Rising GDP Lifts Only the Boats of the Wealthy Few
Since the early 1980s, Canada’s economy has expanded significantly, with GDP per capita rising by 70% in real terms. But while the wealthiest Canadians’ incomes have increased fivefold, those of the bottom half have risen just 1.5 times.
Pedestrians walk past homeless people in Toronto, Canada, on June 15, 2023. (Andrew Francis Wallace / Toronto Star via Getty Images)
- Interview by
- David Moscrop
We hear a lot about economic growth — especially GDP growth — but less about who benefits most from it and who gets left behind. Neoliberal policies disproportionately serve the wealthy, sometimes exponentially so. This is no accident; it’s the result of deliberate political choices, made at the behest of those who profit most. But it doesn’t have to be this way.
To examine who benefits under the current economic order — and how policies could be reshaped to serve the many — Jacobin’s David Moscrop talked with Silas Xuereb, a researcher and policy analyst with Canadians for Tax Fairness and author of the report “Canada’s affordability divide: How the 1%’s rise left millions behind.”
Trickle-Up Economics 101
Who reaps the lion’s share of economic growth in Canada?
What we’ve seen over the past forty years is that the vast majority of economic growth has been captured by the top 1 percent. Since 1982, the incomes of the top 1 percent have increased fivefold. The market incomes of the bottom half of Canadians have increased only 150 percent, one and a half times. If we look even more closely at the top 0.01 percent, which is about 3,000 people in Canada today, their incomes have increased 950 percent — nearly 10 times — since 1982.
When we look at GDP growth, including GDP per capita, the amount of money in the economy per person has increased by about 70 percent in real, inflation-adjusted terms over the past forty years. But it has not increased by 70 percent for everyone. The bottom half of Canadians have seen only a 29 percent growth — just 40 percent of the overall GDP growth. So, really, this gap isn’t just benefitting the upper middle class — it’s overwhelmingly going to the very top.
If real after-tax incomes for the bottom 50 percent had kept pace with economic growth, fifteen million Canadians would each have, on average, $6,450 more in their pocket every single year.
When we consider increases in the cost of living, inflation, what does that look like for the bottom half of earners?
Let’s take the most recent crisis as an example. During the pandemic, inflation hit annual rates of around 6 or 7 percent in 2022 and 2023. But that overall inflation rate is just an average — it blends price increases across a wide range of goods and across different income groups.
A recent report from the Parliamentary Budget Officer found that the disposable incomes of households in the bottom two quintiles didn’t keep up with inflation during the pandemic. Meanwhile, incomes at the top actually grew faster than inflation. That’s why, over the past couple years, we’ve seen so much discussion about the affordability crisis — people are experiencing price increases outpacing their incomes.
There’s been a bit of pushback from politicians and economists — we had [Chrystia] Freeland calling it a vibecession, saying, in effect, “Oh, you people are just misperceiving this, the economy is actually doing fine.” And that’s why I think we need to shift the emphasis away from these kinds of single aggregate numbers — it might look like the economy is growing, that inflation has come back down, but this misses the fact that incomes are growing much faster at the top than at the bottom. The incomes of the majority of Canadians are not actually keeping up with price increases, especially during these crisis periods. And this is a process that’s basically been going on for over forty years at this point.
Forty Years of Winner-Takes-All Economics
What you describe here isn’t a natural phenomenon — it’s the result of policy choices. Which specific policy choices over the last four decades or so have led us to this point?
I characterize this process over the past forty to fifty years as neoliberalism. And this essentially means policy shifts that are motivated by the idea that free markets are the best way to organize everything — the provision of all sorts of goods, from natural resources to housing, health care, and transportation.
In Canada, this shift has manifested itself specifically in terms of free-trade agreements that have prioritized protecting investors over supporting workers. It’s manifested itself in the privatization of Crown Corporations — Petro Canada, Air Canada — which were once publicly owned. Labor rights have been weakened through back-to-work legislation, contributing to declining unionization rates. Corporate tax cuts and reductions to top personal marginal income tax rates have further concentrated wealth. And in the 1990s, the federal government effectively abandoned the provision of affordable housing and social housing.
All of these things together have collectively shifted power away from workers and toward corporations and their wealthy shareholders.
This is a broader, global phenomenon, right? You mentioned the rise of neoliberalism roughly four decades ago. We saw it in Canada, but of course we also saw it in the United States, United Kingdom, and other parts of the world. Is the disparity between the top and bottom half — the top few percent and everyone else — in Canada consistent with what we see in other neoliberal economies?
Yeah, I would say this is pretty consistent. It is part of a broader global phenomenon — though in the United States, income inequality has skyrocketed even more than it has in Canada.
Canada has certainly been shaped by these larger global trends, but I think we’re now at an inflection point due to the Trump administration. The neoliberal world order is shifting, if not crumbling. And so it’s time to look back at the legacy that the last forty years have left us and decide how we want to move forward. And I would argue that we should move toward shifting power back toward workers and marginalized people and away from corporations and the few wealthy elites.
Canada, of course, is not immune to larger global trends. And part of this has been driven by pressures from international finance to move in a neoliberal direction. But Canada is a strong, powerful, independent country — for now [laughs] — and we have the ability to pursue our own path. And there’s a lot that we can do without international cooperation, but of course, we should be pushing for progressive measures on the international stage as well.
Fixing Inequality Means Taxing the Rich
What does a program of reversal look like? How do we get a more equal distribution of income growth?
There are a lot of different things that we could do. We need to be shifting our policy to focus on ensuring that everyone has the resources they need to live a dignified life rather than focusing on GDP growth in general, which as we know has not been shared equally over the past forty years.
We must ensure that essentials are provided at affordable prices. How? There are two sides to this. First, we need to expand nonmarket or subsidized options for essentials. Housing is a prime example — I think we really need to focus on building nonmarket affordable housing. This would go a long way toward ensuring that people have a roof over their head without having to worry about 20 percent or 50 percent rent increases every year. And related to this is rent controls. In the longer term, we should perhaps think about how to ensure that food costs are kept at a reasonable level as well.
The second side of the equation is redistributing income and power from the wealthiest — taking away some of that wealth and power that is concentrated in a few hands. A wealth tax on fortunes above, say, $10 million, could raise huge amounts of revenue while curbing the economic influence concentrated in a few hands. That money could be used to fund crucial investments in affordable housing, a just transition, public health care, transportation, and infrastructure.
We should also eliminate double non-taxation agreements with tax havens. These agreements allow corporations to avoid taxes and use the threat of capital flight to restrict our democratic power to choose how we want to govern ourselves.
We could also implement a windfall profits tax to eliminate corporate incentives to price gouge during crises. We saw this play out during the pandemic — corporations increased prices far beyond their actual cost increases during the pandemic, exploiting the inflation expectations people had. They were able to get away with it for a while, and now with tariffs coming in, we might see the same thing again.
If we’re not going to change policy significantly this time around, corporations will likely do the exact same thing again. We need to take that step of implementing windfall profit taxes as soon as possible to ensure that corporations aren’t able to profit off of this coming crisis as well.