Sunday, August 23, 2009

Everybody Knows

Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
Thats how it goes
Everybody knows

Leonard Cohen (Everybody Knows)

One thing everbody should know is to what degree the benefits of economic growth in North America are distributed disproportionally. That way when politicians speak about the economy, we are fully aware about their intentions and the consequences of their proposed actions.

For example, for the last thirty years we have been led to believe that policies that lead to ever higher levels of economic growth are beneficial to the national interest.

Recent studies, however, raise serious doubts if this is indeed the case, especially for the vast majority of the population. In fact, once we take into consideration the effects of increasing levels of income inequality upon the health of the population, leaving aside the environmental consequences for the moment, we should have serious doubts about pursuing continued economic growth as the means to lead us to the promised land.

Economists Emmanuel Saez and Thomas Piketty, in their recently updated article, Striking it Richer: the Evolution of Top Incomes in the United States, demonstrate the effects of the implementation of free market economic policies in the US on income distribution. What you might not know is the extent to which the rich got richer. For example, from 2002 to 2007, average real family incomes grew by 3.0% annually but 65% of that growth accrued to the top 1% while only 35% of that growth accrued to the bottom 99% of US families.

The other thing you should know is how the disproportional increase in real family incomes affects health outcomes for the population. As could be expected, the implementation of neo-liberal economic policies brought about disproportional health benefits to the very well-off.

Elise Gould notes, while life expectancy has grown across the United States between 1980 and 2000, the degree to which people live longer has become increasingly connected to their socio-economic status. The Chart compares life expectancy by socio-economic decile of the most well-off to the least well-off.

In 1980, those with the highest socio-economic status had a life expectancy 2.8 years higher than those with the lowest status (75.8 versus 73.0 years, respectively). By 2000, that gap had grown: those in the top decile had attained a life expectancy of 79.2 years—4.5 years more than those in the bottom decile.

One might respond that as long as the lot of the poor improves, we should not be concerned with the unequal distribution of real benefits. This is where the question ceases to be simply economic and becomes very political. Even if all the boats may rise, albeit unevenly, during a period of economic expansion, the unequal distribution of wealth exacerbates existing social problems to such an extent as to call into question whether or not continued economic growth is called for.

Once a certain threshold of revenue per capita is attained, the benefits of increasing revenue with regard to the health portrait of a nation begin to level off. For the developed countries that have long passed this threshold, the pattern of the relative distribution of wealth becomes a more important indicator of the overall health of the population than the absolute wealth of the nation.

This suggests that with regard to how we manage our political economy in Canada, the reduction of income disparities should take precedent over continued economic growth.

In the next few posts, I will turn my attention to the evidence concerning income distribution.

1 comment:

  1. Hi Brian,
    " long as the lot of the poor improves, we should not be concerned with the unequal distribution of real benefits." This was obviously the driving philosophy that led our MP Lawrence Cannon to pledge $6 million in federal money to Chelsea's new community centre (one of the richest per capita municipalities) and - belatedly - only $1.8 million to country cousin Wakefield/La Peche.


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