High earners who are worried that this year’s Tax Day will be the last one before their rates rise have more than just the White House and Washington to blame. They can also look to two academically revered, if publicly obscure, left-leaning French economists whose work is the subtext for the battle over tax fairness.

Emmanuel Saez and Thomas Piketty have spent the last decade tracking the incomes of the poor, the middle class and the rich in countries across the world. More than anything else, their work shows that the top earners in the United States have taken a bigger and bigger share of overall income over the last three decades, with inequality nearly as acute as it was before the Great Depression.

Known in Washington and the economics profession by the of-course-you-know shorthand “Piketty-Saez,” the two have been denounced on the editorial page of The Wall Street Journal and won mention in White House budget documents.

Mr. Saez, a professor at the University of California, Berkeley, has won the John Bates Clark Medal, an economic laurel considered second only to the Nobel, as well as a MacArthur Fellowship grant.Mr. Piketty, 40, of the Paris School of Economics, has won Le Monde’s prize for best young economist, among other awards.

Both admire, even adore, the United States, they say, for its entrepreneurial drive, innovative spirit and, not least, its academic excellence: the two met while re-searchers in Cambridge, Mass. But both also express bewilderment over the current conversation about whether the wealthy, who have taken most of America’s income gains over the last 30 years, should be paying higher taxes.

“The United States is getting accustomed to a completely crazy level of inequality,” Mr. Piketty said, with a degree of wonder. “People say that reducing inequality is radical. I think that tolerating the level of inequality the United States tolerates is radical.”

As much as Mr. Piketty’s and Mr. Saez’s work has informed the national debate over earnings and fairness, their proposed corrective remains far outside the bounds of polite political conversation: much, much higher top marginal tax rates on the rich, up to 50 percent, or 70 percent or even 90 percent, from the current top rate of 35 percent.

The two economists argue that even Democrats’ boldest plan to increase taxes on the wealthy — theBuffett Rule, a 30 percent minimum tax on earnings over $1 million — would do little to reverse the rich’s gains. Many of the Republican tax proposals on the table might increase income inequality, at least in the short term, according to William G. Gale of the Tax Policy Center and many other left-leaning and centrist economists.

Conservatives respond that high tax rates would stifle economic growth, at a minimum, and cause some businesses and high-income workers to flee to other countries. When top American tax rates were much higher, from the 1940s through the 1970s, businesses could not relocate as easily as they can now, say critics of Mr. Piketty and Mr. Saez.

“I materially disagree with the idea you can raise a marginal tax rate to 70 percent and not have an impact on economic growth,” said Ike Brannon, an economist at the American Action Forum. “It’s absurd on its face.”

But Mr. Piketty and Mr. Saez argue that history is on their side: Many countries have higher tax rates — and the United States has had higher tax rates — without stifling growth or encouraging the concentration of income in the hands of the very rich.

“In a way, the United States is becoming like Old Europe, which is very strange in historical perspective,” Mr. Piketty said. “The United States used to be very egalitarian, not just in spirit but in actuality. Inequality of wealth and income used to be much larger in France. And very high taxes on the very rich — that was invented in the United States,” he said.

Mr. Saez added, “Absent drastic policy changes, I doubt that income inequality will decline on its own.”

The two economists’ project of mapping income inequality started two decades ago, when Mr. Saez was teaching at Harvard and Mr. Piketty teaching down the road at the Massachusetts Institute of Technology.

Their innovation was to measure American income inequality historically. Existing data went back only to the 1970s. Tedious archival research at the Internal Revenue Service allowed them to stretch the data all the way back to 1913.

Once they had collected the data, the computation was easy. They figured out the benchmark for various income levels — the top 10 percent, top 1 percent and top 0.1 percent of earners, for instance — and calculated what share of income each group took each year.

What they found startled them. As in other industrially advanced countries, income inequality in the United States fell after World War II, a period that economic historians call the “Great Compression,” and remained stable through much of the 1970s.

