The Trouble with Billionaires

  October 1, 2011

The Trouble with Billionaires

Linda McQuaig: Concentration of wealth in North America growing and dragging down economy
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Journalist and best-selling author Linda McQuaig has developed a national reputation for challenging the establishment. As a reporter for The Globe and Mail, she won a National Newspaper Award in 1989 for a series of articles which sparked a public inquiry into the activities of Ontario political lobbyist Patti Starr, and eventually led to Starr’s imprisonment. As a Senior Writer for Maclean’s magazine, McQuaig probed the early business dealings of Conrad Black, uncovering how Black used political connections to avoid prosecution. An irate Black suggested on CBC radio that McQuaig should be horsewhipped. In 1991, she was awarded an Atkinson Fellowship for Journalism in Public Policy to study the social welfare systems in Europe and North America. McQuaig has been a rare voice in the mainstream media challenging the prevailing economic and political dogma -- as a columnist in the financial pages of the National Post in the late 1990s, and since 2002, as an op-ed columnist in the Toronto Star. She has also taken on the status quo in a series of controversial books – including seven national best-sellers – such as Shooting the Hippo (short-listed for the Governor General’s Award for Non-Fiction), The Cult of Impotence and It’s the Crude, Dude: War, Big Oil and the Fight for the Planet. Her most recent book (written with Neil Brooks) is The Trouble with Billionaires.


The Trouble with BillionairesPAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Toronto. In the last few years, there's been a lot of discussion in the United States about the massive shift of income to the top 1 and 2 percentile. Well, the same thing more or less has been going on in Canada. Now joining us to talk about the Canadian situation is Linda McQuaig. Linda is the author of the book The Trouble with Billionaires: Why Too Much Money at the Top Is Bad for Everyone, which she cowrote with Neil Brooks. In the past she's been a reporter with The Globe and Mail, a senior writer at Maclean's magazine. She's an op-ed columnist at The Toronto Star. Thanks very much for joining us.


JAY: And I guess I should add for--our Canadian viewers all know this, but for our American viewers, Linda has written at least seven or more bestsellers in Canada, mostly about the economy. So talk about the Canadian situation, about this shift of income. What do the Canadian numbers look like?

MCQUAIG: Okay. Well, first of all, it is similar to the American situation, but not as dramatic, okay? But what you're seeing in Canada is the same pattern. In the last 30 years, there's a dramatic transfer of income and wealth from the bottom, from the middle, to the top, and the higher up the top you go, the bigger the gains have been. So, for instance, you've got the median Canadian family income, in other words, the family right in the middle, their income in 30 years, if you adjust for inflation, hasn't gone up at all. In fact, it's declined by a couple of thousand, whereas at the same time, the families who are in the top 100th of 1 percent, their incomes have been growing hugely, so that, for instance, over 30 years their incomes on average have gone up by $4.8 million.

JAY: This is annual income.

MCQUAIG: Yeah, yeah. So, obviously, over time that really accumulates. So in a sense I think the extent that the middle class has kind of held its position a little bit, as opposed to sinking completely, you know, you've got to add in the fact that the middle class is working maybe not twice as hard, but almost twice as hard, by the fact that, you know, it used to be single-income families were the norm. Now to be middle-class, you pretty well have to be a dual, two-income family.

JAY: And one assumes, as it has in the United States, the productivity's been going up in Canada during all this time.

MCQUAIG: Yeah, yeah. But, I mean, the point is, just ordinary people are losing ground. They're having to struggle much harder than they did before. You know, it used to be, in the early postwar period, the average income was doubling roughly about every 20 years. That's the rate of growth that ordinary people were experiencing. So, you know, at that time, you know, middle-class families could anticipate that their children would do significantly better than they had done, just as they were doing way better than their parents had done. So there was this wonderful kind of--I mean, there was all kinds of problems with unsustainable development and everything, but in terms of income growth and in terms of equality, what you found was that in fact, you know, it was becoming a more equal society.

JAY: Okay. So the argument would go, if I'm arguing for the billionaires, is: we're not the trouble; we actually create jobs, we make more investments, so the more this bubbles up, the more prosperity generally we create. What's wrong with that?

MCQUAIG: Yeah. Well, for one thing, I mean, it just isn't true. That's one problem. In that same period, that early postwar period I was just talking about, we had much, much higher taxes. This is true in both Canada and the United States. The marginal tax rate at the upper end went, you know, above 80 percent most of those years, compared to top rate in Canada, marginal rate in Canada today of 46 percent. So you'd think, well, that would be crushing, that must have just destroyed jobs, that must have been a disaster in terms of economic growth. Exactly the opposite. In fact, in terms of, you know, job creation, economic growth, those were just the boom years, both in Canada and the United States. So that whole argument--and, in fact, I think if you look at the situation now, what you see is that there's huge, huge concentrations of capital in corporations in the US, something like $2 trillion accumulating in corporate treasuries, and yet by that billionaire theory, there should be lots of jobs, right?

