Inequality in Canada? Canada follows the US lead.

In the 1930s, when Canadians faced dire economic circumstances supported by a dysfunctional ideology, they made important changes in both. I hope we can do the same.

I graduated from university half a century ago. For the first half of the period since then, we Canadians were busy creating one of the most productive and equitable societies in the world. We ensured that high economic growth rates were accompanied by a wide-ranging set of social entitlements. Under prodding by social democratic parties, and in continental Europe also by Christian Democrats, it came to be understood that, left to its own devices, capitalism would be inherently unstable and produce a distribution of goods and services that was profoundly unfair. If citizens in the North Atlantic democracies were to have half a chance at a life of dignity, governments believed they had to act.

Here in Canada, we were part of this widespread political and economic change. While pushed by the CCF and the NDP, the other federal parties in varying degrees came to share in this shift in ideology and practice. For both ethical reasons and the functional need for stability, an expanding role for government and increasing equality became national practice. Left behind was the belief that individuals and the economy should be left to fend for themselves. In its place was the model of democracy best expressed by Abraham Lincoln: government not only by and of the people, but also for the people.

What emerged from this thinking was a Canada characterized by a wide range of new social and economic rights: government pensions, universal health care, trade union rights, comprehensive unemployment insurance, the expectation that every boy and girl with ability could go to university — and all were paid for by adequate levels of progressive taxation. Achieving more equality in our everyday lives, we became a nation of greater social cohesion, and started to describe ourselves as “sharing and caring.”

This higher level of social and economic equality, symbolized by our signing on to the International Covenant on Economic, Social and Cultural Rights in the mid-1970s, also produced greater tolerance and a reaching out to provide new freedoms -- to women, to First Nations, to gays, to ethnic minorities, and to the artistic community. These freedoms were best illustrated by the civil society activism and political leadership that led to the provisions of our new Charter of Rights and Freedoms.

Whether put in place by political parties self-described as social democratic or by other political formations, this post-war combination of political, civil, social, and economic rights aimed at citizens’ equality came to be known by social policy experts and the general intellectual community as the social democratic alternative to the pre-war minimal-state market-based system.

However, long before the 2008 crash in the global economy, Canada and many other Western countries had undergone an ideological and material reversal. Writing last year in the New Yorker magazine, David Frum, the Canadian-born ideologue of the American right, asserted that the conservative (small “c”) revolution launched by Margaret Thatcher and Ronald Reagan in the 1980s had as its purpose the rolling back of the “social democratic” model I have just described.

In Canada, the reversal first took place in open ideological form in Ontario when the Harris government turned its back on the red Toryism of Bill Davis. It came to be joined at the federal level not only by the Reform Party and the Conservatives, but also by the market-driven Liberal party of the 1990s. This became apparent in the middle of that decade, after the deficit had been overcome and surpluses restored.

Federal programs were not fixed; they were abolished. Budgets were not simply reduced; they were slashed. Artists and the CBC were cut loose and encouraged to rely more on the market. Income taxes needed for the restoration of social programs were not only cut, but also made less progressive. During that decade, the number of poor children in Canada increased almost every year, while the rich continued to get richer.

In marked contrast to continental Europe, environmental reform never got established; national housing programs disappeared, and post-secondary education spending was slashed.

Reflecting the ideological shift at the time, the Minister of Finance, Paul Martin, actually boasted that government spending as a proportion of GDP had been reduced to the level of 1951. During the 1990s and continuing since, virtually all the real growth in market-based income has gone to the top 10% of Canadians. Instead of increasing taxes on the rich to compensate for this — as Bill Clinton did in the U.S. — the Liberal government severely reduced capital gains taxes and carved 9 percentage points off income taxes for the wealthiest.

The scale of the increase in inequality, beginning in the last decade of the 20th century, is immense. Remember that was the best decade of economic growth in 40 years, a period during which the trickle-down soothsayers said everyone would benefit from it. Between 1998 and 2007, the average wage of full-time workers went up from $33,000 to $40,000, but that was less than the rate of inflation. In contrast, during the same period, the top 1% of Canadians increased their share of total income by 100%, and the compensation of the top 100 CEOs went from an annual average of $3.5 million to $10.4 million — up 300%.

The vast majority of Canadians have actually seen a downward shift in their share of the national income that they worked to create. Seventy percent of Canadian households have a smaller share now than they had at the end of the 1990s. Apart from the elderly, the bottom 50% of Canadians actually have lower after-tax incomes than their equivalents in the 1980s.

The present federal government has simply continued its predecessors’ onslaught on equality. As a consequence of the continuing underfunding of social spending and irresponsible and unfair tax cuts, it came as no surprise when we were criticized by the United Nations for failing to live up to our obligations under the Covenant on Economic, Social and Cultural Rights. This was followed by an OECD report showing that the level of inequality in Canada is now among the worst in the OECD. This in turn was confirmed recently by the Conference Board of Canada.

In continental western Europe, where increases in inequality in general have been less severe, in April of 2008 (six months before the crash) finance ministers at the European Union meeting in Brussels, with the exception of the British Chancellor, committed themselves to taking action to deal with inequality. It was the same group of continental Europeans who took the lead at the last G-20 meeting to curb the outrageous salaries and bonuses of the super-rich.

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This, then, was the legacy of recent federal governments leading into the economic crisis that befell us in the fall of 2008. While we Canadians can congratulate ourselves on the relatively healthy structure of our financial institutions, we must not allow this to obscure the other, deeper democratic problem -- the alarming increase in inequality that is now being openly debated in Western Europe.

In fostering this inequality in Canada, what our recent federal governments have done is not only to reject the political legacy of the CCF and the NDP, but also that of Lester Pearson, John Diefenbaker, Pierre Trudeau, and Bob Stanfield — all of whom came to see the importance of social programs and the use of government as a stabilizing and equalizing force in the economy.

http://www.policyalternatives.ca/publications/monitor/equality-core-value-democr...

Ed Broadbent

http://worthwhile.typepad.com/.a/6a00d83451688169e20120a4fb8aae970b-800wi