Miscellaneous material to start your week.
- Richard Wike notes
that inequality is properly being recognized as a higher priority around the globe. But Steven Rattner observes
that recognition of the issue isn't doing anything to resolve it, as income and wealth concentration are only getting worse. And Linda McQuaig discusses
the need for far more political attention to the gap in Canada:
Apart from the obvious issue of fairness, this diversion of money to the top raises other issues that should be central to meaningful public debate.
For instance, there is growing evidence that a high level of inequality hurts economic growth -- presumably something voters might want to know. A staff report released earlier this year
by economists at the International Monetary Fund noted: "Recent empirical work finds that high levels of inequality are harmful for the pace and sustainability of growth."
Even more worrisome is the impact on democracy, as Canada's 70 billionaires and hundreds of multi-millionaires become ever more dominant in the political sphere, with an effective veto over a range of economic policies.
It's hard to imagine a development more crucial to the future of Canadian democracy. Just don't expect to hear much about it during the coming election campaign.- Meanwhile, Yves Smith highlights
another obvious (and dangerous) trend as corporate profits continue to grow at the expense of wages.
- Chris Dillow points out
that it's utter folly to expect "innovation" in the private sector to accomplish anything other than to further enrich the wealthy - and that if we want to see new financial instruments developed for the public good, we'll only get them through public control:
(W)hy do we get so much "dark" innovation and so little "bright"? Banks are guilty not just of sins of commission - mis-selling and rigging markets - but of sins of omission, not developing good products sufficiently.
The answer lies in the basic economics of innovation - that the social benefits (or costs!) of it often differ from the private benefits. (There is, of course, nothing
unusual about financial innovation in this regard.) The type of innovation that occurs will depend not upon its social utility, but upon whether its proceeds can be appropriated privately. And this incentivizes dark innovation. "Crap
" and "shitty
" CDOs which can be sold to fools - sometimes in a different division of the same bank - will be produced, whereas products with big external social benefits need not be. It might be no accident that a big chunk of the good innovation we've had in recent decades - such as index funds or venture capital trusts - has received nice tax breaks.
Herein, I suspect, lies an under-rated argument for intelligent state control (or even ownership) of banks. Such control might be necessary to rejig incentives towards bright innovation and away from dark. Mariana Mazzucato's argument (pdf)
that the state can be entrepreneurial
might be especially valid for the financial sector.- Susan Prentice and Holly McCracken follow up
on this weekend's child care convention by reminding us how much good could be done for the cost of just one of the Cons' tax giveaways. And Aaron Wherry muses
about the budget debate we might have seen if the Cons were willing to allow Parliament to discuss their latest fiscal update, rather than presenting it in an isolation chamber to stifle any response.
- Finally, Michael Harris writes
that after a decade of relying on campaigns designed to win over just enough swing voters at election time to overcome general public unpopularity, Stephen Harper is now losing even his party's base.