The Role of Government

It’s the statistic that got everyone’s attention. A recently released study by Oxfam, the international agency dedicated to combatting poverty and injustice, warns that the richest 1% of the planet’s citizens will soon possess more than the remaining 99%.

The nation's representatives? Michael Riffle photo
The nation’s representatives?
Michael Riffle photo

In an interesting related factoid, The Upshot (a ‘data-driven’ undertaking from The New York Times) reports that the richest 1% of Americans, on average and after excluding capital gains, have seen their incomes increase by $97,000 since 2009; the 99% have seen their average income fall by $100 in that time.

In Canada the situation is less dire, but the trend is in the same direction. In the 1980s, as reported by the Broadbent Institute, the top 1% of Canadians received 8% of all national income; that figure has now risen to 14%.

In that same article in The Upshot, writer Justin Wolfers, professor of economics at the University of Michigan, wonders why it is that “robust employment growth over recent years” has not generated more broadly based income growth in America.

Well, surely part of the answer has to be the structural changes wrought in the economy by the digital revolution. The London taxi drivers currently protesting the arrival of the Uber app are just the latest in a now long line of workers who have found themselves displaced by hi-tech changes in their industry. And those workers, once displaced, rarely find themselves able to land alternate employment at higher wages. As has been pointed out by authors like Erik Brynjolfsson and Andrew McAfee, the people not being displaced by computers—once we get past the coders themselves—tend to be folks like waiters, gardeners and daycare workers; not exactly the sorts pulling down the big bucks.

And the other major factor of course has to be the whole trickle-down, anti-regulatory economic wave that began to swell back in the days of Reagan/Thatcher, and which continues to roll over us today. The financial crash of 2008 is the most obvious example of what economic deregulation can mean to all of us, but, more generally, as times have toughened in the Western economies (that is as we have seen the onset of globalization), people have tended to increasingly resent the hand of government in their pockets. Neo-cons have encouraged this attitude at every turn, and so the back doors have been increasingly left open, allowing the rich to sneak into the kitchen, then scoop up ever larger portions of the economic pie.

The single greatest triumph of the Republican Party in America has been their ability to convince a great many white, working-class Americans that the Party has their backs, when very few propositions could be further from the truth.

We have seen, in recent decades, a steadily growing anti-government sentiment provide steadily growing opportunity for the rich to get ever richer. And let’s be very clear about one thing. The growing bank accounts of the mega-rich are not the best means for growing the economy, for easily apparent reasons. Those guys simply don’t have to spend their money the way us poorer people do, just to stay ahead of the monthly bills. Here’s a TD Bank study that makes this point.

Now no one should rightly go about saying more government is the answer to all our socio-economic woes. Anybody who has ever dealt with a government office in a time of acute need knows that these bureaucracies can be inefficient, self-serving and sometimes obnoxious, even vindictive. But greater government management of the current economy? Well, how much more evident could that need be?

Robert Reich's formula for government intervention.
Robert Reich’s formula for government intervention.

 

 

 

 

 

 

 

 

It comes down to some fairly old-fashioned ideas like a guaranteed annual income, higher minimum wages, and a more progressive income tax regime. Scary stuff for a whole lot of people. But if you’re one of them, if you’re one of those people who finds the idea of more government anathema, an outrageous infringement upon your economic freedom, you should recognize that if your opinion prevails, then what you see now is what you will see later.

Only worse, if that can be imagined.