The strug­gle to civ­i­lize cap­i­tal­ism

In only a few years, the com­mon ground in Canada to work for eco­nomic fair­ness seems to have evap­o­rated

The Expositor (Brantford) - - FORUM - R. MICHAEL WAR­REN R. Michael War­ren is a for­mer cor­po­rate direc­tor, On­tario deputy min­is­ter, TTC chief gen­eral man­ager and Canada Post CEO. r.michael.war­ren@gmail.com

Four years ago I wrote an opin­ion piece ar­gu­ing cap­i­tal­ism had the ca­pac­ity and time to civ­i­lize it­self. It sur­vived the Great De­pres­sion be­cause it has the in­her­ent abil­ity to re­form it­self — in its own self-in­ter­est. Now, I’m not so sure. I thought the cap­tains of cap­i­tal had a vested in­ter­est in en­sur­ing the work­force had the means to buy their prod­ucts and ser­vices. As Henry Ford fa­mously said, “The own­ers, the em­ploy­ees and the buy­ing pub­lic are all one in the same.”

But since the 2008 re­ces­sion, eco­nomic re­cov­ery has been slow for most Cana­di­ans. Per­sis­tent wealth and in­come dis­par­ity has con­strained con­sumer de­mand.

One per cent of Cana­di­ans are earn­ing 15 per cent of to­tal in­come. Twenty per cent own nearly 70 per cent of the wealth. Mean­while, more than 50 per cent of Cana­di­ans are $200 or less away from not be­ing able to pay their bills.

Some cor­po­rate lead­ers rec­og­nized the dilemma. A 2012 Bloomberg Poll found 75 per cent of them be­lieved cap­i­tal­ism was “in trou­ble.” Thirty per cent said it needs a “rad­i­cal re­work­ing of the rules and reg­u­la­tions.”

Mean­while, pro­gres­sive gov­ern­ments in Canada promised greater fair­ness in in­come tax, labour stan­dards and so­cial pro­grams as ways to bring the dis­en­fran­chised back into the eco­nomic main­stream. There seemed to be com­mon ground for civ­i­liz­ing cap­i­tal­ism in Canada.

Fast for­ward to to­day and this com­mon ground has evap­o­rated. Busi­ness doesn’t seem to get the big­ger pic­ture.

A coun­try with more than a quar­ter of its work­force earn­ing less than $15 an hour is a coun­try flirt­ing with po­lit­i­cal ex­trem­ism. Busi­ness hasn’t acted, so gov­ern­ments have had to in­ter­vene, maybe too ag­gres­sively.

The fed­eral gov­ern­ment and some prov­inces are mov­ing to shore up the mid­dle class and bring more low-in­come work­ers into the eco­nomic main­stream. Busi­ness lead­ers and pro­fes­sion­als feel the col­lec­tive im­pact on their bot­tom line and per­sonal after-tax in­come is too much too soon. As a re­sult they are fight­ing pro­posed re­forms to the fed­eral tax sys­tem and pro­vin­cial labour stan­dards at ever turn.

Two things need to hap­pen. Gov­ern­ments need to in­tro­duce longer phase-in pe­ri­ods for their re­forms. Busi­ness needs to look past its im­me­di­ate con­cerns to the po­lit­i­cal sta­bil­ity these re­forms will bring longer term.

I can un­der­stand why busi­ness feels it is be­ing over­whelmed. An On­tario golf course owner told me he will have to ad­just to a 32 per cent in­crease for his min­i­mum wage work­ers over 18 months to $15, plus pay some ad­di­tional ben­e­fits. That will also prompt his work­ers al­ready mak­ing $15 to want a raise.

On top of this, the owner is pay­ing more fed­eral and pro­vin­cial per­sonal in­come tax as a re­sult of re­cent fed­eral and On­tario taxes on high-in­come earn­ers. And now the fed­eral gov­ern­ment is pro­ceed­ing with leg­is­la­tion that will pre­vent him from us­ing his com­pany to split in­come among his fam­ily and en­joy a low tax rate on pas­sive in­come within his busi­ness.

Ottawa and Queen’s Park should follow the lead of the new NDP gov­ern­ment in Bri­tish Columbia. It’s giv­ing em­ploy­ers more time to ad­just by phas­ing in a $15 min­i­mum wage over the next four years.

Mean­while, the busi­ness and pro­fes­sional groups that are al­lied against the Trudeau and Wynne gov­ern­ments are for­get­ting some­thing fun­da­men­tal. It’s what can hap­pen if we ig­nore the frus­tra­tion of those mil­lions in our so­ci­ety who feel the game is rigged in favour of the rich.

The de-facto leader of the West­ern world, Angela Merkel, has just won a hol­low vic­tory in Ger­many. An emerg­ing rightwing, anti-im­mi­gra­tion party made ma­jor in­roads. And in France, the National Front, a right-wing, pop­ulist, anti-im­mi­gra­tion party also made his­toric gains in re­cent elec­tions.

The ma­jor­ity of those who voted for Bri­tain to leave the Euro­pean Union live out­side the Lon­don bub­ble. They are mainly lowto mid­dle-class work­ers who thought leav­ing the EU might some­how im­prove their eco­nomic well-be­ing. It’s not clear how that will hap­pen with Brexit.

Don­ald Trump’s un­likely win was fu­elled in part by a coali­tion of over­looked blue-col­lar and work­ing-class white vot­ers. For many of them the Amer­i­can Dream has passed them by. Un­for­tu­nately their anger has found a voice in a patho­log­i­cal pres­i­dent who’s un­likely to ease their pain. In­stead he’s bringing us all closer to nu­clear war.

In this coun­try the mem­brane that di­vides us from this kind of di­vi­sive, ex­trem­ist pop­ulist pol­i­tics is thin­ner than many think. It must be in­fu­ri­at­ing for the nearly five mil­lion Cana­dian work­ers mak­ing less than $15 an hour to watch the ex­pen­sive me­dia cam­paigns of the well-off claim­ing they can’t share any more of the div­i­dends from our pros­per­ous econ­omy.

We have to find ways to re­verse the ris­ing in­come and wealth dis­par­ity in Canada with­out crip­pling en­trepreneur­ship, ini­tia­tive and in­vest­ment. If we fail to civ­i­lize how cap­i­tal­ism func­tions in this coun­try, we risk desta­bi­liz­ing our democ­racy and de­scend­ing into po­lit­i­cal chaos.

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