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11/9/13

Economics: The Wealth Paradox: - "it has nothing to do with Socialism - only greed" - by Barrie Mckenna

It’s been dubbed the Great Gatsby Curve.

Plot countries on a graph. Put income inequality on one axis, mobility between generations on the other.

A sobering picture emerges. The dream of achieving a better life than your parents is more elusive in countries where the gap between rich and poor is larger.

While inequality is significantly less pronounced than in the U.S., Canada (and the EU) are trending in the same direction as its neighbour on several key metrics, including ebbing mobility, a rising share of income in the hands of the top 1 per cent and a swelling gap between what CEOs and workers make.

In Canada today the country’s business elite – the chief executives of the top 100 companies – took home 122 times what the average worker did in 2012, up from a ratio 84-to-one a decade earlier, according to research commissioned by The Globe and Mail.

The reality is that perfect equality is both unattainable and undesirable. Nowhere are wealth and income distributed completely evenly across a population. Countries are all unequal, and that’s generally a good thing. Inequality creates a powerful incentive to work, to invest and to get ahead. More income is the reward for success, which is spread to others when those at the top invest, start new businesses and hire more workers.

But it’s all a question of degree. You can have too much of a good thing.

The ability for succeeding generations to do better than preceding generations is an essential part of the glue that makes a democracy work.

The concentration of wealth is also rising. The top 20 per cent control 70 per cent of net worth. The Conference Board of Canada gives Canada a “C” grade for inequality, ranking it 12th out of 17 peer countries. Denmark and Norway earn the highest scores. The U.S. is last with a D.

Note EU-Digest: as one Canadian economist said when he saw the results of the Conference Board of Canada inequality ranking - "I can understand  why the US was ranked last. It is all the fault of their political system. The US has a two party political system, both with identical ideologies, but their problem is that they are in a stalemate on the methods as to how to rob the US tax payer and on how to fool the rest of the world".

Read more: The Wealth Paradox: What growing income inequality is costing Canada’s future generations - The Globe and Mail

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