Jordan Heath-Rawlings: You may have heard – and actually, never mind heard, because you probably know first hand that this pandemic is more than a health crisis. It’s a financial crisis.
Clip: The worst we had ever seen in Canada, you’ve got to go back to 1982. And in that we lost. 600,000 jobs, 610,000 jobs over 17 months. Here we’ve lost 3 million in two months. It’s just staggering. 20.5 million jobs were lost in the U S just for the month of April alone, the unemployment rate spiking up to 14.7%.
Jordan Heath-Rawlings: A financial crisis. Yes, but not for everyone.
Clip: The super rich have gotten even richer during the pandemic. Amazon’s Jeff Bezos, for instance, is worth 36 billion more than he was in mid-March. Facebook’s Mark Zuckerberg is 30 billion richer. Total wealth for US billionaires is up nearly 20% since the start of the pandemic.
Jordan Heath-Rawlings: Now, unless you’re a boomer or even older, you’ve lived most of your life with rising income inequality. It’s not new. The rich steadily get richer and the rest of us try to keep up, try to keep a job and afford a home, pay the bills. It’s difficult sometimes, honestly, to keep in mind it wasn’t always this way. That this is a choice we made, maybe not us personally, but the people that we put in power, and allow to make those choices. And what COVID-19 has done to steadily rising inequality is basically the equivalent of gasoline on a fire. When Jeff Bezos can make $14 billion in a day, a month before millions of people across North America face evictions, you don’t have to be a genius to realize we are close to a tipping point. What happens when we reach that point? What happens when, and I’m only exaggerating a little bit when none of us have any money to give to Bezos because he and his colleagues already essentially have it all. There are a few ways it can go from there and none of them are easy or pretty.
I’m Jordan Heath-Rawlings. This is The Big Story. Bruce Livesey is an investigative reporter and writer who tackled what the pandemic has done to income inequality.
Bruce Livesey: Hey Jordan.
Jordan Heath-Rawlings: Can you start, I guess, just by giving me a sense of where the world and Canada in particular was at with income inequality before we got hit by a pandemic?
Bruce Livesey: It was really, really bad. Is the best, the best way to put it. So there’s some – just to give sort of a historical look at this. There’s something called the Gini coefficient, which is a way to measure income inequality. And zero on the Gini coefficient is perfect equality. So the higher it goes, the worse, the level of inequality is.So the Gini coefficient was, at its peak just before the Great Depression, in what, 1929. And then it fell all the way down to about 1980 or the 80s. So basically income inequality got better or, meaning that there was less income inequality from the 1930s till the early 1980s. And then since the 1980s that’s gone in exactly the opposite direction, has gone up to now a level which was around the same level it was just before the Great Depression.
Jordan Heath-Rawlings: Before we get into what’s happened in the past few months – I realize I’m kind of asking you for the 101 course on this, but, what was it that happened in the big picture around 1980, that started it this way?
Bruce Livesey: So can I guess the best way to explain it is the reason that income inequality declined from the 1930 to the 1980s was a combination of higher taxes on the rich and much more mass unionization among especially blue collar workers, because there was a large portion of the Canadian and American population who worked in heavy industry which got unionized mostly during the 1930s and 40s. And so unions were able to negotiate better contracts in the post-war economic boom, to get a larger portion of the profits. And starting in the 1980s, a number of things happen. One is the state governments in the United States and Canada decide to do a number of things. One of which was to stop taxing the wealthy. And just to give you an idea, in the 1970s in Canada, the top 1% were being taxed at a rate of around 90%, but they essentially started de-taxing the rich, they began to take the, stop taxing the wealthy at those levels and reduce their portion of the tax burden. On top of that, offshore tax havens, which have, have existed for a very long time long before that period, but they became, you know, they’ve proliferated since then, so that availed corporations and the rich to, to escape again, the tax burden. And then the second thing was, you know, with de-industrialization, which really accelerates when free trade agreements come into effect in the 1980s and 90s. Which had already begun beforehand, but basically deindustrialization meant the decline of especially blue collar unions. And as, as they declined their capacity for average workers to get a larger portion of the economic pod began to decline, you know, and governments exacerbated that by also bringing measures to make unionization more difficult. So those were the kind of the large measures, the large forces at play that led to the current situation.