But then inequality started increasing again, with the top 1 percent of earners drawing a bigger and bigger share of overall income. Their graph showing the trend became well-known: a deep U, with inequality as acute today as it was just before the depression.

When they first published their work, income inequality was mostly off the political radar screen, thanks to the 1990s boom, Mr. Saez said.

“Growing inequality was not perceived to be an issue because the economy was growing fast and even the incomes of the 99 percent were growing significantly,” he said.

But the deep downturn of the last few years, and Mr. Obama’s election, brought the issue back to the fore. Peter R. Orszag, the former Obama budget director, has said the Piketty-Saez work “helped to point the way for the administration in its pledge to rebalance the tax code.”

Now living many time zones apart, Mr. Piketty and Mr. Saez update their work with frequent e-mails, Skype conversations and data-sharing through Dropbox.

They have found that the trends have mostly continued. From 2000 to 2007, incomes for the bottom 90 percent of earners rose only about 4 percent, once adjusted for inflation. For the top 0.1 percent, incomes climbed about 94 percent.

The recessioninterrupted the trend, with the sharp decline in stock prices hitting the pocketbooks of the rich. But the income share of 1 percent has since rebounded. Data that the two economists released in March showed that the top 1 percent of earners got nearly every dollar of the income gains eked out in the first full year of the recovery. In 2010, the top 10 percent of earners took about half of overall income.

That has led the two economists to renew their calls for higher rates on the rich. Along with Peter Diamond, an emeritus professor at M.I.T. and a Nobel laureate, Mr. Saez has estimated the “optimal” top tax rates for the wealthy — getting the most revenue from those most able to surrender it — to be between 45 and 70 percent.

In France, François Hollande, the Socialist who may well succeed Nicolas Sarkozy as president, wants to raise the top marginal income tax rate to 75 percent, calling earnings over a million euros “impossible.” A candidate yet farther on the left suggests a top rate of 100 percent.“The debate in Washington is between the Bush-era and Clinton-era tax rates,” said Mr. Diamond, whom Mr. Obama nominated to the Federal Reserve and Republicans blocked. “Our finding is that the debate should be between the pre-1986 Reagan tax rate, which was 50 percent, and the rates that existed from Johnson until Reagan,” which were higher.

“Thirty percent is three times smaller than the 91 percent of Roosevelt,” Mr. Piketty said, responding to the Buffett Rule proposal and referring to the presidency of Franklin D. Roosevelt, who engineered the New Deal. “And inequality is greater than in the time of Roosevelt.”

< http://www.nytimes.com/2012/04/17/business/for-economists-saez-and-piketty-the-buffett-rule-is-just-a-start.html?pagewanted=1&_r=1&ref=annielowrey >

< http://www.nytimes.com/interactive/2012/04/17/business/income-earned-by-the-wealthiest.html?ref=business >

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A Federal Court judge has opened the door for the federal government to potentially be held legally responsible – and culpable of discrimination – because First Nations residents’ children receive less funding per capita for social services than young Canadians living off reserves.

Justice Anne Mactavish issued a ruling Wednesday that found the Canadian Human Rights Tribunal’s chair erred when she dismissed a 2007 case from the First Nations Child and Family Caring Society of Canada and the Assembly of First Nations.

As a result, she granted the three applications for judicial review of the decision.

The First Nations groups allege the federal government discriminates against aboriginal children by consistently underfunding services on reserves, leading, they contend, to poverty, poor housing, substance abuse and a vast over-representation of aboriginal children in state care.

At the core of the issue is whether the government can be held legally responsible for the circumstances of native children in the child-welfare system.

Under the Indian Act, the federal government is responsible for funding health, education, police services and child welfare on reserves, all of which fall under provincial jurisdiction off reserves.

Research cited by the assembly and the caring society indicates children on reserve receive 22 per cent less funding for services than those who live off reserve.

That distinction was central to the government’s argument that comparing funding from two different levels of government was both “unreasonable” and nonsensical.

