The Gap Between the Rich and the Poor

[lenwick]

The Gap Between the Rich and the Poor

Poor bashing and scapegoating poor people is behaviour that reveals a feature of society in Canada that is becoming a more serious problem every year. Canada has become a place where there are a few extraordinarily wealthy people and a growing number of very poor people, and each year the very few wealthy people control an increasing amount of the country's wealth.

In 1984, the poorest 20% of Canadians owned –0.3 % of the total private wealth of Canada (assets that can be used to generate income). The second 20% owned 2.4 % of Canada's wealth. The third 20% owned 9.4%. The fourth 20% owned 19.8%, and the richest 20% of Canadians owned 68.8% of Canada's wealth.

Since the 1980s the situation has become worse. From 1981 to 1991, the wealthiest 20% of families in Canada increased their share of family income by $6.2 billion, at the expense of middle- and low-income families.

In 1991, the average poor household was $1,029 further below the poverty line than it was in 1981.

In 1991, the bottom 60% of Canadian families had a smaller share of market income than in 1973.

If you think of Canada's total wealth as one dollar, and you divide it among 100 people, the bottom 40 people would receive 2.1 cents (2.4 – 0.3). The top ten people would receive 51.3 cents.

Now imagine wealth distribution as a one-hour parade in which everyone in Canada marches, and everyone's size is proportional to his/her individual wealth. A person of average wealth will be represented by a person of average height.

For about the first twelve minutes of this parade we would see nothing because the marchers would be underground (bottom 20% of Canadians own -0.3% of wealth). Then we would begin to see tiny people, but it is only at half past the hour when we would see dwarfs six inches high, people whose wealth is furniture, a car, maybe some savings. At about fifteen minutes before the hour, we would begin to see people of average height, for about three quarters of our population have fewer assets than the average. In the last few minutes of the parade, we would see giants fifteen to twenty feet tall. In the last minute we would see wealthy giants as tall as the CN Tower in Toronto, and in the last second we would see some of Canada's most powerful businessmen with assets of more than $100 million and ranging into the billions. Conrad Black, the newspaper robber baron; Paul Desmarais, a Montreal entrepreneur known as "Le Patron" in Quebec; Galen Weston, head of the Weston food empire; Charles Bronfman, head of a massive corporate structure; and Kenneth Thomson, head of the Thomson papers and the richest man in Canada, would be miles high.

Another image you can create is with strings. Let one inch equal one percentage point of wealth. Now cut a piece of string representing the wealth of the bottom 20%, or six million Canadians. You will find this task difficult to do. A string representing the wealth of the second 20% would be 2.4 inches long, and a string representing the wealth of the richest 20% of Canadians would be 68.8 inches long.

Can we have economic prosperity and a just society at the same time, or can we only expect to live in a country with so much economic inequality, so many poor and so few rich? Robert Kuttner, in his thoughtful book, The Economic Illusion —False Choices Between Prosperity and Social Justice, points out that the most egalitarian societies often turn out to be the most productive ones with the lowest unemployment rate. He reminds us that during World War Two, tax rates and tax collections were at record high levels, as was the rate of economic growth. In his conclusion, Kuttner stresses the importance of full employment and a more egalitarian distribution of wage income to a healthy economy. He observes that the choices that can guide us toward both economic prosperity and social justice are political choices, not economic ones. We don't have to have this misery of unemployment and poverty and so much inequality.

There are in fact countries in the world that have avoided economic inequality and the poverty and unemployment that goes with it. Norway is an excellent example. In Norway, inflation is below 2%, and the unemployment rate is the lowest in Europe. There are many social programs that are not a safety net, but part of the vision of a just society. Norway's health minister, Gudmund Hernes, said that his country's investment in health, education, and financial security paid large economic dividends, and he criticized those who wished to break up trade unions and downsize government by laying off government workers. "They are producing such dissatisfaction and enormous strains on society," he said. "That will come back to haunt you."