Jordan Heath-Rawlings: As you can imagine, by now, we’ve kind of done a ton of episodes about how the pandemic has changed various aspects of how we live and the term that keeps coming up and these conversations, is that it’s an accelerant. Is that a fair use of that word for this situation?
Bruce Livesey: Yeah, I mean, basically, the rich have either gotten wealthier or their wealth has stayed the same while everybody else has declined, either because they’ve lost their job or because as occurs in all depressions or recessions, wages become depressed, meaning that they’re going to stop rising. The pandemic has caused the rich either to even get richer. And this sort of depends on who you are among the rich and what, where your assets are held. But, but generally the rich have either maintained their wealth or gotten richer while everyone else has gotten poorer.
Jordan Heath-Rawlings: Can you give me some examples, either of individuals or corporations, so I can get a sense of, you know, how quickly some people’s wealth is growing during this?
Bruce Livesey: So, so some example, the most famous example probably is Jeff Bezos, who, as we know, is the CEO of Amazon and not surprisingly, Amazon has done boffo sales during the pandemic. And the estimate that Bloomberg came up with is that since the pandemic has begun, or since the beginning of this year, is his wealth, which currently is around $190 billion has increased by $74 billion since the pandemic began. The Walton family, which owns the Walmart empire, they’ve seen their wealth increased by $25 billion. Mark Zuckerberg has also seen his wealth increased by exactly the same amount. In Canada, I mean, I calculated that Tobias Lütke, who runs, is the CEO and the co-founder of Shopify, he’s seen his wealth go from around $3 billion in March to 8, something like 8.6 or $8.5 billion today. The owners of the Loblaws, the Western family, you know, they’ve seen a, not that such, not such a great, the growth like that, but I think they’ve gone from like seven to 8.5 billion. And there’s, any way we can get into the reasons for that. But yeah, those are some examples.
Jordan Heath-Rawlings: Well, tell me about those reasons then.
Bruce Livesey: There’s a couple main ones. One is that, as governments have given money through programs like CERB, or through unemployment insurance to, to the unemployed or, you know, people who are struggling through the pandemic, that money has, it’s essentially gone straight to the rich because average working people have to spend that money on goods and services like their rent, like food, like heating, like paying off, you know, keeping privacy, maintaining their mortgage, their debts. So that money has flowed from government to average working people who then have spent the money. Which then ends up in the pockets of those who own supermarkets or banks or, you know, eCommerce companies or, landlords. The other, probably the biggest reason, is the stock market. So if you’re wealthy, you don’t stick your money in a bank account or underneath your mattress. You put it into the markets, which, you know, have been on this steady incline, this steady, you know, increase since, especially since the 2008, 2009 recession. And what happened with the stock market is it crashed, about 30% in March when the, when the real sort of impact of the pandemic hit, especially North America. And then it almost instantly rebounded and it has rebounded to the – it’s almost back to the level it was in January, February. So the wealthy, you know, they would have on paper, seen their wealth drop during March, but it has rebounded and is what it was, pretty much what it was, prior to the pandemic. So for those two reasons – and, oh sorry. And Jordan, the final reason is the wealthy have stopped spending themselves. And then they too, during the pandemic, you know, have, have cut back their own spending. They’ve been investing their money in assets like gold or real estate .They’ve done – it’s a combination of that they’re spending less, they’re still getting money from, you know, as I said, via governments through the average workers, plus, their paper wealth has rebounded and it’s pretty much what it was.
Jordan Heath-Rawlings: What about at the other end of the spectrum, how has people’s income dropped? And maybe just give us a sense of how bad it is out there.