In her decision, Mactavish said the tribunal “erred in failing to consider the significance of the government’s own adoption of provincial child-welfare standards in its programming and funding policies.”

The federal government now has 30 days to appeal the ruling. But First Nations groups say they’re hoping for a quick resolution.

“We must all agree that lengthy and costly legal battles are not the way forward,” Shawn Atleo, national chief of the Assembly of First Nations, said in a release.

Cindy Blackstock, executive director of the caring society, had said during the time of the hearing that if the government was allowed to use the comparator argument, “that would basically immunize the government from any discrimination or human rights claim relating to its funding policies and procedures on reserve.”

On Wednesday, she expressed enthusiasm with the ruling. “I’m overjoyed that (Justice Mactavish) looked at the balance of the evidence and saw what many Canadians saw, which is the complete obvious, that what’s happening here is fundamentally wrong.”

Aboriginal Affairs and Northern Development Canada was not immediately available for comment.

Native advocates have also pointed out that three times more First Nations children are being removed from their families today than at the peak of the residential school system in 1949. Then, approximately 8,900 aboriginal children were taken from their families Now, more than 27,500 first nations children are in foster care.

< http://www.montrealgazette.com/life/Reserve+kids+underfunded+court+decides/6482101/story.html >

Think of it as a shield against the slings and arrows of outrageous fortune. The Canadian Charter of Rights and Freedoms, adopted 30 years ago this week, protects us all. Time and again, Canadians have invoked it to challenge overbearing government power, to expand freedoms including that of free speech and of the press, to right wrongs and to remedy inequality. It is one of our great treasures.

Indeed Canadians put it on a par with such icons as Confederation itself, and universal health care. And for good reason. We look to the Charter for guidance on the political, legal, social and ethical issues that define our lives.

It’s a shame, then, that Prime Minister Stephen Harper and his Conservatives have no great regard for the Charter, seeing it as a Liberal political legacy that “limits democracy” by empowering unelected judges to review the decisions of Parliament, legislatures and bureaucrats. There will be no official celebratory bash in Ottawa on Tuesday, despite the Tories’ attention to other, less relevant aspects of our history.

The Charter was adopted on former prime minister Pierre Trudeau’s watch when the Constitution was repatriated from the United Kingdom on April 17, 1982. Queen Elizabeth II attended a ceremony on Parliament Hill to sign the documents that transformed us from being a parliamentary democracy to a constitutional one.

Since then the Charter has reshaped Canadian society in big ways and small, bringing sweeping and at times controversial change. “On balance,” says Peter Hogg, one of the nation’s most respected constitutional scholars, “we have improved our country’s governance” by having it. At root, the Charter empowers the people, he told Lawyers Weekly in a recent interview. That is its great, enduring value.

Every schoolchild by now knows that it guarantees the right to free expression and association, to freedom of the press, to vote, to life, liberty and security, to freedom from discrimination, and more. But fewer are aware of what that means in practice.

In recent years the Star and other media have successfully invoked the Charter to shield responsible journalism from defamation lawsuits, providing for a stronger, more informative press.

Just this past Friday the Supreme Court cited it in holding police who conduct wiretaps more accountable for notifying people who are under surveillance.

Since the 9/11 attacks the Charter has been used to temper needlessly draconian anti-terror laws. And to affirm the worth of human life by preventing the extradition of suspected criminals who might be executed. The Charter has been invoked in regard to Quebec secession, to raise the bar to breaking the country. It has forced police and prosecutors to meet higher procedural standards in criminal cases, reinforcing the presumption of innocence. It has been used to stop discrimination against gays, to permit the wearing of religious symbols, and to effectively legalize women’s freedom of choice in abortion.

The Charter has been invoked, as well, in causes that range from minority language rights to aboriginal rights, Sunday shop closings, refugee cases, assisted suicide, extradition to torture, prostitution, censorship, collective bargaining, tobacco advertising, and more.

Under a series of vigilant judges who did not hesitate to strike down bad laws, or to “read in” rights when justice required, the Charter has come to affect most aspects of our lives.

