Modern democracies have always been in flux, with common people caught in a never-ending tug of war with the wealthy aristocracy for the reigns power. When one group is brought to the brink, or the guillotine, the other side starts to pull back. One moment Rome’s a republic, the next it’s an empire. Communist countries become socialist, socialist countries embrace capitalism, capitalists flirt with facism, and then we go back again. As we evolve politically and democratically, the extremes to the left and right are narrowing as we set up stakes in the middle ground between people power and money power.
The job of modern governments is to act as referee in this process, raising and lowering taxes, strengthening and weakening labour laws, funding and de-funding education and social programs, regulating and deregulating industry, raising the minimum wage or letting it stagnate relative to inflation, investing in companies or investing in people. When money and governments become too cozy, the lower wage majority can be counted on to eventually vote the bums out.
I think it’s safe to say that the aristocracy is winning this latest round.
According to the Canadian Council on Social Development, the richest 20 per cent of Canadians saw their net income increase by 43 per cent between 1984 and 1999. During the same period, the bottom 20 per cent of earners actually saw their net wealth slip by about 51 per cent when inflation is taken into account.
From 1999 to 2005, Statistics Canada reports that the wealthiest 20 per cent saw their wealth grow another 19 per cent, while the bottom 20 per cent made no gains whatsoever. The rising value of housing explains part of the growing disparity, and income taxes do lower the gap somewhat.
For middle-income families, wages have more or less kept up with inflation the past 30 years and that’s about it. However, with the rising cost of housing, energy, post-secondary education, insurance, and other necessities — not to mention growing debt loads as people overspend to keep pace with a middle-income standard of living — people are having a tougher time getting ahead. Include the fact that both parents are typically working these days, and it would appear that middle incomes are actually shrinking quite drastically.
According to a report by CIBC World Markets, even a one per cent increase in interest rates — which would result in increased mortgage and loan rates — would force thousands of families already living close to the wire to declare bankruptcy. Others would have to adopt drastic cost-saving measures that would reduce consumer spending and bring about another recession, with all the accompanying job loss, wage stagnation, and loss of real estate equity.