Bruce Livesey: Well, I think it, it depends, if you’re in the professional classes, if you’re a lawyer or an accountant or a middle executive In a city like Toronto, for example, has a, you know, a large portion of its population are the so-called professional classes. They’re doing fine. They haven’t lost, generally have not lost their jobs. So they’re doing okay. The people who’ve been hardest hit are, you know, average workers, especially more on the unskilled workers. So anybody who worked in the hospitality industry, and I think between 2 to 3 million jobs were lost Canada by the end of May. And those would be largely, as I said, jobs in hospitality, in, certain aspects of well, what’s left of our manufacturing. In the United States, 40 million people lost their jobs by the end of May and now, there was an, an estimate that came out that said if governments don’t intervene, as many as 40 million Americans could be evicted by the end of this year. In Canada, because the federal government in particular intervened with, you know, CERB and EI, and they’ve stopped evictions in, in places like Ontario, so far people have not been, you know, thrown onto the street. Even though that might change because the – my understanding is the moratorium on evictions is going to end in places like Ontario. And then the future of these payments is also somewhat in doubt. CERB is supposed to eventually run out. It’s supposed to be replaced by some, you know, some form of EI. But if, if there’s a federal election and if Trudeau gets thrown out, then God knows what’s going to happen.
Jordan Heath-Rawlings: What does this kind of inequality and the uncertainty that you mentioned do to what I’m sure everybody is, is hoping will be an economic recovery?
Bruce Livesey: Well, basically, and going back to the Great Depression, why, you know, this issue of the Gini coefficient is important…so, by 1929, when the crash begins, when the Great Depression begins, the wealth inequality gap was massive. It was one of the highest levels in history. And then you go into this Great Depression. The Great Depression was exacerbated by a number of other things, such as the failure of the banking system. And the fact that governments, especially the US government refused, you know, began to cut government spending. But the reality is, is that if all economies produce, you know, a finite amount of wealth at a given time, and if all the wealth is held by, or most of the wealth is held by a small group of individuals, we’re simply not spending it. And the history of wealth accumulation is the more the wealthy get, the more they sit on it. There’s a great myth that they invest it. So the more they, if a small group of people have most of the wealth and they’re not spending it, then the vast majority of the population has less money to spend on goods and services. And spending on goods and services is what employs people. It gets the economy going. It gets people to go back into the workplace, into factories and into all of their jobs because there’s money flowing into the system. They have customers again and orders for goods and services start coming in. So if in the current situation with the pandemic, if there’s great wealth inequality, the capacity to recover from this recession is greatly undermined.
Jordan Heath-Rawlings: Is there any way to change that? Are there any, I know this is the million dollar question, but are there any ideas out there that are being looked at?
Bruce Livesey: Well yeah, I mean, basically if you go back to the period from 1930 to 1980, I mean, you look at what governments were doing. Well, they were taxing the rich at a much higher levels than they do today. And unionization was much higher. Unionization is more difficult to replicate now because the unionization that occurs in the 1930s is in large industrial workplaces, like auto factories and steel mills, which used to employ ,in their heyday, tens of thousands, if not hundreds of thousands of workers and those don’t exist anymore. Those factories, the factories that do exist, which are very many anymore – I mean, just as an example, in the 1980s, Canada had 30 auto assembly plans. We now have six in Ontario, so like, it’s really low. Like it’s been a huge collapse in the sort of blue collar unionized workplace, workforce. And then most people ended up in service industry jobs or government jobs, but especially the service industry or in the gig economy and they’re almost impossible to unionize. Or very hard to unionize in countries like Canada and United States. So the reality is that you have, well, yes, governments could intervene by taxing the rich more , in terms of the capacity for average workers or, you know, even some professionals, depending on what industry they work on to get higher wages is greatly undermined by just the nature of how the workforce has changed in the last 50 years, 40 years.
Jordan Heath-Rawlings: Is there the political will to move that in the other direction?
Bruce Livesey: No. I mean, the shocking thing is that the there’s virtually no discussion of income inequality in any respect and, beyond, you know, some academics and economists, especially more progressive academics and economists, but in terms of the media, in terms of the political discourse, I mean, no, they virtually never discuss it .Canada, like the United States, is a political duopoly, you either interchange between the Conservatives or the Liberals. United States, as we know, is the Democrats and the Republicans. All of those ,parties have no interest have demonstrated no interest because they’ve all been in power since this great wealth inequality divide began in the 1980s. They’ve shown no interest in, retaxing the rich or getting rid of the offshore tax havens or doing anything about that. They make, they often, you know, will sort of claim that they’re going to do something about it, but they never do. So at the moment, the political parties that generally end up in power are very beholden to the wealthy and we know this to be the case. And so not, not surprisingly, they do nothing about, Taxing the rich more than they currently are.
