 Welcome back to Think Tech. I'm Jay Fidel, and this is View from the North mostly from North America, Canada, and today we're going to talk about income and wealth equality or disparity, as the case may be, in North America, Canada with Ken Rogers. It would be right back. Welcome back to the show, Ken. Great to see you. Let's talk about income and wealth disparity in Canada. Very important. We understand how things work there. We can learn from that. What can we learn? Well, not a heck of a lot different than in the US. Income inequality is a problem worldwide, and the explanation of it is pretty simple. How does it arise, and why does it arise, and will it continue to get worse or better? And there was a famous book written about less than 10 years ago, a fellow named Thomas Piketty, a French economist, and the book was an instant smashing success, made New York Times top list. But the most interesting thing about it, it was the most viciously attacked economics book ever written. And it was attacked by the wealthy elite in the United States, particularly the Cato Institute. And for example, this is a publication from the Cato Institute. Now, Thomas Piketty did a great detailed analysis of about 20 different countries in the world of what was income equality over time. And he was pretty clear that income inequality varies from time to time. For example, during and after World War II, and up to the middle of the 70s, income equality actually improved. That is, you know, people at the bottom of the rung were doing better at relative to the people at the top of the rung. I mean, the wealthy were getting wealthier, but the poor were getting less poor at a quicker rate. That's a pretty rare occurrence. Now, what Thomas Piketty concluded, and I believe rightfully so, is that the rate of return on capital is always greater when the majority of the time, but over a period of time will be greater than the growth rate in domestic GDP. Or the growth of the economy. Well, of course, if there's just two people, you and I, and I have a bunch of money or capital, and so I own all the machinery and all the factories, and that my return on those factories is a little greater than the growth rate of the economy. If the economy grows at 3%, and I earn 4% on all my capital, obviously I'm going to get, you know, a bigger share of the pie every year, you know, that my wealth and my income will grow faster than everybody else's added together. You know, it's a pretty simple concept, and if you're a good capitalist like I am, you know, I'm a great believer in, you know, initiative and the guy who's clever, Ian Musk, a brilliant engineer, he creates a company called Tesla, and he deserves, you know, a great economic reward for that. You know, the, so when you stand back and say, gee, it's inevitable that the wealthy would get rich faster than the average person, you really say, well, is that okay? And in my answer, then I switch to what is the social consequence of growing inequality, and I believe, you know, a great portion of the unrest we have in the United States, Canada and other countries relates to, you know, a feeling of, of, you know, things as they're growing or going are going way better for a few people at the top relative to me. You know, that, that there's an unrest that getting larger and larger, whether you take, you know, how many people are living on the streets is outright homeless, or how difficult is it for, you know, the public to own a house. You know, those may be symptoms, but it takes time for inequality to, to graduate, get worse and worse and worse. Well, the interesting thing about the major countries of the world, I think of the G7 as the, you know, seven largest economies other than, you know, say China. That Canada's in the middle of the pack in terms of inequality. You know, Japan is the best of the G7 and in Italy and France are a little bit better than Canada, but the United States is by far the worst. Now, if you changed one statistic, or let's call it two of them, if you said how, how do the countries compare before taxes and income distributions, and how do they compare after? Well, the answers I gave you are the after, because that's the reality. You know, on a basis of after taxes are paid and income is redistributed, you know, Canada looks pretty fantastic compared to the U.S. Whereas before taxes and distributions, the U.S. is just about the same as the rest of the G7. That is the entire difference relates to, you know, taxes and distribution. Well, now you could see why if Thomas Piketty in his famous book, you know, describes inequality pretty simply and says that it will get worse and worse and worse unless there is taxes and redistributions of wealth. Well, clearly you could see why that upset the very wealthy at the U.S. end. And I think of it as, you know, an example of why the U.S. is political is messier than almost every other country. You have, you know, you have the ability of the very wealthy to control the entire political process by way of their financial contributions. Where countries like Canada have said, you know, corporations and unions may not contribute to political funding and they limit the funding very dramatically. You know, it