For as long as I can remember, we’ve been told that putting more wealth in the hands of the already wealthy will benefit everyone through greater economic growth, more jobs, and higher wages. Academic studies find the opposite is true. However, with most major media outlets controlled by the super-rich, these studies are barely reported.
A paper published by Oxford University Press in 2022 is blunt:
The last 50 years has seen a dramatic decline in taxes on the rich across the advanced democracies… We find tax cuts for the rich lead to higher income inequality in both the short- and medium-term. In contrast, such reforms do not have any significant effect on economic growth or unemployment. Our results therefore provide strong evidence against the influential political–economic idea that tax cuts for the rich ‘trickle down’ to boost the wider economy.
The economic consequences of major tax cuts for the rich
.
Robert Reich, Emeritus Professor of Public Policy at UC Berkeley, often writes about economic inequality. In a recent article for The Guardian, Reich noted that tax cuts are not the only way the richest citizens add wealth. Exercising monopoly power is another. The Professor makes these comments about the American economy, but similar points can be made about Canada:
- Corporate profits reached a record high in the fourth quarter of last year.
- Corporations have enough monopoly power to keep prices high.
- Many corporations are also shrinking the size of the products without lowering their prices.
- The only thing that’s popular these days seems to be corporate price gouging.
- Just four companies now control processing of 80% of beef, nearly 70% of pork, and almost 60% of poultry.
- In 75% of US industries, fewer companies now control more of their markets than they did 20 years ago.
After pointing out the problem, Dr. Reich suggests the solution:
- Antitrust laws must be enforced.
Writing for the Harvard Business Review in 2017, distinguished law professors Maurice Stucke and Ariel Ezrachi said the U.S. has little antitrust enforcement today, and that needs to change. They show that U.S. antitrust policy and enforcement have waxed and waned over four cycles.
- The third cycle (1940s–late 1970s), in many ways the golden era of antitrust action. At the time, competition was seen largely as an antidote to fascism, and antitrust as the enabler of that competition. During this third cycle, robust antitrust policy was a central condition necessary for effective competition.
- Antitrust policy and enforcement declined during the fourth cycle (late-1970s–mid-2010s). Discarded was the historic concern about halting concentration in industries, in order to arrest the economic, political, and social harms from concentrated economic power.
- Antitrust during the fourth cycle also relied on an incomplete and somewhat distorted conception of competition.
The professors express concern about developments in recent years:
- Competition is decreasing in many significant markets, as they become concentrated. Greater profits are falling in the hands of fewer firms.
- Since the late 1970s, wealth inequality has grown, and worker mobility has declined.
- Labor’s share of income in the nonfarm business sector was in the mid-60 percentage points for several decades after WWII, but that too has declined since 2000 to the mid-50s.
- Despite the higher returns to capital, businesses in markets with rising concentration and less competition are investing relatively less.
- Liberal and conservative academics recognize that consumers are damaged by meager competition in many markets. Their concern is that the current state of competition law (and crony capitalism) benefits the select few at the expense of nearly everyone else.
- Start-ups, small- and mid-sized firms, and many citizens will be left to the beneficence or spite of a few powerful, but arbitrary, corporations.
“IT IS NOW CLEAR THAT [DIGITAL TECHNOLOGIES] NOT ONLY CAN DIRECT IN TERMS OF THE PRODUCTS WE BUY, BUT THEY ALSO BEGIN TO IMPACT THE WAY WE THINK, THE WAY THAT WE RESPOND AND THE WAY WE RECEIVE AND INTERPRET THE NEWS—AND ALL OF A SUDDEN YOU SEE AN ALL-EMBRACING MONOPOLY THAT GOES BEYOND THE MATERIAL INTO THE NON-MATERIAL WORLD.” –PHILIP J. JENNINGS
“I THINK IN THE U.S. WHERE WORKERS ARE NOT CONSIDERED STAKEHOLDERS—ONLY SHAREHOLDERS ARE CONSIDERED STAKEHOLDERS—HAS CREATED A LEVEL OF INEQUALITY AND SOCIAL DISAFFECTION THAT HAS LED TO POLITICAL UPHEAVAL.” –DAVID AUTOR
Categories: Economics, Income Inequality
in-sights.ca 
There is an old saying in the toy collecting circles; “He/she who has the most toys when one dies, wins”.
Sad to say, it seems to be the credo of the wealthy of the wealthy. The more money one makes the more avaricious one gets.
My dad was a graduate forester from the early 1950’s. He was taught silviculture and the economic harvesting of our forests, for coming generations.
By the 1970’s, the forestry faculty was teaching foresters to “strip mine” the forests and to hell with the future, it was all about profit and pleasing the shareholders with large dividends.
In BC, the forest industry is all but dead and what trees are “strip mined” are shipped to Asia for processing.
I could go one.
The higher the profits for international corporations, the poorer we become.
With our politicians (NDP, Conservative, Liberal, and the rest), civically, provincially and federally, bought like cheap “ladies of the night”, change will not happen.
As the good ship Canada drifts into a morass of corruption, international intrigue, and pure stupidity, the wealthy are now manning the lifeboats leaving the great unwashed to go down with the ship.
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Today , here in BC the radio media have been in overdrive condemning the taxation of the rich! Given that the rich own the radio stations is there any wonder?
TB
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IT IS TIME TO BREAK UP THE MONOPOLIES. Our cable and internet fees are huge as are cell phone fees. If Sandanvian countries can have much lower fees, we can also.
As they used to say, the rich get richer and the poor get poorer.
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Thanks for this article , especially at the time of a Federal Budget and the spin we will read and hear in the next few days.
In the late 1960s the then Federal Government so viciously attacked the Royal Commission (Carter) reporting on income tax unfairness in Canada that one was left with the conclusion that our then politicians were really in the pay of the corporations and 1 %.
Later in the mid 1970s this was verified for me by the Federal Government imposing wage and price controls on Canadians (My salary was frozen for 5 years). This policy was backed by an unproven, late 1950s ,theory proposed by Prof. Phillips of the London School of Economics. We got the idea that the “Phillip’s Curve” , suggested that inflation was in a negative co-relationship with the demands of labor . The 1970s inflation was not caused by the demands of labor but a good old fashion cartel going by the name OPEC. A read of some current reports coming from the Federal Reserve one can still reference to the Phillips Curve even after it has been proven wrong.
The use of the Phillips Curve in the 1970s by PM Trudeau was opposed by Senator Lamontaine. The present government caters to the same faceless few as in the 1970s. That is also probably why the Minister in charge of Statistics Canada has avoided writing a reply to my request for a new statistic the captures “Deaths of Despair”, something the US Congress is considering. The examination of the current Lorenz curve will help your readers process the problem of income mal-distribution in Canada.
Early in the present century French economist Thomas Piketty published an extensive description of global wealth concentration and featured some examples from this process. Hunger, homelessness, “deaths of despair” and war, were all featured in his books. We humans are now there.
Regards Erik
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From Investopedia:
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