[Melanie_]

Is this a previously published article? You should cite the source if it is. If it isn't, and you wrote it just for us, you should know that Kenneth Thomson died in June of 2006. I'm not quibbling with the sentiments, just remember to acknowledge the writer and source.

[Charles Anthony]

Is this a previously published article?

Good catch. This article is apparently a "teaching" aid.

The British Columbia Teachers' Federation

[jbg]

On the merits, the problem with this approach is that poor people don't create jobs; under the best of circumstances they fill jobs.

[White Doors]

A major fallacy when you re-read this is that it assumes that the 'poor people' and the 'rich people' are the same people. That is not a fact and it is not valid in the least. Besides Canada only the USA does a better job of letting you 'choose' which category you represent. Equality of opportunity, NOT equality of income IS and will REMAIN the answer.

[geoffrey]

That's a pretty blind assertion White Doors.

I'd say many countries are better than the Americans, Ireland, Hong Kong, Switzerland... and many more far beter than Canada for giving people that choice.

There are many better ways of organizing things than the North American way.

[Saturn]

Of course you can prefer to deny reality but the reality is that indeed a significant shift of wealth has occurred from the bottom 2 quintiles to the top 2 quintiles of the wealth distribution and from the under 35 age group to the over 45 age group in Canada over the last 2 decades. Not that anyone here cares about reality but I thought I'd mention it anyway.

[geoffrey]

What's your explaination of this?

It could be, perhaps, that in the 1980's, those that had investments made a killing and those that had mortgages were made poor?

[jbg]

That's a pretty blind assertion White Doors.

I'd say many countries are better than the Americans, Ireland, Hong Kong, Switzerland... and many more far beter than Canada for giving people that choice.

There are many better ways of organizing things than the North American way.

Than why are standards of living in the countries you've listed so high?

[myata]

FYI: Norway: population 4.6 mln people, oil exports (2005) 2.7 mln barrels / day - ranked #3 in the world, after Saudi Arabia and Russia. (reference).

That may explain many of this country Norway's economic miracles (not to diminish it's achievements in any way). Obviously it's a special case that cannot serve as a general example of prosperous egalitarian economy that can be applied elsewhere. Somehow, many leftwing authors who like to admire Norway forget to mention this fact.

More (and better) examples of economic systems where egalitarian distribution of income has been sustainable over long time, are needed for this argument to gain credibility.

[Argus]

That's a pretty blind assertion White Doors.

I'd say many countries are better than the Americans, Ireland, Hong Kong, Switzerland... and many more far beter than Canada for giving people that choice.

There are many better ways of organizing things than the North American way.

I agree. The very wealthy are undertaxed and overpaid. The compensation package of CEOs is obscenely out of step with their actual value to the corporations they run, and based more on an old-boys network than on value for stockholders.

As for the poor, the problem is that we need to completely revamp our adult educational and skills training system. It is - sorry to use the same word again - obscene - how many people we have who are warehoused and doing nothing, or who are unable to attain the proper skills training when the government and business are whining about a lack of labour, and importing immigrants.

That's not to say poverty will ever be eliminated. It cannot be. There will always be people without drive, motivation or intelligence enough to be anything but poor. Nor can we compensate them for that monetarily. Human nature being what it is, if we give big enough welfare cheques to the poor many, many more will decide that being on welfare is easier than working.

[myata]

I agree. The very wealthy are undertaxed and overpaid. The compensation package of CEOs is obscenely out of step with their actual value to the corporations they run, and based more on an old-boys network than on value for stockholders.

On that, there was a commentary on CBC The Current yesterday morning. A prof from US was essentially suggesting a kind of a "salary cap" on renumeration of execs (like 100% tax on personal earnings above 50 times the minimum wage). His arguments are that rewards paid to execs have reached "grotesque" levels which reward and inspire "grotesque" behaviours counter-productive for the economy in the long run. It would also make exec directly interested in the well being of the lowest paid category. Sounds interesting, I wonder if anything like that has been tried?