JAY: But they're sitting on it, because they're--

MCQUAIG: They're sitting on it!

JAY: --they're waiting to see, I guess, where the bottom will be so they can start picking up an easy buys.

MCQUAIG: Actually, more specifically what they're waiting for is some sign of life in the economy. There's no--if you're a billionaire or sitting on a ton of cash, why would you want to invest in an economy where incomes aren't growing, where incomes are shrinking, where, you know, so many people are unemployed?

MCQUAIG: Well, I talked to someone who works in finance in Toronto--and Toronto has a big financial sector, for those of our American viewers--and they said the finance sector's roaring, except it's all about Asia. It's not about investing in Canada.

MCQUAIG: Well, yeah, that's right. And the finance sector--that's another factor is that when you have these huge accumulations of wealth at the top, what ends up happening is--as I say, there's no incentive to invest, 'cause there's no growth in the ordinary--.

JAY: Because of lack of purchasing power.

MCQUAIG: Yeah. So they look at elsewhere, and they turn to financial markets, because there's huge opportunities for speculation, among other things. In fact, this is one of the things that explains the 2008 financial crisis, just as it explained the 1929 financial crisis, is in both those years you'd reached a period of extreme inequality, with huge concentrations of wealth at the top. In fact, incidentally, you'd reached exactly the same level of extreme inequality those two years. No incentive to invest in the ordinary economy. The rich increasingly turned to financial markets, to speculation, and used their incredible political clout to deregulate those markets. And, you know, the result is financial disaster. So, contrary to the idea that allowing all this concentration of money at the top is good for the economy, I would argue it's exactly the opposite, and it's in fact financially dangerous, you know, and it leads to this kind of financial crash.

JAY: Now, in the last federal election and in the--as we do the interview, there's a coming Ontario election. I don't hear much, if any, of this in any of the political discourse, either--including very much, even, from the NDP, which in theory would be the party that would raise these kinds of issues.

MCQUAIG: It is very disappointing. I mean, we did in the last federal election, the NDP did raise the issue of the corporate tax and was arguing for, you know, rolling back some of the deep cuts that have been made to the corporate tax. They could have gone much farther. The corporate tax in Canada has been declining dramatically since the year 2000. It's been deliberately cut by governments federally and provincially. And yet, in lockstep with that decline you've seen decline in investment by the companies that are benefiting from that corporate tax cut, just proving the point that they're not using those tax cuts to reinvest; they're using it, you know, for dividends or just, you know, building up their corporate stockpile.

JAY: Yeah, that's the other thing is they use a lot of this money just to buy back their own stock to artificially inflate the value of the stock.

MCQUAIG: Yeah, yeah. I think this should be a terrific issue for the NDP and they should go after it. It always interests me that, you know, Bob Rae, when he was running for NDP premier in 1990, one item on his campaign platform was to bring in an inheritance tax in Ontario. And, of course, you know, people scoff at that idea, but let's not forget he was elected premier, so, apparently, the people of Ontario didn't find the idea so outrageous. But, tragically, I think what's happened to progressive parties, you know, the NDP, and even to the extent that the Democrats are progressive in the US, is they become just incredibly timid arguing the progressive case. You know, they've allowed the Republicans or the Conservatives to push them into sort of very much onto the defensive. In fact, I think you can make very powerful arguments for progressivity.

JAY: Well, one could imagine why the NDP, which isn't so--you know, not so much controlled or financed by corporate dollars, you could imagine they would want to make these, and they seem to be wanting to just argue to the middle, mushy middle. The Democrats, on the other hand, I think is a different story, because Democrats to a large extent are controlled by corporate interests, and they've pushed a lot of these policies themselves. They didn't have to be won over to the argument.

MCQUAIG: No, no, that's true. But the Democratic Party traditionally did defend these policies, you know? And, I mean, look it, we've got Warren Buffett, one of the richest men in the world, arguing, you know, for higher taxes on the rich. Like, I mean, if Warren Buffett can make that case, can't, you know--.

JAY: Can't the NDP in Ontario? Thanks for joining us. And thank you for joining us on The Real News Network. The Trouble with Billionaires is on Canadian bookshelves, and there's going to be an American edition coming out in a few months as well. So thanks again for joining us on The Real News Network.

End of Transcript

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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