Jordan Heath-Rawlings: So then my final question is, and I’m, I’m only joking a little bit, is like, what happens next? Does this get worse and worse until we have a revolution or what?
Bruce Livesey: Well, I mean, somebody I interviewed recently about this ,who’s an economist that, Laurentian University, he says, yeah, I mean, look, if you look at history, you know, civilizations collapse over this, right? A number of things can happen. Even if the peasants don’t revolt, you know, the, the society becomes less governable because – and you’re seeing this in, quite frankly, in the United States.
Jordan Heath-Rawlings: I was just going to ask. Yeah.
Bruce Livesey: I mean, you know, basically because you know, a greater portion of the population is being thrown into desperate straits where they cannot – they’re either, you know, they’re up to their eyeballs in debt, or they’re unemployed or they’re in these jobs, which don’t pay enough to pay the bills, which is a growing portion of the population in both countries. In Canada, we have a level of a consumer debt that’s reached $2.3 trillion, which is larger than our GDP. It’s no accident that as the wealth inequality has grown, consumer debt has grown with it because as more people cannot, through their salaries, which have generally been stagnant for 40 years, if they can’t buy goods and services like a house or a car or a kid’s education by saving money the way they used to, perhaps back in the 60s and 70s, they go to the banks and they get credit. Well, you end up with this massive amount of consumer debt, which is another, you know, more evidence of the wealth divide, but the upshot of all of this is that the great risk is you end up with a growing portion of the population angry and desperate. And also the other part of this is that the richer the rich become, the more they become divorced from reality. I mean, they live in gated communities, they, you know, they just don’t live in our world. They don’t take the subways. You know, there exists, they have no idea what’s going on in the so-called street. So I can imagine if the pandemic goes on for too long and the income inequality is not addressed, then you’re going to see more and more social unrest.
Jordan Heath-Rawlings: Okay, one more question now because I can’t resist. There’s a lot more poor people than rich people and we theoretically live in a democracy. So, why won’t people just vote to end income inequality? I made you sigh, which is always a good sign.
Bruce Livesey: Well, I, you know, I theoretically, you know, you should see the rise of parties that have that as part of their platform and part of the problem is that really, perhaps with the exception of the Green Party, none of them really do, and they don’t talk about it. I think it’s a very good question, but it’s a very complicated question to answer because it’s like, why do people constantly vote against their own political interests, which is, you know, they always seem to do, and this is, you know, this predates the pandemic or, you know, this period of history. I mean, you could argue that societies in these circumstances, go in one of two directions. They go, they go to the left or they go to the far right. They go to the fascist right, who will claim very much like the Republican party has done under guys like Steve Bannon and Trump is that they’re interested in, they want to answer the interests of this displaced working class, especially the, the white male working class., who have suffered under de-industrialization. But in fact, if you look at their policies, they’re all there to benefit the rich. And it’s interesting that Trump has not gotten rid of any of these free trade agreements that he promised he would. He passed a tax bill that, you know, enormously gave huge tax breaks to the rich and, and piled on more taxes to the suffering middle class. And he’s tried to gut every workplace and environmental law he can get his paws on. So, you know, that’s the great danger, is this could go in a very alarming direction, which is to more of a fascist and authoritarian response, you know, which has many ways what happened in Russia, you know, after the collapse of the Soviet Union. It’s become an authoritarian state that represents the interests of a very tiny, rich oligarchy. Canada, the United States are also oligarchies with sort of an element of democracy, but the democratic element, the space for democracy in both countries is shrinking and that’s very alarming.
Jordan Heath-Rawlings: We’ll leave it to on a cliffhanger there then. Thank you so much, Bruce.
Bruce Livesey: My pleasure, Jordan.
Jordan Heath-Rawlings: Bruce Livesey, investigative reporter. That was The Big Story. If you would like more head to thebigstorypodcast.ca. Find us on Twitter @thebigstoryFPN. Find us in your favourite podcast player. Those reviews, keep them coming. They are amazing, except for that one star review the other day. You were wrong, by the way, whoever you are. You can also of course find us and our brother and sister podcasts at frequencypodcastnetwork.com and you can email us anytime. The address is firstname.lastname@example.org. Thanks for listening. I’m Jordan Heath-Rawlings. We’ll talk tomorrow.
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