Tuesday Morning Links

This and that for your Tuesday reading.

- Dana Flavelle and Rachel Mendleson both cover Lars Osberg's study on the harmful effects of inequality. But let's highlight the key conclusion from the original source:

(T)he continuation of a divergence in income growth trends necessarily creates changing flows of consumption and savings. Although aggregate demand can be maintained in the short run if the savings of the increasingly affluent are lent to those with stagnant incomes, their increasing indebtedness leads inevitably to financial fragility. The trend in the U.S. and Canada to rising income inequality thus leads to periodic financial crises, greater volatility of aggregate income and, as governments respond to mass unemployment with counter-cyclical fiscal policies, a compounding instability of public finances.

The conundrum in all this inequality-induced macro-economic instability is that it clearly can be avoided. A steeply progressive income tax system can reduce the imbalances of financial flows, lessen the volatility of GDP and help pay off government deficits. Yet, in both the U.S. and Canada, the progressivity of the income tax system has been substantially eroded, over the same period in which the pre-tax incomes of the top 1% have grown most strongly. Even if an occasional deviant multi-billionaire protests that his income tax rate is absurdly low, indeed less than the tax rate of his employees, he is outgunned by the other billionaires who contribute to anti-tax crusades. There appears to be little likelihood of a return to the progressivity of tax regimes during the era (1946 to late 1970s) when income shares were roughly stable in North America, and massive financial crises were avoided.

The recent historical experience of Canada and the U.S. is clearly inconsistent with the simplistic political economy theories that predict that the ‘median voter’ in a more unequal society will vote in more redistribution and more progressive taxation. Indeed, recent history offers much more evidence consistent with the ‘deeper pockets’ model of political influence — that one can expect great wealth to be used in the political process to accentuate further wealth inequality.

- Meanwhile, Renata D'Aliesio manages to pitch Canada's drop from second to sixth in the OECD's latest quality-of-life assessment as good news. But it surely can't escape our notice that it's continued inequality that's pushing Canada down in the world. And that goes doubly when (as Glen Pearson notes) we have plenty of money to eradicate hunger and poverty if we're willing to limit how much we spend on military vanity projects.

- Jim Stanford points out that corporate-oriented free trade agreements have proven a flop on all counts - even in measuring the trade they're supposed to encourage:

Total exports of goods and services were equivalent to 31 per cent of Canada’s GDP last year – down from 38 per cent when the Harper government was elected (and 46 per cent in 2000). If the goal is truly boosting trade (as opposed to enshrining business-friendly economic rules or propping up authoritarian governments in Latin America), then this government is failing miserably.

Canada’s export failure cannot be blamed on foreign trade barriers. Instead, we must look in the mirror – at the structural inadequacy of our business sector. Canada has chronically failed to nurture and develop domestically based globally active firms that produce innovative, high-value products for world markets. Working to fix that problem (through proactive technology, innovation and sector-development strategies) would do more for our actual trade than all the free-trade talks in the world. If you truly believe in trade, don’t be distracted by the trade deals.

- And finally, Bea Vongdouangchanh reports on the copyright bill the Cons are set to force through Parliament, featuring this apt observation from Tyrone Benskin on the difference between holding hearings and actually listening to concerned citizens:

Mr. Benskin told The Hill Times last week, however, that the “sweeping bill” was “rushed” and more importantly, the government did not listen to stakeholders. 

“This is their argument for every single solitary bill they’ve put forth: we talked about it in 1792. It’s ridiculous. Yes, they did see hundreds of people and yes they did hear hundreds of hours of testimony. And they ignored each and every hour of that. It’s one thing to say, ‘I heard it,’ it’s another thing to say, ‘I listened to it.’  They have selective hearing,” he said.