costs about the same to run a total federal election in Canada as it does for one state senator in the U.S. It, you know, it's just, you know, throwing money at it to get a result. However, you know, if we take, you know, the Thomas Piketty thing of what inequality is there, I got a few examples of stuff in why the United States is so pathetic. I saw one statistic that four of the richest U.S. families had more wealth than the bottom half the United States total population. You know, so if you can say you got four people, you know, you know, you could name the four but you could pick half a dozen of the top billion, you know, let's call them all the trillionaire level people. Well, when you think of, of there's only about three eighths of the U.S. population does not own a house, you know, or a condo. So, so in the bottom half, you're still sitting where, you know, maybe a quarter of the poorest 50% of Americans still own a house. Well, if you think, you know, millions and millions of people owning a house, they still have less money than four people or four families. Like wealth and income go together. But, you know, another simple kind of example is, is in the United States in 2018, the richest 400 U.S. families paid an average income tax rate of 23%. Now, the bottom 50%, the bottom half of U.S. households paid an average income tax rate of 24.5% or more. Now, you know, does that sound reasonable? You know, if you're a guy living on the street and you want to spit out and get angry about something, you know, that's not a bad idea. Another one was in 2019, the U.S. Census Bureau said that any quality in the United States was higher than it had ever been in history. Now, that was just before the Trump brought in the rich tax cuts or tax cuts for the wealthy. Now, showing a little bit over the last 40 years, the top 1% of people have had their income increase 300%. That is, if they used to earn $1,000 a day, they now earn $300,000 a day. You know, just a pretty significant difference where the bottom 20% of people, their income only went up 16%. You know, so if they used to earn $100 a day, they now get $116. Now, that ignoring inflation and someone, I mean, inflation did eight up more of it than the guy, than the bottom 20% of the population gained. And you really, you know, have a thing like comparing that 300% increase for the top 1%. Well, the next 19%, let's take virtually all the professionals, like the medical doctor that everybody says, you know, is earning so much money and, you know, what a terrible thing I should have get my kids to be medical specialists or to be Wall Street lawyers. You know, well, their income in that last 40 years really only went up 70%. No, that's, you know, they at least beat inflation. You know, like if you think of the MD that, you know, lives in a really fancy house and drives, and his wife drives at Mercedes and so on, you know, it's still, you know, they did nothing compared to the top guys. And, you know, the, you know, the majority of people, that is, if you took the 20th percentile to the 80th percentile, you know, virtually all the people there, there in the last 40 years, their income went up about 40%. Well, that's probably not as much as inflation. You know, well, you know, the basic idea of income inequality to me is so basic to the whole idea of democracy, you know, is not let's be libertarians to the end of all possibilities. You know, a libertarian to me like the Anne Rand or the Cato Institute at its extreme types of view is, is that the rich guy, he should be able to keep absolutely every penny he earns and you should keep your grubby hands often. And that, you know, the idea is that, you know, to give somebody help when there's a problem, you know, even the, you know, young girl who gets pregnant, their parents' disowner, you know, should society help that girl out? You know, and my opinion is yes, you know, the pure, you know, Anne Rand type would say, nah, let her drown. You know, she must have somehow had some role in her fate. You know, that the guy, the people in Giziantep in Turkey right now, you know, suffer from two major earthquakes, they probably, you know, they somehow must have done something to deserve that. We shouldn't help them, you know, that that idea that the wealthy should be able to keep all their money is just absurd to me. And I think that the United States leads the world in outright stupidity in terms of not having sufficient taxes on the wealthy to have capital gains, have such favorable treatment over any other kind of income, dividend income, or have such favorable treatment to have, you know, one of the key causes of income inequality is, is, you know, not having enough unions. You have a lot of things that the US leads the world in things that increase inequality. That's just a scary picture, isn't it? Yeah, well, Americans, Americans like to think of themselves like like Canadians and Brits and Australians is, we're really fair people. Well, that's not fair in any description of fairness or that's not not being human. It's not kind. It's not thoughtful. It's not whatever adjective you can use the opposite of greedy. Well, the other part is that you did mention that if you're earning your