As Justice Claire L’Heureux-Dubé once put it, memorably, the Charter “stretched the cords of liberty” and enfranchised us all.

< http://www.thestar.com/opinion/editorials/article/1161574–at-30-the-charter-of-rights-has-reshaped-our-society-for-the-better >

As part of its 2011 election platform, the Liberal Party of Canada released “Your Family. Your Future. Your Canada.” This platform document included two proposals to increase fairness in our tax system. One, the cancellation of the Harper government’s corporate tax cuts, received a significant amount of media attention during the election.

The other received no attention at all, which is surprising given the current interest in increasing tax revenues received from wealthy individuals. The ignored Liberal proposal called for limits on the application of paragraph 110(1)(d) of the Income Tax Act that provides for the preferential tax treatment of stock options. A government that says its committed to balancing the budget should give serious consideration to the elimination of this deduction.

Some employees receive a portion of their employment compensation in the form of stock options. A stock option provides the right to buy stock of a corporation within a stated period of time at a specified price. Stock options are used as part of an employment remuneration package in situations where there is a desire to link compensation to company performance. The more the company then grows, the more their stock options are worth.

Stock options have become the single largest component of compensation among CEOs and senior executives at large publicly traded companies in Canada. Executives like stock options because they have made them extremely wealthy, irrespective of the individual or collective managerial acumen.

In Canada, the income earned from stock options is granted preferential tax treatment when compared to other forms of employment remuneration. Under Canadian tax law, stock option recipients do not incur a tax liability on stock options until the options are exercised. The amount that must be included in income from employment on exercise is equal to the difference between fair market value of the stock on the date the option is exercises and the strike price.

While income earned from stock options is deemed to be ordinary income under our tax laws, a special deduction was created in 1984 (paragraph 110(1)(d)) which allows individuals to deduct 50 per cent of the income derived from exercising stock options. That is, only half of the employment benefit from stock options is subject to tax.

As an example, let’s say the CEO of WidgetCo earns an annual salary of $500,000, and for this fiscal year also received a bonus of $400,000. Given this income level, the CEO faces the highest marginal tax rate on any additional income. We will assume a combined federal and provincial marginal tax rate of 45 per cent.

On March 1, the CEO elects to exercise previously awarded options. The company’s stock is currently trading at $20. She exercises 100,000 options and sells the obtained shares from the exercise on the same day (more than 90 per cent of executive stock options are exercised and sold on the same day) which were granted with a specified (exercise) price of $15. The exercised shares are valued at $1.5-million (100,000 options at $15 a share) and the sale is valued at $2-million (100,000 options at $20 a share). The CEO then derives an employment income benefit valued at the difference of these two amounts, which is $500,000.

If the full $500,000 was taxed, as it should be, she would pay $225,000 in taxes leaving her with after tax income from the stock options of $275,000. But because of the special deduction, she only pays tax on $250,000 of the income benefit for a total of $112,500. That is, with the special deduction, the CEO pays $90,000 less in tax than she would otherwise.

Let’s be clear: This $500,000 is not a capital gain. A capital gain only accrues if shares are bought and then held because there is an element of risk associated with the holding the shares. By buying and selling the shares on the same day, she is simply realizing the income benefit that had been attached to the awarded stock options. It is simply deferred employment compensation.

The purpose of paragraph 110(1)(d) was to encourage more widespread use of employee stock option plans. However, no clear causal link has been established between the increasing use of stock options and the existence of the tax deduction. That is, there is no evidence the deduction achieved its stated goals.In the United States, the use of stock options has increased much faster and have risen to a far higher level than ever witnessed in Canada, despite a more limited tax preference.

The Liberals are proposing to limit the deduction to the first $100,000 in annual employment income benefit from stock options, for a projected total increase in tax revenues of approximately $300-million a year. While the Liberal proposal is a step in the right direction to address unfairness in our tax system, our research (here, here, and here) clearly demonstrates that the entire deduction should either be eliminated (by repealing paragraph 110(1)(d) of the Income Tax Act) or a holding period should be attached to the exercised shares in order to qualify for the deduction, as is the case in the United States.

Making this simple change to our tax system would ensure that wealthy Canadians are paying their fair share of taxes. It would also make a significant dent in the government’s efforts to balance the budget and restore fairness and progressivity to our tax system.

Lindsay Tedds is an Assistant Professor in the School of Public Administration at the University of Victoria. Daniel Sandler is a law Professor at Western University. Ryan Compton is an Associate Professor in the Department of Economics at the University of Manitoba

< http://www.theglobeandmail.com/report-on-business/economy/economy-lab/the-economists/a-simple-way-to-tax-the-rich/article2364184/ >

Why must the poor, the young, the old always suffer while the rich never do? While the Drummond report has some good ideas, the well-to-do remain, as usual, untouched. Not even asked to do without luxuries, perks and tax breaks all subsidized by taxpayers who cannot even afford to make their own ends meet.

Where is leadership by example? As long as those in power continue to focus on policies that spare the “haves” at the expense of the “have-nots,” Canada will continue hurtling toward Third World country status. We are a lot closer than many would care to admit. Except those in positions of power, of course. They use it only to take good care of themselves.

Rick Lockman, Orillia

OTTAWA — The federal government is working quickly to change the law so that the marriages of the thousands of gay couples who travel to Canada to wed are legally recognized in this country.

“We want to make it very clear that in our government’s view, these marriages should be valid,” a senior government official said on Friday.

“That’s why we will change the Civil Marriage Act so that any marriages performed in Canada that aren’t recognized in the couple’s home jurisdiction will be recognized in Canada.”

The legislative change will apply to all marriages performed in Canada regardless of the laws of the jurisdiction in which the couple live, the official said.

Their marriage is not recognized in Canada if it is not recognized in their home jurisdictions — in this case, Florida and England, the lawyer said.

However, under the current law, marriages of non-Canadian residents performed in Canada cannot be dissolved in Canada.

Under the Divorce Act, there is a residency requirement that a couple must live in the country for at least one year in order to divorce here.

The government will not be looking at changes to the Divorce Act, as that legislation is much more complicated, a senior government official told Postmedia News earlier on Friday.

Instead, the official said the government would explore other options of dissolving marriages for same-sex couples that do not live in Canada.

On Friday, Nicholson repeated what he and Prime Minister Stephen Harper made clear on Thursday, that the issue of same-sex marriage is not on the Conservative government’s agenda.

“We have been clear that we have no desire to reopen this issue”be said. “Both myself and the Prime Minister consider this debate to be closed,” said Nicholson.

Harper said Thursday that he said he didn’t know much about the case, but said that his government “has no intention of further opening or reopening this issue.”

< http://news.nationalpost.com/2012/01/13/same-sex-marriages-declared-legal-and-valid-by-justice-minister-rob-nicholson/ >

As we brace for those New Year credit card bills to roll in and eye the Lotto 649 results, it’s easy to feel a twinge of envy at the high rollers in our midst. Few of Canada’s 100 best-paid chief executive officers need to worry about the letter carrier’s next delivery. They took home an average $8.4 million in 2010, a 27 per cent hike over 2009.

Canadians averaged $44,000 last year, up just 1 per cent.

As a new report from the Canadian Centre for Policy Alternatives points out, “Canada’s CEO elite have left the rest of us behind in their gold dust.” Certainly, that sentiment helped fuel the “Occupy” protesters last autumn, and the sympathy they enjoyed. And it is compounded by a sense that the very affluent are not paying their fair share.

Apart from their hefty pay packets, the top-earning CEOs are sitting on $2 billion in stock options that are treated as dividend income, and taxed at half the value. That’s a tax break worth $475 million, the centre calculates. Arguably, for those who need it least.

