What’s really wrong with the economy
By Lance Crossley
It can get confusing listening to the various media pundits and experts talk about what’s wrong with the economy. You hear a lot of talk about “subprime loans”, the “credit crunch”, and “market confidence”. All this is true, but for me, there is no clearer illustration of what ails the economy than this startling fact: On the morning of January 2, at precisely 9:04 a.m., the country’s highest paid 100 CEOs had already earned what the average Canadian earns in an entire year.
That means that before these CEOs had barely recovered from their New Year’s hangover, they had “earned” $40,237. This shocking fact was recently published by the Canadian Centre for Policy Alternatives, which analyzed the earnings of Canada’s best-paid CEOs for 2007. The study’s author, Hugh MacKenzie, puts it like this:
“If you made what most would consider a substantial salary – say, the $100,000 a year that gets you on the so-called ‘sunshine list’ in some provinces – the highest paid 100 CEOs would have pocketed your annual earning by the end of lunch hour on January 5.”
This perverse gap between the rich and poor is one reason it is going to be very difficult to get out of this deepening recession. In the last five years, hundreds of thousands of well-paying manufacturing jobs have evaporated into thin air. Workers are left to scrounge for low-paying jobs, which doesn’t help in a country where not a single province has a minimum wage even close to the poverty line. In fact, Canada has the second highest percentage of low-paid workers in the developed world. (Only the United States is worse).
Meanwhile, household debt in Canada is at a record high; as the recession worsens, a lot of Canadians simply won’t be able to keep up. Those relying on their home equity to bail them out of debt are in trouble too, as the Bank of Canada says that “a severe economic downturn could result in a substantial increase in default rates on household debt.” In other words, brace yourself for a housing crisis of our own.
In the last 30 years corporate profits have soared while workers’ wages in real dollars have either stagnated or declined. According to Canadian Business magazine, the country’s 46 billionaires are worth more than the total assets of the bottom 14 million Canadians. This ever-widening gap is finally catching up to the greedy few at the top. Why? Because no one has any money to buy the things they’re selling.
In 1914, Henry Ford announced he would pay his employees five dollars a day for their work. This was unheard of at the time, as most industrial workers were only making 11 dollars a week. He did so because he wanted his workers to be able to buy his cars. He realized that if citizens don’t get a fair share of the pie, then the economy cannot grow because capitalism relies on people buying things.
Ford’s philosophy helped build North America into an economic giant. Now the giant has grown top-heavy. Unfortunately, it’s the ones on the bottom who are going to suffer when it falls.