US and Canada on 'parallel' path to economic inequality-US economist
“The United States economy and the Canadian economy are going on parallel courses,” Reich said in an interview with CTV on Sunday.
Reich, Professor of Public Policy at University of California Berkeley and former secretary of labor under President Bill Clinton, warns of wealth in the hands of a few.
In the US, the top one percent now own over 41 percent of all the wealth in the country, the highest since the end of the Great Depression, according to a recent study by the National Bureau of Economic Research (NBER).
Statistics released in Canada last week show that Canada’s top one percent of earners accounted for 10.3 percent of the country’s total income in 2012. This figure is however lower than it was in 2006, when the one percent earned 12.1 percent of the country’s total income.
The surge of wealth at the top in the US simultaneously cuts away at the wealth of the middle class and poor.
As a progressive leftist economist, he warns of the negative effects of a shrinking middle class and the problem of income equality.
“The people who create jobs actually are the vast middle class and the poor whose spending creates incentives for companies to expand and hire,” Reich said, adding that corporations cannot survive if all their customers lose their spending power.
Robert Reich was active in the Occupy Los Angeles movement in 2013, which criticized the corporate structure in America that exacerbates the wealth gap between the rich and poor. The so-called “99 percent” gathered in cities across America, and later the world, to protest the concentration of wealth of the “one percent.”
“The wealthy and corporations are not the job creators. They don’t need any more wealth. They don’t need any more tax cuts to give them incentives to create jobs,” Reich said.
The key to reversing growing inequality is to invest in education, childcare, and fair wages, the economist suggested.
Reich said that both the US and Canadian economies aren’t growing fast enough, partly due to the fact wealthy individuals and corporations are investing money to make more money - not to create more jobs and a more equal society.
The US economy grew 3.5 percent in the third quarter, and is on course to expand 2.2 percent in 2014, according to the most recent International Monetary Fund forecast.
Canada is expected to boost growth between 2-2.5 percent for the August-September period, and 2.3 percent in 2014 by IMF estimates.
However, despite the economic slowdown, Reich warns against the temptation to cut spending to recover from the economic crisis.
“Austerity economics does not work,” Reich said. “If you slow down the economy because government is cutting down so much that there’s not enough demand to keep the economy going, then you end up with a worse ratio of debt to GDP.”