[frogs]

On that, there was a commentary on CBC The Current yesterday morning. A prof from US was essentially suggesting a kind of a "salary cap" on renumeration of execs (like 100% tax on personal earnings above 50 times the minimum wage). His arguments are that rewards paid to execs have reached "grotesque" levels which reward and inspire "grotesque" behaviours counter-productive for the economy in the long run. It would also make exec directly interested in the well being of the lowest paid category. Sounds interesting, I wonder if anything like that has been tried?

The only thing that will economically work, is to allow people, rich and poor, have free land that is used for primary residence, and it's food growth, tax free, and to have all public services become private, paid only by those that want the service. Electrical/gas power need be volunteer non profit bizniz.

Then CEOs etc, can make all the money they want. Life will be much better.

[White Doors]

Of course you can prefer to deny reality but the reality is that indeed a significant shift of wealth has occurred from the bottom 2 quintiles to the top 2 quintiles of the wealth distribution and from the under 35 age group to the over 45 age group in Canada over the last 2 decades. Not that anyone here cares about reality but I thought I'd mention it anyway.

So that just basically means that there is nmore opportunity for people as they age. That is good news all around of you ask me.

[White Doors]

I agree. The very wealthy are undertaxed and overpaid. The compensation package of CEOs is obscenely out of step with their actual value to the corporations they run, and based more on an old-boys network than on value for stockholders.

On that, there was a commentary on CBC The Current yesterday morning. A prof from US was essentially suggesting a kind of a "salary cap" on renumeration of execs (like 100% tax on personal earnings above 50 times the minimum wage). His arguments are that rewards paid to execs have reached "grotesque" levels which reward and inspire "grotesque" behaviours counter-productive for the economy in the long run. It would also make exec directly interested in the well being of the lowest paid category. Sounds interesting, I wonder if anything like that has been tried?

I agree that they are obscene but let the market sort it out. Shareholders will punish those companies that do this and indeed have already started doing so.

[Jerry J. Fortin]

Shareholders do NOT punish the companies they invest in, they DO make a profit on their own investment. As long as the share price remains high and the company remains profitable and declares dividends to shareholders they can do as they please.

The gap between the rich and the poor will always exist, partly for reasons Argus has described. On the other hand, this nation needs to recognize that corporate governance is a direct threat to democracy. That threat has the potential to further widen the already growing gap between the rich and the poor.

Our society needs to evolve beyond the grubbing for money that currently describes our economic situation. There is sufficient wealth in this nation to provide for the care of its citizens to the extent that no citizen should want for any basic necessity of life. That applies from food to shelter. Without forcing communism or radical socialism down the throats of citizens, simply reforming the taxation system and applying some carefully thought out economic and monetary reforms it is possible to gain our independence from both the political and economic thugs who currently run the show.

[White Doors]

Uhh... shareholders hold the board of governers and CEO's accountable. You obviously have never been at a shareholders meeting. They punish by selling their shares and getting out or by demanding resignations. Warren Buffet has already railed against high CEO salaries and you better believe that his voice carries clout and that compaies will listen.

[Robert777]

In my humble opinion....and this is only an opinion, not a statement backed up by Harvard Studies. If you are poor, it is because you deserve to be poor.

This is not a 3rd country. People here are able to make choices.....about education, investments, your work ethic.

There is no reason for someone to be on the streets....now I know that some of you might say, the streets of Canada's major cities have alot of homeless, mental patients that live outside. My reply to you would be tough.....Those that don't pose a danger to society should not have the tax payers money going to their keep being locked up.

If some of you don't agree with what I have say, maybe you should write your MP and ask them to increase your taxes (not mine of course) to pay for the plight of these poor misfortunates. I would agree with euthanasia for these people though, my tax dollars could be sent for that.

PROUD TO BE A REFORMER, BUY A GUN AND PO A LIBERAL! :angry: