The Trouble with Billionaires

Posted on December 5, 2010 in Equality Debates

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December 4, 2010.   By Richard Goldman, For Postmedia News

The rich are different from you and me,” wrote F. Scott Fitzgerald – but should we care? Aside from generating some celebrity gossip, is it of any consequence that some in our society earn, or own, a thousand – or even a million – times more than others?

According to The Trouble with Billionaires, the answer is a resounding “yes”: extreme inequality of the sort that has emerged in the Anglo-American world in recent decades – and the economic policies that have promoted it – are taking a heavy toll on our social fabric.

Veteran political journalist Linda McQuaig and Toronto tax law professor Neil Brooks present a convincing case and rebut much of the conventional wisdom of the neo-conservative policies that brought us this great divide.

In economic terms, the authors note that the three decades following the Second World War were marked by strong economic growth, a highly regulated financial sector, a significant middle class with steadily rising incomes, heavy taxation of the rich (whose marginal tax rate reached 91 per cent under Eisenhower) and, consequently, record-low levels of inequality.

By contrast, the neo-con era, kicked off by Ronald Reagan in 1980, gave us generous tax cuts for the rich, deregulation, stagnating middle-class incomes, sharp increases in inequality, a bloated and wildly speculative financial sector and, ultimately, financial collapse.

In social terms, the authors provide a wealth of evidence showing that more equal societies, such as the Scandinavian countries, do much better than highly unequal ones, like the United States or Britain – and, to a lesser degree, Canada – in terms of life expectancy, infant mortality, mental health problems, homicides and imprisonment rates. Perhaps most surprisingly, even social mobility, as measured by income comparisons between fathers and sons, is higher in more egalitarian countries than in unequal, “winner take all” societies.

A chapter on how highly concentrated wealth harms democracy is particularly alarming. Arguably, Canada foreshadowed the neo-con revolution when it eliminated the estate tax in 1971, providing its richest families with an estimated windfall of $62 billion in today’s dollars. This followed a recommendation of the Senate Banking Committee, whose members represented a total of 211 corporate directorships. (Most other advanced countries, including the United States, still have some form of estate tax.)

Further tax cuts for the rich have led to the point where the poorest 10 per cent of Canadians, earning $13,500 per year or less, now pay a higher proportion of their income in taxes than the richest one per cent, with incomes over $300,000.

The authors offer some interesting policy suggestions for reducing inequality, perhaps most intriguingly a tax on inheritances of $1.5 million or more to fund an education trust of $16,000 for every Canadian child.

Lest one lapse into complete cynicism about the chances of turning the inequality tide at this point, the authors note that a strong majority of Americans now believe their society has become too unequal and favour increased taxes on the rich. In the authors’ view, a serious campaign by progressive forces to address inequality could succeed there. One can assume that the Canadian public, with its more social-democratic leanings, would be even more receptive to such a campaign.

The Trouble with Billionaires, By Linda McQuaig and Neil Brooks, Viking Canada, 304 pages, $34 Edmonton Journal

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