David Frum says that Canada has lurched to the left like that is a bad thing. And he sees in yesterday’s strong performance by the Liberals a greater trend. Bernie Sanders is getting a lot of traction here in America and the Labour Party in the U.K. just elected a pretty far-left leader in Jeremy Corbyn. In other words, the Clinton-Blair neoliberalism of the 1990’s seems to have played itself out and left-wing parties are reverting to an earlier model.
Of course, Frum holds up the budget balancing credentials of the neoliberals in the U.S., U.K., and Canada as some kind of unambiguous plus, but if you read between the lines of his own column, you can see that budgetary responsibility wasn’t all it was cut out to be. For example, look at his explanation for why Canada embraced Trudeau.
Even before 2014-15, however, the populist anger expressed by Sanders and Corbyn could be heard in Canada, too. Canada has done a better job than the United States of sharing the proceeds of economic growth. Yet even in comparatively egalitarian Canada, rewards have tended to concentrate at the top of the income distribution. Earlier in the decade, resentment among middle-income Canadians toward the more affluent was offset by relief when Canadians compared themselves to Americans. As time has passed, however, the relief has waned and the resentment has intensified. It was those feelings that Trudeau harnessed, by condemning many small-business owners as tax cheats and telling Canadian business leaders that if they didn’t accept higher taxation now, they’d face even more radical claims in the future.
In other words, even a country that is more “egalitarian” than the United States or Britain eventually saw too much wealth concentration at the top. This isn’t necessarily explained by budget austerity, but that’s only part of the Clinton-Blair model. Tax policies are the primary way that money moves to the top, and it’s not just historically low progressive rates that have had an impact. It’s also how we handle carried interest and capital gains, or even inheritance.
If you take less money from the top, that’s an obvious causal factor in creating wealth disparity, but just as crucial are the incentives that are created for people to use their money in unproductive ways.
Why build a factory when you get rich at the casino table playing with credit default swaps?
So, there’s a deregulatory element to this, too. The left got away from protecting the small depositor at the same time that they decided to pinch the social safety net, and this all happened at a time of accelerating globalization and increased financial competition from abroad.
It’s time now for a correction. And I don’t know if a Clinton is the right person to preside over this correction here at home. I guess the test will be how well Hillary understands and can adjust to the changed circumstances we find ourselves in.