money on the investment of your capital, you're not necessarily working, not even working like that doctor you mentioned. You're just sitting back in the armchair eating bonbons and your capital is working for you. You and the people around you never have a work a day in your life. And yet you're getting all this incredible income with low taxes and it's passed on from generation to generation. The world's full of Paris Hilton. Yeah, and Donald Trump's. I mean, because they have the inherited wealth, look at the damage he's done to the world. Well, that's that's one thing too is that there's a political effect and you described that also. And that is that if I have a lot of money and I sit around eating bonbons and developing more money. I use that money for political influence, especially with the advent of Citizens United in the United States. I can put that money anywhere I want politically and I can stop any effort on the part of government to, you know, even the playing field. So I prevent any reform whatsoever. I agree that the tax reform of tax form act of 2017 was really all for the benefit of the rich and it was dumping on the rest of us. And if you tried right now you've walked into the hallowed halls of Congress. And you still I want to do some tax reform I want to tax the wealthy such as Joe Biden has suggested. You won't get anywhere. Not just because they're Republicans, but because there's an active group of influencers who are very well healed, who will take, you know, dramatic measures to stop any reform. Yes. I mean, you have one of the geographic phenomenon in the world or what are called tax havens. You know, you have countries like Luxembourg, you know, a teeny weeny place in Europe right between Belgium and Germany, let's call it, you know, which is the highest income per capita of any country in the world. You know, and all they do it's really just a tax haven for primarily wealthy Germans, but you know, wealthy, wealthy anybody. You know, in the US you hear of places like the Cayman Islands, you know, or, you know, Curacao or the British Virgin Islands or Bermuda, they all have some tax haven element to them. You know, that the structure for the wealthy to not pay their share in the world is pretty, pretty strong. It's pretty hefty. It's hard to break down. Well, they complain, they complain that if they have a way to generate additional income by investing their capital, you know, in lucrative investments, they should be permitted to do so. But, you know, I would add this thought I'd be interested in your reaction, as if you live in a country, a modern up here country that allows you a platform to invest your money reasonably safely, and to have the best environment in the world, or making money with capital, shouldn't you pay a price for that platform, for that environment. And these guys are at the same time saying, no, you just give that environment to us and we don't want to pay a price for it. And there's something really another step of unfairness involved. It's not a true analysis to say that they should be entitled to everything they keep, because in fact the country itself is providing them with an environment that allows them to make more money and politically pay less taxes. So, you know, one thing I'd like to ask you about is how do we fix this? What did Piketty say about fixing it? What do you say about fixing it? I mean, something would say you have to have a revolution. What do you have to do? Well, Elizabeth Warren was correct in her basic strategy of, you know, you can correct virtually every political ill in the United States with a simple, you know, small tax on the very, very, very wealthy. You know, they are paying such a puny, unreasonable share, you know, that you simply need to get more tax from the wealthy and redistribute it for the public good. You know, for example, when you and I went to university graduate school in New York City, you know, way back, you know, a zillion years ago. The income tax rate in the United States, the highest tax bracket was at 90%. You know, it was left over from World War II. Well, you know, it takes a world war for the rich guys to say, goodness, we better buckle down and protect the whole country or something. That was a bit dramatic, too. And the only way that that could be done was contributed. But all the very, very wealthy families did extremely well in the 50s and 60s, even though those were the decades in which middle class got created and developed, really, how Americans and Canadians and Australians got to own single family homes. How everybody had an automobile, pretty soon they all had two automobiles. You know, it was a fantastic time period, but it was only because the contributions of the wealthy to the society were fair and reasonable. You know, if you're earning, you know, $200 million a year and your marginal tax rate is 90%, I still don't feel too bad for the guy who's got $25, $30 million left. Right. He's fine. But that's not like that anymore. It's like they got greedy. They got greedy through the likes of Citizens United. They got greedy to stop any tax rate 90% a long way from where we are. And they want to hold on to everything and dump on the little guy. But, you