Can We Regain Economic Equality?

That is, without a major coup or popular revolt? Last of two on the Oxfam wealth report.

By Crawford Kilian 23 Jan 2015 | TheTyee.ca

Crawford Kilian is a contributing editor of The Tyee.

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If only our political parties had this strength of will. Photo by robinbassett in Your BC: The Tyee's Photo Pool.

The recent publication of the Oxfam report, "Wealth: Having It All and Wanting More," has drawn attention to the widening gap between the world's super-rich and the poor. Using Credit Suisse data, Oxfam concludes that the 80 richest people in the world now hold wealth valued at US$1.9 trillion, up from $1.3 trillion in 2010.

What's more, Oxfam said, those 80 will hold as much wealth in 2016 as the poorest 3.6 billion people on the planet.

As yesterday's column pointed out, Oxfam's data could be stronger, but it's the best we've got, which in itself says something about how well the super-rich keep themselves out of sight and out of mind.

While Oxfam's numbers may be slightly off, the trend is not. The super-rich are growing richer every day, while the world subsidizes their wealth by crippling governments, starving social services, and simply exploiting the lives and labour of billions of people in Africa, Asia, and Latin America.

For some, including many of the ambitious in the lower reaches of the one per cent, this is a welcome state of affairs. They are eager to party on, hoping to rise from the one per cent to the 0.0001 per cent where the real money and power are.

For most of us, however, it looks like a poker game where one or two more hands will leave one player with all the chips and the rest with none. It's happened before; that's why U.S. President Franklin Delano Roosevelt called his Depression recovery program "the New Deal."

The New Deal helped redistribute enough money to annoy the 1930s' super-rich, who called FDR "a traitor to his class." In this he was like his cousin Teddy Roosevelt, who as president had blasted the "malefactors of great wealth" who wanted to rob the country blind.

As Thomas Piketty shows in Capital in the 21st Century, wealth has steadily accrued to fewer and fewer people since the late 1700s. The world wars, not government welfare programs, demolished much of the capital accumulated since the French Revolution. It was spent in part by taxation to build munitions and feed soldiers, and in part destroyed by those munitions in the form of shells and bombs. Only after the Second World War did the victorious nations create the conditions for an egalitarian golden age, rebuilding not only factories but social systems.

Taxes as evil spawn of Big Government

The super-rich were as unhappy with the postwar golden age as they'd been with the New Deal, but it took them until the 1970s to create the conditions to overthrow it. Scores of millionaire-funded think tanks like the Fraser Institute began to produce apparently sound research, arguing that taxes were the evil spawn of Big Government, and private enterprise produced the only real jobs.

Oxfam's report is testimony to their success. The super-rich converted even the communists: Deng Xiaoping told his people "To get rich is glorious," and the Soviet Union collapsed into the embrace of its spies and gangsters. The 21st century belongs to oligarchy.

Or does it?

Piketty caused some eye-rolling when he proposed higher taxation to reduce the gap between rich and poor. But Oxfam and the Canadian Centre for Policy Alternatives tend to agree.

The eye-rolling is the result of the think tank-inspired belief that any taxation is a kind of armed robbery. This is a deeply entrenched attitude, especially in North America, where stagnant incomes can't easily cope with new demands.

But an existential threat concentrates the national mind wonderfully. In the First World War, Britain's ruling aristocrats taxed themselves ruthlessly while also paying workers sharply higher wages. The income gap narrowed. As a result, British life expectancy actually rose between 1910 and 1920, despite the slaughter in the trenches.

Similarly in the U.S. and Canada, massive taxation and rationing extended government power beyond anything ever seen before. CEOs went to work in Washington and Ottawa as "dollar-a-year men." Postwar taxation continued despite the return of millions to civilian life, helping to house and educate the returned soldiers while paving the way for the golden age of the baby boomers.

U.S. taxes at the start of the Second World War had a top rate of 75 per cent (on incomes above $5 million), and by war's end were at 94 per cent for incomes about $200,000. Even in the early 1950s, the top rate was 92 per cent. Today, the top American tax bracket is 39.6 per cent -- for incomes over $400,000.

How to reduce inequality

So new taxation is not out of the running. Oxfam's ideas for reducing inequality depend on it:

• Pay workers a living wage and close the gap with skyrocketing executive reward.

• Share the tax burden fairly to level the playing field... including a nod to Piketty with an "exploration of a global wealth tax."

• Close international tax loopholes and fill holes in tax governance.

• Achieve universal free public services by 2020.

And that's just for starters.

Last year, the Canadian Centre for Policy Alternatives came to similar conclusions in its report "Outrageous Fortune: Documenting Canada's Wealth Gap." The report contrasts "the wealthy 86" richest Canadians with the poorest, and finds that in 2012 it took 11.4 million of us to match their wealth. The CCPA suggests closing a loophole: "capital gains are taxed at half the rate of normal income."

It adds: "A combination of a higher [capital gains] inclusion rate and higher income taxes at the top of the income scale could go part way to offset the flood of wealth that is accumulating in the pockets of Canada's wealthiest and ensure some of those benefits are returned to the majority of Canadians."

This may seem unjust if you think that the super-rich and their CEO errand boys create wealth simply by inhaling oxygen and exhaling money. They are smart and decisive, but they gain their wealth within an enormous economic structure created by the rest of us. Without that structure, even Jimmy Pattison would be digging for clams at low tide with a stick.

Exploiting the system we built

The super-rich exploit that structure, but 7.2 billion of us have built the fortunes of the 80 top billionaires, whether from our inventions or the sheer cheapness of our labour. The super-rich don't expect to give us a free lunch, and they shouldn't expect one themselves.

Overhauling the system will require more political will than we now have in Canada. The reactionaries who support the super-rich have framed the issues in their favour, and their media operate within that frame. Critics thinking outside the frame automatically relegate themselves to fringe status, like the Occupy movement three years ago.

A political party might serve as a platform for serious proposals to improve the tax structure -- but which one? Certainly not the Conservatives. The Liberals built much of the present structure during their years in power. The New Democrats have moved right to stay within the frame, knowing they could be safely dismissed if they so much as called themselves "socialist" again.

Another meltdown might de-legitimize the status quo and make the crucial questions thinkable. At that point Liberals or the NDP might seize the opportunity to re-frame the debate in terms of equality.

Resistance would still be bitter. Consider how Greece has suffered economically since the meltdown, yet only now is a serious challenge being mounted against the status quo. Syriza is automatically described as a "radical leftist" party that might take Greece out of the Eurozone. If it does well in the Jan. 25 elections, the media will portray it as a terrible threat to us all.

Still, the only alternative to tax reform through democratically elected parties is some kind of coup or popular revolt, or both -- or just the status quo, indefinitely. At some point Canadians will have to choose, and live with the consequences.  [Tyee]

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