As an investment banker with experience working in B.C. and around the world, I'm increasingly concerned that inequality has grown so dire that it will stall the economic growth we all depend on.
That's why I've sponsored, through the Lochmaddy Foundation, The Great Divide, a collection of films exploring inequality at this year's Vancouver International Film Festival starting Sept. 25. While inequality takes many forms, these films focus on the economic strain that's become the story of our times. Two Days, One Night, winner of the Sydney Film Prize paints a picture of job insecurity and fleeting solidarity; Jalanan, the most successful documentary in the history of Indonesia looks at inspirational life of street musicians in Jakarta; Leviathan, named Best Screenplay at Cannes, is a tragedy of power and money in Russia.
But we don't need to visit Belgium, Indonesia or Russia to find economic inequality. Here in B.C., it's all around us. Despite a strong fabric of inclusiveness, the legacy of governments of all stripes who recognized the value of investing in infrastructure, progressive taxation and the universality of key services, we are losing ground. It is time to do better.
The moral case for reducing inequality is well known, and compelling. But there's little discussion of the economic case. Competition and free markets will always result in some doing better than others, but when growth accrues overwhelmingly to the top 10 per cent, it threatens the health of our society and the sustainability of the economy. If the majority of our population is unable to spend on more than merely the basics, money won't circulate through the economy. If money doesn't circulate, economic growth slows. When economic growth slows, businesses fail, jobs disappear and key programs providing health, education and safety to our citizens begin to fail. It is true that we manage inequality better than many other countries, but since when is B.C. satisfied with measuring itself against the worst instead of by our proximity to the best?
Working people in the western world have had a tough go in recent decades. Real incomes have remained stagnant, resulting in crippling household debt loads. Globalization has allocated capital and jobs to jurisdictions that offer cheaper fiscal terms and lower-cost labour. Technology and automation have improved productivity and created some new jobs, but they have also resulted in the loss of many more. Meanwhile, regulation and tax policies have favoured investment returns and the financial sector itself without a corresponding focus on jobs and affordability. All these factors have contributed to greater economic challenges for families in B.C.
In the world of investment banking, numbers show us the problems, and they show us the solutions. So let's take a look at the numbers in B.C.
In 2011, the top 10 per cent earned 34.4 per cent of all after-tax income in this province. But income only tells us half the story. A recent report has estimated that the top 10 per cent owns 56.2 per cent of the wealth in our province -- well above the national average.
At this point some might suggest this line of inquiry is motivated by a disdain for the economically mobile. Wrong. I believe these numbers show how income inequality is bad for business. Let me put it this way: if an individual earns 10 times as much as her neighbour, she does not buy 10 times as many bottles of Okanagan wine or make 10 times as many trips to Science World. We can measure this effect: the 'velocity' of money in Canada -- the measure of how many times the money supply circulates in a year -- is now at a 35 year low.
Am I calling on B.C. to eat its rich? Absolutely not. This disparity, bad as it is, will only get worse if we scare investment away from B.C. But as Warren Buffet is fond of reminding us, just because we need investors doesn't mean that we must treat them with gilded kid gloves.
There's no shortage of ideas about how to address inequality without threatening our ability to do business, but few have talked about how much the future of our economy depends on reconciling this. Let's dare to end the false choice between growth and equality. Let's make our province more prosperous by making it more fair.