long term it's the more equal societies that will be most successful.

Making change

An unfair system will ultimately be unsustainable. It's an observation made by many, including Chrystia Freeland in her book Plutocrats and Robert Reich in Aftershock.

582px version of Begging in front of a Victoria jewellery store
Begging in front of a Victoria jewellery store. Photo by Robin from Your BC: The Tyee's Photo Pool.

"It's not whether America will continue to reward risk taking," wrote Reich about the long-term results of the 2008 financial crisis in a passage that could equally apply in Canada and other countries. "It's whether an economic system can survive when those at the top get giant rewards no matter how badly they screw up while the rest of us get screwed no matter how hard we work."

As people lose faith in the system, they will either opt out in greater numbers, take their grievances into the streets like the Occupy and Idle No More movements, or both.

Governments have been able to find policies to address inequality whenever they've really wanted to, argue Richard Wilkinson and Kate Pickett in The Spirit Level.

People need to demand that change, however, they wrote. "Rather than greater equality waiting till well-meaning governments think they can afford to make societies more equal, governments have usually not pursued more egalitarian policies until they thought their survival depended on it."

And while revolution would change things quickly, there is much unforeseeable about how it would turn out. Many observers noted that when Russell Brand was asked on the BBC what he proposed for after the revolution he was championing, he had no answer.

There are alternatives. "Rather than simply waiting for government to do it for us, we have to start making it in our lives and in the institutions of our society straight away," wrote Wilkinson and Pickett. "What we need is not one big revolution but a continuous stream of small changes in a consistent direction."

Avoiding that kind of disruptive change depends very much on choosing that "consistent direction" carefully, then steadily delivering.

This article completes the series "Super Unequal BC" for The Tyee Solutions Society looking at the causes, costs and potential solutions for wealth inequality in British Columbia, Canada's most unequal province by some measures.  [Tyee]

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