A tent is set up in front of La Halte du Coin shelter in Longueuil, Que., on Oct. 13, 2023.Ryan Remiorz/The Canadian Press
Lars Osberg’s latest book, The Scandalous Rise of Inequality in Canada, (James Lorimer Publishers, 2024) was published in September.
Economic inequality and poverty have always been important social issues in themselves, but they also matter because of the importance of the issues whose solution they prevent.
Take COVID-19 and climate change, for example. They have vastly different time scales of impact – the pandemic shut down the global economy in a matter of weeks and has wound down over months while CO2 concentrations have built up over many decades and will take many centuries to wind down, even after decarbonization.
But in both cases, economic causes and costs are central to the policy debates and, in both cases, what economists call “externalities” – the direct adverse affects of individual behaviour on everybody else’s well-being (through transmission of virus infection or burning of carbon-based fuels) – are central to the problem.
As such, both climate change and periodic pandemics are collective policy problems, which require collective responses. Finding and agreeing on effective solutions to collective-action problems require some level of social cohesion. That requires a shared perception that the individual costs and benefits of action are being fairly distributed, which increasing economic inequality destroys.
Unbalanced economic growth in Canada has, since the early 1980s, produced rapidly increasing income and wealth at the top, stagnant family incomes among the middle class and greater deprivation for the disadvantaged.
For more than 40 years in Canada, the dominant intellectual paradigm informing public-policy formation has been a belief that social and political stability can be taken for granted, that self-interested individual decisions in competitive markets will always produce an efficient allocation of resources, and that the inequality and the unfairness of rewards generated by the market are of secondary importance.
As a consequence, Canada has become a place of increasing economic inequality and rising social instability. Big collective problems such as climate change are now collateral damage.
How exactly is inequality ruining social cohesion? Part of the problem is that the rising income share of the top 1 per cent has created new highs of conspicuous consumption and new potential markets for luxury goods. “Aspirational advertising” feeds the consumer demand of the new luxury markets by telling the affluent how their purchases can make them “special” – advertising that also tells the 99 per cent, increasingly often, of the inadequacies of what they can have.
As growing income gaps magnify the intergenerational consequences of slipping down in the income hierarchy, equality of opportunity is undermined by the reduced willingness of affluent parents to pay the taxes that would, among other things, fund a public school system that could better educate the poorer children who will compete for jobs with their own kids.
Tent encampments in Canadian cities also now send the relentless message to the many Canadians who wonder monthly how they will pay their bills that there really isn’t much of a social safety net in the country and that they too could end up on the street.
And the resentments created by these implications of rising inequality destroy the sense of fairness and the social cohesion necessary to find collective solutions to the big existential common problems facing Canadian society of recurring pandemics and continuing climate change.
The scandalous part of the increasing inequality of the last 40 years is that the COVID-19 pandemic showed that inequality and poverty can be changed, quite quickly. Although most COVID transfer payments went to businesses, CERB payments to individuals were big enough to noticeably reduce poverty and inequality in Canada in 2020. But both inequality and poverty ticked back up in 2021 as transfers were unwound.
Rising costs of rent and food have since reinforced that upward trend of inequality. And the big new trend shaping our futures is the threat that artificial intelligence now poses to previously secure, well-paid middle-class jobs, and the shift of national income toward capital that AI implies.
Left unchecked, the problem gets even worse. Rising economic insecurity and an increasing sense of being unfairly “left behind” eventually have very worrying implications for political economy and for civil liberties – as the “Make America great again” phenomenon in the United States illustrates.
If nothing substantive is ever actually done to reduce inequality and insecurity, the anxieties, anger and resentments they generate will make it ever more difficult for Canadians to get it together to find solutions to our big collective problems. The scandal of increasing economic inequality is that we have recently seen that we actually could reverse this trend.