Inequality too important to leave to academics – Opinion – Inequality too important to leave to academics
March 20, 2009.   Carol Goar

Last May, the leaders of the world’s major market democracies became so concerned about the widening gap between rich and poor that they asked the Organization for Economic Co-operation and Development to take an urgent look at income inequality in all 30 member countries.

The results confirmed what everybody suspected. Throughout the industrial world, a small group of winners was reaping a vastly disproportionate share of the rewards of economic growth. The middle class was hanging on by working longer and harder. The poor were losing ground.

In Canada, this trend was particularly pronounced. Between 1995 and 2005, it had the sharpest increase in income inequality in the survey. (Even so, it did not catch up to the United States.)

This set the stage for an intense policy discussion at the University of Toronto last week. It was an off-the-record forum, but the substance of the deliberations can be reported.

What quickly became clear is that there are two schools of thought about how to counter, or at least contain, the accelerating concentration of wealth in a narrow band at the top of the economic spectrum.

The first approach, which served Canada well until the mid-1990s, is income redistribution.

Governments use their taxing power to shift income from the well off to those who need help. A combination of progressive taxation and strong social supports has long been a pillar of Canadian public policy.

The second strategy, favoured by business leaders, market economists and an increasing number of Western governments, is known as “social activation.”

Governments use public funds to equip the disadvantaged with marketable skills.

No one at the U of T symposium advocated that Canada put all of its eggs in either basket. But there was a sharp divergence of views about the right mix.

Defenders of the welfare state argued that the best way to reduce inequality is to disseminate the benefits of work as widely as possible and ensure that the poor, elderly, sick and unemployed have a decent standard of living.

The reason Canada’s tax-and-transfer system has lost some of its potency, they contend, is that governments have systematically restricted jobless benefits, slashed social assistance, held down minimum wages and disinvested in social housing.

The solution, therefore, is to acknowledge the harm these cutbacks have done and shore up the nation’s social safety nets before the damage gets worse.

Proponents of welfare-to-work policies argued that such “Robin Hood” policies are outdated.

What is needed in the 21st century, they contend, are targeted investments in education, skill upgrading and workfare, allowing more Canadians to compete in the job market and become self-supporting.

Challenged to produce evidence that these policies actually reduce income disparities, they concede there is little yet. But they blame exogenous factors: globalization, the changing nature of work, new technologies and an extraordinary outbreak of executive greed in the past decade.

Nevertheless, the bottom line, they maintain, is that the old model is too expensive for today’s taxpayers.

Although no consensus was reached, both sides were aired thoroughly.

Intellectually stimulating as the dialogue was, it had an artificial quality. There wasn’t a single non-white person in the room. There were very few young people, private-sector workers or active politicians. There was almost no one who’d used any of the social programs being discussed.

It is useful to look at trends and debate theories.

But the real story of inequality lies in pinched lives, stifled hopes and a deepening sense that millions of Canadian have no stake in the country’s success.


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