These numbers aren’t just about whipping up raw envy. They reflect public policy choices at a time when Prime Minister Stephen Harper’s government is looking to chop federal spending to erase Ottawa’s $31-billion annual deficit in the next few years. It’s hard to make a compelling case that the affluent need tax breaks that ordinary workers will never see when Ottawa is short on cash. And when 3.5 million Canadians live in poverty.

Granted, it’s easy to overstate the case that taxing the rich can solve Ottawa’s cash crunch, or materially ease society’s inequities. While top CEO pay has soared, taxing away every last cent from the top 100 would generate less than $1 billion. Against federal spending of $278 billion, it’s a rounding error. And in fairness, CEOs are hardly the enemy.

The question such numbers do raise, however, is one of basic tax fairness, and whether Canada’s personal and corporate tax systems need change to ensure that the burden is shared more progressively and equitably. In the long run, ever-growing inequality undermines prosperity and well-being for everyone – including the super rich. This is not a debate the Conservatives are eager to hold, for ideological reasons. But it will gain urgency as the Harper government rolls out its austerity budget and Ontario, too, faces tough choices.

The Canadian Centre for Policy Alternatives report, for example, urges Ottawa to eliminate the tax break for executive stock options. Roger Martin, dean of the University of Toronto’s Rotman School of Management and no soft-headed leftist, would go further. To spur the creation of real corporate value he argues that stock-based compensation should be eliminated and that executive pay should be tied to real-market measures including revenues and profits.

Others argue, additionally, that Canada’s top federal tax rate of 29 per cent should be increased for high earners, or that corporate taxes should be hiked.

Brian Topp, a contender for the federal New Democratic party leadership, has proposed reforms that would include a new 35-per-cent tax rate for those making more than $250,000 a year, which would generate $3 billion in revenue. Raising the corporate tax rate to just over 22 per cent from 15 per cent would bring in $11 billion.

While tax policy is a proverbial minefield, far more complicated than the broad numbers suggest, the Conservatives do have options for dealing with the deficit beyond thinning out the public service and cutting transfers or services. As Finance Minister Jim Flaherty draws up the budget, tax reform ought to be up for discussion. If there’s one message the Occupy activists managed to get across, it’s that not all of us are contributing our fair share.

< http://www.thestar.com/opinion/editorials/article/1110040–the-case-for-tax-reform >

Eradicating racial hatred is a noble goal but it cannot be legislated out of existence. The Canadian Human Rights Act prohibits communication “likely to expose a person or persons to hatred or contempt.” This is impossibly vague and subjective.

It could be used against most religions, Occupy protesters (contempt for the 1 per cent), authors like Salman Rushdie, Zionists denying the existence of a Palestinian people or “Israeli apartheid” protesters.

The legislation does not permit a defence of truth and ignores progress made by feminists, gays and civil rights activists, many of whom were contemptuous of, and hateful toward, their oppressors.

This draconian, anti-intellectual edict has drawn condemnation from people and groups as diverse as the National Post, the Canadian Civil Liberties Association, the Canadian Association of Journalists and Noam Chomsky.

Bigots are best defeated through open debate, rather than judicial or legislative fiat, precisely so their ideas can be exposed to both hatred and contempt.

Joe Killoran, Toronto

Indeed, hateful words can do harm, but Bernie Farber and Marvin Kurz don’t even attempt to speak against the over-inclusiveness of Section 13. Members of any society should be judged for what they do, not who they are, and that is why the truth is indeed an excellent defence against partisan over-inclusiveness of that law, a blunt instrument that can be abused.

Farber and Kurz offer some disingenuous examples: how can you prove that Africans are not inferior or that Jews are not rapacious, they say. But you can prove that some African rulers are committing criminal acts (and some are at the International Criminal Court now), and you can prove that the government of Israel has repeatedly violated any number of human rights and humanitarian laws and should be taken to account for it.

Yet some attempt to confuse silly and unprovable claims with what amounts to an unacceptable reality: in the case of Israel, by referring to both as “anti-Semitism.” That is the problem with Section 13.

