A prominent U.S. political economist says Canada is moving toward American-style inequality, and believes austerity economics and tax cuts for corporations are making the problem worse.
Robert Reich, the secretary of labor during Bill Clinton’s presidency, now writes extensively on income equality and was in Canada this week speaking at an event for the Broadbent Institute.
“The United States economy and the Canadian economy are going on parallel courses,” Reich said in an interview on CTV Question Period.
With Japan moving into an official recession and much of Europe still mired in a slowdown, there’s still an idea that countries need to cut government spending during the recovery.
That kind of thinking, Reich says, has the effect of worsening the ratio of debt to the total economy.
“Austerity economics does not work,” Reich said. “If you slow down the economy because government is cutting down so much that there’s not enough demand to keep the economy going, then you end up with a worse ratio of debt to GDP.”
The U.S. and Canadian economies are growing too slowly, he says. And many wealthy people or corporations, he said, are putting their money in places where they can get the highest return – but that kind of investment isn’t what creates jobs.
“Without customers, businesses are not going to create jobs,” he said.
Reich, who teaches policy and economics at the University of California Berkeley, said the key to reversing growing inequality is to invest in education, childcare, and fair wages.
“The people who create jobs actually are the vast middle class and the poor whose spending creates incentives for companies to expand and hire,” Reich said.
“The wealthy and corporations are not the job creators. They don’t need any more wealth. They don’t need any more tax cuts to give them incentives to create jobs.”
Earlier this week, a Statistics Canada report suggested Canada’s wealthy have seen their share of Canadian income shrink.
The report, released Tuesday, found that Canada’s top one per cent of earners made 10.3 per cent of Canada’s total income in 2012. That share of income was almost two per cent smaller than in 2006, when the top one percent earned 12.1 per cent of the country’s total income.
