As the ultra-rich get richer, the Trudeau government should tackle corporate greed and stagnant wages rather than offer personal finance tips.
by Gloria Novovic. Originally published on Policy Options
November 19, 2022
“Cancel Disney+!” – the message from Finance Minister Chrystia Freeland to Canadians struggling amid the affordability crisis – raises concerns about the government’s approach to what Robert Reich, the former U.S. secretary of labour, calls the inflation-by-corporate-greed crisis.
Although she later backtracked, the minister’s unsolicited personal finance advice reflects her broader solution to the current economic crisis – saving $9 billion in government spending by optimizing the budgets of federal programs.
Home economics tricks, however, are unlikely to solve the crisis of soaring housing, food and energy prices. More ambitious market interventions such as a wealth tax, market diversification and strengthened labour rights are urgently needed instead.
Homemade solutions for an economic crisis
In her interview with Global News’ Mercedes Stephenson, which aired in early November, Freeland acknowledged the financial hardship of “Canadian families [that] are looking very closely at all of their expenses.” Taking off her finance minister hat, she spoke instead “as a wife and a mother” and offered personal finance advice of minimizing non-essential costs. In her household, that meant cancelling the $13.99 monthly subscription to Disney+.
The Disney+ example reflects the Thatcherist “home economics” approach, which leads to policies that Neil Gilbert calls the “silent surrender of public responsibility.”
This tactic is dangerously effective: most people understand personal finance but have limited grasp of how state finance can and should be run. As a result, public attention is focused away from possible (and more effective) policy solutions and narrowed to seemingly reasonable (but insufficient) household fixes.
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In this case, the minister’s fix of a $9-billion cut in federal spending will not end a crisis that defies the textbook rules of inflation. In normal inflation scenarios, rising employment pushes salaries up, which increases demand for goods and consequently prices go up. Now, however, employment is rising but the increase in prices has been going up unsustainably, with food prices, for example, rising faster than the overall inflation rate. Wages have not followed suit, plunging people across the country in the affordability crisis.
Freeland’s remarks offer a misleading message to Canadians. The government is not limited to belt-tightening: it has the responsibility to tackle the root causes of today’s higher prices – corporate greed. The real solution lies in an increase in the social safety nets, a wealth tax and long-term market changes.
The difference between inflation and “greedflation”
The current debate on Canada’s budget considers only a limited repertoire of possible solutions. The Conservative Opposition is also off the mark when Pierre Poilievre blames government spending for inflation. The current inflationary environment is not a result of ballooning social welfare payments or rising wages (which would increase people’s purchasing power). Quite the contrary, we are facing an affordability crisis because the wages, especially for women, have not been catching up with the rest of the market.
Our crisis is not a market anomaly, it is the logical product of its current design. An Oxfam Canada report says that while Canadian government spent $109 billion on financial aid to workers between 2020 and 2022, the 59 Canadian billionaires saw their wealth increase by $111 billion.
The ultra-rich are, therefore, getting richer at the public expense: As the businesses they own raise prices while keeping wages low, the government is forced to spend taxpayers’ dollars to support the population facing the effects of “greedflation.”
As David Macdonald from the Canadian Centre for Policy Alternatives argues, the corporate sector has managed to capture unprecedented gains from the current recovery, with profits increasing to 15.2 per cent of gross domestic product in 2022. However, companies’ profit has not resulted in higher wages; workers’ share of GDP fell by 0.8 percentage points between 2020 and 2022.
A wealth tax along with diversifying key industries therefore emerge as urgent issues to be addressed. As Phoebe Stephens points out, Canada’s food market, much like the global one, is in the hands of the few corporations, resulting in problems such as a 70-per-cent hike in the average grocery bill between 2000 and 2020. Despite global supply-chain issues, companies are making huge profits, with Loblaws admitting to a “favourable momentum shift” that led to a 40 per cent first-quarter profit increase compared to the same period last year.
A case for feminist domestic policy
In the current context, even the more ardent TV enthusiasts will be hard-pressed to solve their financial woes by cancelling their streaming subscriptions. Canadians can do little individually to diversify markets or implement a wealth tax, an idea the vast majority of Canadians supports. That work must be done by Freeland and the government itself, with its self-declared feminist orientations.
Corporate greed and wage stagnation particularly impact women and other marginalized people, who have been traditionally ignored in household-based economic policies. Similarly, given the economic importance, not to mention the economic rights, of Canada’s immigrant population, one would hope for more inclusive language that transcends the traditional category of “Canadian families” alone.
Even if Freeland’s household savings tips represent only a portion of her strategic arsenal against the current financial crisis, they feed a discourse that places the responsibility of solving systemic problems on individuals, not government. Our understanding of the cause of a problem determines what we consider to be a fair solution.
The current affordability crisis is a signal of a broader market imbalance in which the ultra-rich hold too much power. Instead of personal finance advice, the federal government should implement tax and market reforms on national and global levels (such as through the reform of the World Trade Organization).
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It is reasonable to hold our elected leaders responsible for nurturing collective cohesion in the face of ongoing environmental, public health and economic crises. Increased social safety nets and welfare transfers must accompany a wealth tax – for which even some millionaires are calling! – and long-term market intervention that protects us from future greedflation scenarios.
This article first appeared on Policy Options and is republished here under a Creative Commons license.
