The Wealthy Banker's Wife
The Assault on Equality in Canada
McQuaig, Linda
Publisher: Penguin
Year Published: 1993
Pages: 192pp Price: $11.99 ISBN: 0-14-023065-3
Resource Type: Book
Cx Number: CX6632
Abstract:
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Table of Contents
Introduction
1 As Long as They Can Sell Their Blood…
2 What to Do with the Wealthy Banker's Wife?
3 Freedom to Die: Social Welfare in the U.S.A.
4 Europe's Little Secret
5 Canada Triumphant: Just Don't Read the Fine Print
6 Day Care or the Business Lunch?
7 Why Library Books Are as Important as Nintendo: The Case for Public Spending
8 As Canadian as … Equality
References
Excerpts:
The European countries show that high levels of social spending do not hinder economic growth. "If anything look at growth rates, economic performance, productivity growth and compare it to trends [in social spending], you'll find there's no relationship - however you squeeze and twist the numbers," says Gosta Esping-Andersen.
What matters is not just the well-being of the individual, but the well-being of the society. Society is seen as an interconnected community where everyone contributes to the communal purse and everyone benefits from it. In this sense, everyone is part of the welfare state.
The Americans have an absolutely dismal record in helping the poor, while the Europeans have done much better, and the Scandinavians - where the universal social welfare model has been applied most comprehensively - have the best record of all.
The reason targeted programs don't work, according to many analysts, is that it is difficult to maintain political support among the population for the programs that only benefit a small portion of society. On the other hand, if taxpayers feel that a program offers important benefits for themselves and their family members, they are much more willing to support it - even pay high taxes to maintain it.
Before social payments, the poorest 20 per cent of Canadians received only 1.2 per cent of all families in 1989. After social payments, however, the families in this bottom group increased their share of total income to 4.8 per cent - still obviously a very small share of the national pie, but a significant improvement over the share distributed to them by the private marketplace.
For example, if the government had not intervened with social payments but had simply left the market to its own devices, the bottom 20 per cent of Canadians would have had $15.7 billions less income!
The data showed that between 1977 and 1989 income expanded for all Americans by a total of $740 billion, and an astonishing $550 billion of this - 74 per cent - went to the top 1 per cent of U.S. families. The income of this tiny elite of 600,000 families grew from an average of $315,000 to $560,000 over the twelve-year period (in inflation-adjusted US dollars).
Despite the continuing popularity of this image of America, there is in fact less upward mobility un the U.S. today than in many European countries. A recent study by the Joint Center for Political and Economic Studies in Washington examined poverty in the U.S. and seven other industrialized countries and found that poverty in America is more pervasive, more severe and more long-term.
The strong union movements in Europe pushed for universal social programs to improve the conditions of their members, and also to prevent splits in the working class. They feared that the power of unionized labour would be undermined by the presence of a huge pool of unemployed workers who, desperate and without benefits, would sabotage strikes and work for lower wages.
Interestingly, in virtually all other industrialized nations, the government contributes to the unemployment insurance system, and government contributions automatically rise as unemployment rises. This recognizes the fact that government policies have an impact in employment trends, and it gives governments an incentive to use their policy levers to keep unemployment down. The one major industrialized nation where government does not contribute to the unemployment fund - and therefore has no direct financial stake in the country's unemployment rate - is the United States.
"[I]n glaring contrast to the predictions of the market liberal hypothesis, the Golden Age of economic growth coincided with the extension of the welfare state," notes Korpi. He concluded that the universal welfare state, which is "often singled out by the critics as having particularly negative consequences for economic efficiency, is not found to be associated with lower growth rates."
Furthermore, it is noteworthy that those who are inspired by Japan's low social spending are not similarly inspired by Japan's relatively progressive tax system: Japan has high corporate taxes and a significant wealth tax.
Europeans enjoy greater social benefits largely because they pay for them. But - and this is the key part - this apparently hasn't harmed their economic growth. Indeed, as we've seen, their economic growth has overall been stronger than ours.
When Sweden found itself saddled with a large debt in the early '80's, it managed to reduce that debt without cutting social programs significantly. By 1900, it had one of the smallest debts in the industrialized world.
The story becomes even more fascinating. Using data from the federal finance department and the OECD, Brooks has done calculations which show that if Canada had imposed the same level of taxation on Canadians as European countries imposed on their citizens throughout the last decade, Ottawa would have collected so much additional revenue that we would now have no deficit at all. In fact, we'd have a surplus of $88.5 billion!
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