Laura Westra, Professor Emerita (Philosophy), University of Windsor, Maple

< http://www.thestar.com/opinion/letters/article/1104465–hate-and-the-law-how-to-deal-with-bigots >

When you lift the lid on this “season of discontent,” it’s clear the Western world is going through a dangerously confusing time.

Even in a country as affluent as Canada, people at all points on the social and economic spectrum seem increasingly disillusioned. We feel a collective unease.

The one per cent we hear so much about these days (who make 10% of all the income in Canada, and pay about 25% of all income taxes) don’t seem particularly pleased. Their wealth is being diminished by falling markets and global uncertainty. They are being simplistically blamed for all our economic ills by the Occupy Bay Street protestors carrying “Tax the Rich” placards.

The middle class is shrinking and they know it. They are struggling and losing the battle to maintain their slice of a stagnant economic pie. And they feel that no one cares about their plight.

The working class also feel under siege. They are having trouble covering the cost of day-to- day living. One in ten Canadians cannot withstand an unexpected expense of only $500.

Unions fear that the Harper government is using our “fragile economy” as an excuse to dilute their hard-earned right to strike, and to a fair arbitration process.

And, all the political assurances that Canada is in better shape than other G8 countries are cold comfort for the millions who are either unemployed or underemployed. They feel powerless and share a growing sense of alienation.

Recurring global economic crises are highlighting the inherent conflicts between the values of the market economy and those of democracy. We are failing to keep these largely contradictory influences in balance. The dictates of the marketplace are overshadowing the values inherent in our Western democracies.

Economist Jacques Attali, in a 1997 article in Foreign Policy, warned about this imbalance. “It seems obvious that, all over the world, the market economy today is more dynamic than democracy,” he wrote. He predicted the rise of “market dictatorships” if stronger and more flexible democracies aren’t developed.

Many of the conflicts that he saw then, between these “twin pillars of Western civilization,” have become even more pronounced today.

In a market economy the individual is often treated as a commodity, whose value depends on their unit cost, education, age, and even gender and race. But in a democratic society, the promotion of the individual is supposed to be paramount.

Capitalism, by its very nature, accepts and encourages inequalities between people, corporations and even economies. It thrives on competition, market domination and collective ownership of industry.

Democracy is based on the ideal of equal rights for all citizens. But equal rights do not mean equal access for all to the fruits of a free market economy.

Winston Churchill said: “The inherent vice of capitalism is the uneven division of blessings; while the inherent virtue of socialism is the equal division of misery.”

The social safety nets that have been erected to curb some of these vices now seem to be financially unsustainable. The post-war social compact that has defined life in the West is on a collision course with fiscal austerity in democracies awash in sovereign debt.

The idea that accumulated selfishness produces the best result for the group is another hallmark of the market economy.

Democracies begin with the assumption that the interests of the minority are best served by the wishes of the majority. But modern democracies have become increasingly vulnerable to powerful minorities who can distort tax systems, circumvent regulation and exploit resources.

The market economy thrives on the free movement of capital, people, goods and ideas.

But this globalization is breaking down national borders faster than democracies can forge effective means to act collectively in the interests of their electorates.

There is a wide spectrum of thought about how to address this growing imbalance of forces.

At one end are the optimists like Ed Clark, the chief executive of TD Bank. He is calling on Canadians to “lift the cone of silence” and encourage our politicians to lead us in a national dialogue that seeks fair and equitable solutions to our economic and social disparities. “We must help our politicians make the shift to a world of constrained government resources.”

Others are more fatalistic. Alexander Tyler, the 19th-century Scottish history professor, believed that when voters discover they can vote themselves generous gifts from the public treasury, they will always vote for the candidate that promises the most benefits.

“Every democracy will finally collapse over loose fiscal policy.” Tyler maintained that all democracies go through these same stages:

“From bondage to spiritual faith;

From spiritual faith to great courage; From courage to liberty;

From liberty to abundance; From abundance to

complacency; From complacency to apathy; From apathy to dependence; From dependence back into bondage.”

