Inequality -- thy name is revolution

Hey there, time traveller!
This article was published 1/3/2011 (3001 days ago), so information in it may no longer be current.

Canada has fallen from sixth to 24th place in infant mortality among the 26 member nations of the Organization for Economic Co-operation and Development. We are now just above Poland and Hungary, a situation the Conference Board of Canada calls "shocking."

From 1980 to 2005, the income of the richest one-fifth of Canadians grew 16.4 per cent while the poorest fifth saw their earnings decline by 20.6 per cent, Statistics Canada reported in 2008.

At the end of 2009, just 3.8 per cent of Canadian households controlled $1.78 trillion of financial wealth — 67 per cent of the total.

Suddenly — and not only in Canada but internationally — inequality has emerged as a major social and economic issue. More importantly, no longer is it the sole concern of the left. Such stalwarts of the economic right as the International Monetary Fund, the World Economic Forum and the British magazine The Economist are sounding alarm bells over the damage and cost inflicted on societies by wide gaps in income and wealth.

"Now the focus is on inequality itself and its supposedly pernicious consequences," The Economist said in a Jan. 20 editorial. "One strand of argument, epitomized by The Spirit Level, a book that caused a stir in Britain, suggests that countries with greater disparities of income fare worse on all manner of social indicators, from higher murder rates to lower life expectancy... Several prominent economists now reckon that inequality was a root cause of the financial crisis: Politicians tried to counter the growing gap between rich and poor by encouraging poorer folk to take on more credit. A third argument is that inequality perverts politics, with Wall Street's influence in Washington often cited as Exhibit A of the unhealthy clout of a plutocratic elite."

The editorial notes such widely divergent voices as Chinese President Hu Jintao, British Prime Minister David Cameron and IMF Managing Director Dominique Strauss-Kahn "have all worried, loudly and publicly" about the dangers of a rising gap between the rich and the rest.

"The debate about inequality is an old one," the editorial continued. "But in the wake of a financial crisis that is widely blamed on Wall Street fat cats from which the rich have rebounded the fastest, and ahead of public spending cuts that will hit the poor hardest, its tone has changed."

The Economist was not about to embrace such "radical" (its term) responses as "a greater focus on redistribution." Arguing that much of the "recent hand-wringing" about widening inequality is based on "sloppy thinking," the magazine urged a return to the "old Davos consensus" of relying on economic growth to combat poverty.

The IMF and the WEF think a more robust response is necessary. A 2010 IMF working paper points out the loss of worker bargaining power is an underlying cause of financial crises and restoring that power is key to reducing debt. "Empirically, the periods 1920-1929 and 1983-2008 both exhibited a large increase in the income share of the rich, a large increase in leverage for the remainder and an eventual financial and real crisis."

Global Risks 2011, a paper published by the Davos World Economic Forum, warned of two "cross-cutting global risks" that are "especially significant given their high degrees of impact and interconnectedness. Economic disparity and global governance failures both influence the evolution of many other global risks and inhibit our capacity to respond effectively to them..."

Identifying economic disparity as "one of the most important risks in the coming decade," the paper states the benefits of globalization are unevenly spread. "A minority is seen to have harvested a disproportionate amount of the fruits... There is evidence that economic disparity within countries is growing."

Issues of economic disparity and equity. both national and international, are increasingly important, the paper continues.

"Politically, there are signs of resurgent nationalism and populism as well as social fragmentation."

Today, the Middle East. Tomorrow, who?

Frances Russell is a Winnipeg author and political commentator.