Monday, October 17, 2011

Closing the gap

The protest movement that has brought out thousands of demonstrators to the finance centres of cities around the world has one common theme - frustration that the rich are getting richer while the poor get poorer.

Democracy depends on a broad middle class, but that middle class has been declining for at least 30 years, especially in the United States and in Canada under the Harper government in Ottawa and the Mike Harris government in Ontario.

One measure that would help reverse the trend is to increase taxes on the wealthy. A highly-progressive income tax would help. So would a progressive tax on corporate profits that would discourage companies from continuing to concentrate power and would encourage them to break up into smaller units.

A return of death taxes would also help, reducing the wealth gap for the upcoming generation.

This approach has promise for agriculture.  Cuba recently learned that food production increased dramatically when land was taken from central control and "peasants" were offered about 10 acres each.

Why not tax the largest dairy and poultry farms in the U.S. so they are encouraged to break up by selling to family-scale size - just enough to provide an income of less than $100,000 per year for a family's return on investment and labour?

The measure of adequate size of corporation or business will depend on the nature of the business. For example, capital-intensive industries such as mining and auto manufacturing would be allowed to accumulate more capital than retailing.

Yes, there would be some sacrifice of efficiencies related to scale of operations, but the gains in the size of the middle class would be well worth the sacrifices.

Could Canada go it alone in the global economy? Why not? With our economy in the hands of millions of  individuals instead of one per cent of the population, we would have much better odds of discovering solutions.