know, one other comment on that, Ken, is that, you know, look at Trump, the phenomenon of Trump. He has his base. His base is, in large part, very poor. And yes, his base supports him or did support him on a tax reform act that would only tax them, not the rich guys. So it's upside down. A lot of that is if you just think of straight libertarian, you know, and I am for freedom, you know, leave me alone. You know, if there are problems it's caused by big brother. That plays really well for the very, very rich. You see, the very, very rich and, you know, the hillbilly have that in common. You know, just that, you know, freedom sounds like a good idea. And, you know, the poor guy who's, you know, especially the least educated ones. You know, you want to blame somebody and it's pretty easy to blame big brother. You know, the deep state, whatever that is. You know, and a lot of these racial things, you know, arise really from, you know, the poor end of the Trump base. You know, they, they're having a hard time with jobs like the gig economy does not work very well. You know, it's right now one of the big economic changes as I see is, is that what has happened in the past when technology has created whole new areas and whole new jobs and and eliminated others. There's always been replacement jobs that were pretty good. Well, as I see things evolving now, I tend to think there's, there's less and less replacement jobs. And the jobs that are, are available are not as high paying as, as the ones that are going. Like I think of, you know, solutions in, in the medium and long term, you're going to get do three hour work week. You know, when, you know, job sharing in that sense is, is I think that technology will greatly improve our standard of living. But it'll only be without, you know, internal riots and strife if there isn't some way of having income sharing and income in income equality. And I don't see it being a few people work and everybody else is on welfare. No, it reminds me of Andrew Yang, though he ran for president. I guess a good idea. Guaranteed income, he didn't get anywhere with that. I think they, you know, they pulled the rug out from under him and he was gone. But, you know, bottom line is, you know, all of what you said is very true and of great concern at getting worse. And, you know, to prepare for this show, I went and looked at the numbers and I found the same numbers you're talking about. The US is in really bad shape in terms of disparity of income, disparity of wealth and disparity of political influence, which is, you know, a direct relation to all of that. And so the question is, you know, how do we, how do we right size this? And how do we, you know, if we go out with all these calls for freedom and liberty and democracy and representative government, and we elect people who don't really care. We're not, we're not going to solve the problem that way. The public Congress don't care. And that's their culture. George Saras doesn't care. He likes somebody, you got to know who you're electing and what they really stand for. Yeah, so, you know, the problem is that it's not organized and the people who are on the 99% side of things who are working stiffs, you know, can't keep up. And it's going to be worse. They're not organized and they can't win an election against the big money that comes in for the Citizens United Super PAC. So I asked you one more, I asked you one more question. How do we fix that? Well, during World War two, Canada entered the war far before the United States. And they had an interesting way of getting everybody the best of people. They created a thing called the Buckeer men for a dollar a year. And they had probably the 50 richest people in Canada working for a Buckeer. And they developed everything that Canada did for the war effort. You know, they put, you know, can you envisage if you asked Mr. Tesla to use his intelligence to help with pick a particular problem? You know, what problem would he be best suited for? You know, there's probably few entrepreneurial engineers that have one-tenth the talent that he does in the United States. How could you use that effort? How could you encourage those people to do for the public good? You know, you have had over the years, you've had lots of, you know, very important people, you know, take cabinet posts in the U.S. You know, that were wealthy and it cost them a lot of money just to be in that cabinet post. I think that that's an important item is get the wealthy to be part of the solution rather than keep fighting them. Yeah, I've got to care about the country. You've got to care about, you know, your brother. You've got to care about the society in which you live. And I think we've lost that. Instead, we have greed and a huge disparity, not only of money, but of attitude. And I don't know how you fix that. But let's talk next time about campaign financing and see whether there's some solutions there. Ken Rogers, Dr. Ken Rogers, our friend in Canada, in Kelowna, British Columbia, helping us understand these very naughty problems. And they're not just the U.S., they're international. And we need to know what's going on in other countries like Canada. Thank you so much, Ken. Thank you. Aloha.