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Review: Four new books, including Joseph Stiglitz's The Great Divide, look at economic inequality

Four new books talk about the vast economic disparity that exists within and between countries.

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The Great Divide: Unequal Societies and What We Can Do About Them

Joseph E. Stiglitz, WW Norton, 384 pages, $34.95

A Better Place on Earth: Among the Haves and Have Nots in Super Unequal British Columbia

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Andrew MacLeod, Harbour, 256 pages, $22.95

The Globalization of Inequality

François Bourguignon, Princeton University Press, 224 pages, $34.95

Inequality: What Is to Be Done?

Anthony B. Atkinson, Harvard University Press, 400 pages, $37.78

Once upon a time, not altogether too long ago, we talked about something called "class." There was a lower and working class. There was an upper class. It was understood that these were different groups, with different amounts of power and different, often conflicting interests. Eventually, in the industrializing West, the chasm between these classes grew so great that something had to be done. In 19th-century Europe, workers formed unions and the modern welfare state was born. In the U.S., in the wake of the Great Depression, the New Deal massively expanded public-sector employment. After the Second World War, for the first time in history, the gap between the rich and poor shrank. These were essentially conservative developments. The minimum wage, the eight-hour workday, progressive taxation – all this arose, in part, to ward off the threat of revolution as the Soviet Union loomed and anarchists set off bombs. For the upper class, it was adapt or die, possibly literally.

We don't talk much about class anymore. Beginning under Richard Nixon, Republicans in the U.S. launched the culture wars, decoupling class from income. Working-class values, oddly, became right-wing values. "Elite" came to denote aesthetics rather than wealth.

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In the Reagan-Thatcher years, the assault on the welfare state, the war on organized labour and the dawn of neoliberal globalization began to undo the fleeting progress of the postwar era. This model was exported to most of the West. Now, the only class we mention is the middle class, because, as polls indicate, nearly everyone, no matter how rich or poor, considers herself a part of it. Instead, we use another term: "income inequality."

There have been a lot of books about inequality lately. This can be traced to three interconnected phenomena: first, the Great Recession; second, the Occupy movement, after which mentions of "income inequality" spiked in the news media; and third, last year's English-language publication of Thomas Piketty's Capital in the Twenty-First Century, a dense tome that became an unlikely bestseller. Everyone now understands that the gap between rich and poor is widening, that low and median incomes have stagnated or declined, and that the vast majority of wealth is concentrated at the very top.

In the United States, as Piketty famously documented, economic disparity has returned to levels not seen in a century; in places such as China and India, it has skyrocketed even as standards of living have improved, with the fruits of growth going to a select few. But there is a curious tenor to this discussion. In a recent New Yorker essay, the historian Jill Lepore identified it: "In the first Gilded Age, everyone from reporters to politicians apparently felt comfortable painting plutocrats as villains; in the second, this is, somehow, forbidden." Our tale has no bad guys.

Is this starting to change? The language of Occupy – the 99 per cent versus the 1 per cent – avoided the supposedly Marxist overtones of "class" even as it divided the rich from the rest of us. Former chief economist of the World Bank and Nobel Prize-winner Joseph Stiglitz unwittingly gave birth to this slogan in a 2011 Vanity Fair essay called "Of the 1%, by the 1%, for the 1%," which is included in his new collection, The Great Divide: Unequal Societies and What We Can Do About Them.

Early in the book, he describes a party hosted by "a bright and concerned member of the 1 per cent." The host had brought together an assortment of plutocrats worried about inequality – but not too worried. "I overheard one billionaire – who had gotten his start in life by inheriting a fortune – discuss with another the problem of lazy Americans who were trying to free ride on the rest," Stiglitz writes. "Soon thereafter, they seamlessly transitioned into a discussion of tax shelters, apparently unaware of the irony."

For Stiglitz, this encapsulates the problem. Here, the chief villains are the plutocrats whose astronomical wealth have isolated them from the realities of daily life, as well as a political class that has not just allowed this concentration of wealth, but actively encouraged it. But none of this would have been possible without a broader ideological shift, which, in the US at least, resulted in truly poisonous measures: tax cuts for the rich so extreme that they actually became regressive; a deregulated banking sector that turned profits from predatory lending practices into galling CEO performance pay; and, of course, a financial crisis from which the country has yet to fully recover.

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"As has been repeatedly observed," Stiglitz points out, "all of the economic gains since the Great Recession have gone to the top 1 per cent."

The U.S. is the most economically disparate developed country in the world, and discussions about inequality naturally tend to focus on it. So what about Canada? In the lively and well-reported A Better Place on Earth: Among the Haves and Have Nots in Super Unequal British Columbia, Andrew MacLeod takes us to the province that is, by most measures, the most unequal in the country.

