- Al Engler argues that it's long past time to start raising taxes on the wealthy to make sure that Canada can fund the level of social development we deserve.
- Kevin Drum writes that we shouldn't be satisfied with a temporary dip in inequality caused by the 2008 recession when longer-term trends suggest matters will get worse. And Lynn Parramore interviews Lance Taylor about the demand-side implications of exacerbated inequality:
LP: Thomas Piketty’s work on inequality has generated enormous interest. How does your analysis of how the rich grow richer differ from his?- Meanwhile, Elise Gould points out that U.S. wages are stagnating or declining for all kinds of workers, confirming that it's futile to pretend that education or retraining will address the growing wealth gap. And Anna Mehler Paperny discusses the difficulties facing precarious workers in Canada.
LT: To judge from his writing, Piketty is well aware that social relations and power strongly influence income inequality. But there are problems with the way he thinks economies work in the long run. He’s using the standard supply-driven growth model, assuming that there is always full employment and investment is determined by saving.
But there’s another way of looking at growth, with less than full employment and investment driving demand. From this view, economies grow when people spend their money on goods and services.
Luigi Pasinetti, a Cambridge economist, has looked at the economy in terms of two classes – “capitalists” who collect profits on the capital they own and “workers” who get the rest of income. Extending his work shows that when the wage share falls over time, workers will not only have less wealth, but economic growth will slow because people don’t have as much money to buy goods and services. In other words, wage repression (and excess capital gains, too) create stagnation in the long run. You can think of the top one percent as Pasinetti’s capitalists and the middle class as his workers. (Poor households don’t figure into the story of wealth because they don’t have any, although they do have an impact on the economy when they spend money on goods and services).
Our preliminary simulations show that the top one percent’s share of wealth might stabilize in the range of fifty percent (half the total pie), and the growth rate might settle down at less than two percent per year, which would be a less vibrant economy than we’re used to. One bit of good news for middle class families is that in the long run, they do retain the power to save from wages, which to an extent protects their wealth. Piketty does not take this linkage into account. But overall, a falling wage share will hurt the entire economy and hold back everyone, even, eventually, those at the top.
- Paul Krugman notes that no matter how obviously counterproductive the ideology of further enriching the already-wealthy proves in practice, Republican presidential contenders - and indeed far too many other politicians - see themselves as obliged to keep pitching it. And Brent Patterson writes about the Cons' similar plan to go all-in on a failing economic strategy, handing a massive tax break to gas exporters even as we see the consequences of relying unduly on volatile commodities.
- Finally, Andrew Mitrovica reminds us that Stephen Harper's fearmongering about fabricated threats can't hide his own personal cowardice. And Haroon Siddiqui warns us of the dangers of stigmatizing and profiling large swaths of people for political purposes, while Stephen Lautens notes that the Cons' attempt to stoke public anger over the mere act of wearing a niqab can't be explained any other way.