If we judge where we are on Tyler’s descending scale by the extent of our voting participation in Canadian elections, we are probably in the complacency stage. But if we consider our growing tendency to look to government for our every need, “apathy to dependence” may be closer to the truth.

In the words of the great American philosopher, Pogo, “We saw the enemy and they were us.”

R. Michael Warren is the CEO of The Warren Group Inc. He is a former corporate director, Ontario deputy minister, TTC chief general manager and Canada Post CEO.

< http://www.brantfordexpositor.ca/ArticleDisplay.aspx?e=3407051 >

Reports of people living in tents and shacks at Attawapiskat evoke comparisons with the Third World, with people living in the shantytowns of South Africa and the barrios of Mexico. The comparison is apt, because we now know a lot about how people in the Third World have elevated themselves out of extreme poverty.

Stable government is essential. Failed states, such as Somalia and the Democratic Republic of the Congo, produce colossal misery. But it must be the right kind of government. Regimes that arbitrarily violate the rule of law, such as Robert Mugabe’s Zimbabwe, or concentrate all property rights in the state, such as China under Mao, produce poverty on a mass scale. Redistribution through foreign aid also does not work. Countries that have received the most foreign aid, such as Tanzania under Julius Nyerere, have performed poorly.

Democracy is desirable for many reasons but does not in itself lead to economic progress; think of India before the opening of its economy. And authoritarianism can sometimes produce economic advancement, as with China after Mao and Chile under Augusto Pinochet.

Truly progressive governments recognize individual property rights and enforce the rule of law, thus allowing people to reap the rewards of their initiatives. Individual property, voluntary yet enforceable contracts, open markets – these have been the holy trinity of economic progress in the Western world since the Industrial Revolution, and they are transforming China, India, Brazil and many other previously impoverished countries.

The formula for progress is no different for first nations, which constitute the so-called Fourth World made up of colonized peoples within North America. Their road to advancement runs not through dependence on government transfers but through property rights, contracts and markets, leading to genuine self-determination.

In the United States, the utility of “stable, fair, effective and reliable governing institutions” has been demonstrated in numerous case studies conducted by the Harvard Project on American Indian Economic Development. Researchers from the Property and Environment Research Center in Montana have shown that individually owned Indian land is far more productive than collectively owned land, and that tribes that uphold the rule of law by allowing litigants to have access to state courts rather than tribal courts experience faster economic growth.

In Canada, a recent study from the Centre for the Study of Living Standards demonstrated the overwhelming importance of education to economic progress on Indian reserves. But even after controlling for the effect of education, reserves with higher scores on a governance index constructed by the Frontier Centre for Public Policy had higher average scores on labour-market indicators. Governance matters.

My own research has to do with the relationship between property rights and first nations economies. I have found that first nations that adopt property tax regimes for leaseholds, and that have more certificates of possession for their members, score substantially higher on Statistics Canada’s Community Well-Being Index. In the absence of fee-simple ownership, leaseholds and certificates of possession are the strongest property rights available to first nations people; reserves that make more use of such rights do better in terms of income, employment, housing and education.

Parliament is considering bills to make public the salaries of chiefs and councillors and, on an opt-in basis, to extend elected terms of office of reserve governments from two to four years. These steps in the direction of greater transparency and stability should enhance the rule of law for first nations. But much remains to be done, particularly to strengthen the property rights of first nations people, to give them real ownership, so they will have the same opportunities as other Canadians to make better lives for themselves.

Parliament now has an opportunity to do just that in the wake of a report by the House of Commons finance committee that endorses the idea of an opt-in First Nations Property Ownership Act, as recommended by Manny Jules, head of the First Nations Tax Commission. First nations leaders are asking for better property rights; Parliament should listen and act accordingly.

Tom Flanagan is a professor of political science at the University of Calgary and co-author of Beyond the Indian Act: Restoring Aboriginal Property Rights.

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