"Since 1982, after-tax income for the top 1 per cent of British Columbians has grown by 60 per cent," he writes. "For pretty much everyone else, the bottom 90 per cent, that number has remained essentially flat." This is the dark side of Western Canada's runaway growth, and the strength of MacLeod's book comes from its attention to life at the bottom of the pyramid: the almost unfathomable difficulty of surviving on social assistance; the disproportionate impact of government cuts on women, people with disabilities and aboriginal peoples.

In The Globalization of Inequality, François Bourguignon, another former chief economist of the World Bank, turns his focus even wider, to the paradox of an interconnected world: even as rising incomes chip away at inequality between countries, inequality within countries continues to rise. For Bourguignon, globalization's ambivalent legacy is the key to understanding the challenge we face: "It is the background for almost all that has happened. It has changed the international climate for all national economies and profoundly modified their structures."

For an orthodox economist, this is a dramatic admission: Free trade, technological innovation and market deregulation have not been the panaceas we were promised. "In a majority of countries," he writes, "the conjunction of these effects has resulted in a significant rise in wage and income inequality."

The best of the new crop of books, however, is Anthony B. Atkinson's Inequality: What Is to Be Done? Not unrelatedly, it is also the most solutions-oriented. Atkinson, a distinguished British academic and pioneer of inequality studies, is 70 years old, and at times he sounds fed up. "A number of the proposals involve the classic measures of progressive taxation and social protection," he writes of his ideas, "and I can already hear critics dismissing them as either boringly familiar or wildly utopian."

It's true that Atkinson's prescriptions are at once timeworn and, in today's ideological climate, almost radical. They amount to social democracy: a generous welfare state, support for the most vulnerable and limits on the concentration of wealth and political power.

Atkinson rattles off 15 worthwhile proposals, but a few stand out. One is that the state become an employer of last resort, guaranteeing minimum-wage work to anyone who needs it. Another is a universal inheritance: the state doling out a set amount of cash to all upon reaching adulthood. Atkinson's most compelling idea, however, is something called basic income. The concept of universal basic income – the government providing a monthly payment to every citizen, regardless of employment status – has recently caught fire in policy circles. Atkinson tweaks the idea, calling it a "participation income" and insisting that it require some kind of productive activity, such as employment, volunteer work or education. Other thinkers, however, believe it should be implemented with no strings attached – a paycheque just for existing in the world.

The obvious knock against basic income is that it would act as a disincentive to work. But, during a basic-income experiment that took place in a small Manitoba town called Dauphin in the 1970s, labour-market participation decreased only slightly, while key social indicators, such as high school enrolment and hospitalization rates, improved substantially. That seems a worthwhile trade-off.

Basic income is a noble goal and would eliminate extreme poverty as we know it. But class is a two-way street. Reducing income disparity must not only involve eliminating poverty; it will also require showing the rich what it's like down here, in the real world. To that end, there is an inverse to basic income that, though discussed less often, is no less worthy: not only guaranteeing the poor a paycheque, but also limiting how much top earners can make. "We've had minimum-wage laws in much of the developed world for ages," MacLeod writes, "so why not set a maximum?"

In Laws, Plato declared that no man should be more than four times wealthier than the poorest member of society. (One can only imagine what he would think of Canada's current average CEO-to-worker pay ratio, which stands at 206:1.) "In a state which is desirous of being saved from the greatest of all plagues – not faction, but rather distraction; – here should exist among the citizens neither extreme poverty nor, again, excess of wealth, for both are productive of both these evils," he said. However one feels about Plato's suggested order of magnitude, it is worth asking how much is too much – what each of us really needs in order to live a good life.

Extreme wealth is just as pernicious as extreme poverty; it distorts the political process, undermines social stability and dampens aggregate demand, since the rich spend a smaller fraction of their income than the poor. It doesn't make the wealthy any happier, and it doesn't make society any more productive or just. As Stiglitz points out, today's superrich largely earn their money through what economists call rent-seeking; it is no coincidence that the two richest men in the world, Bill Gates and Carlos Slim, got that way by creating de facto monopolies, or that the developed countries with the highest levels of inequality, such as the U.S. and the U.K., are also those whose economies have become dependent on the kind of speculative financial activity that led to the 2008 crisis. The existence of obscene wealth in an unequal world is an affront to any reasonable sense of fairness, and implementing a 100-per-cent tax rate on earnings above a given threshold – one to be determined by democratic consensus – is the simplest and best way to rectify this. If no one deserves to be poor, then perhaps no one deserves to be rich, either.

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