Aspiring to thrive: Building a shift to a new political economy

Monica Da Ponte & John Stapleton

The moment

For a brief moment at the beginning of the COVID19 crisis, our principal political and economic paradigms converged. Without any significant controversy, the government moved to provide new benefits that quickly became the largest income security intervention in Canada’s history.

Every region in the world today struggles to emerge from the pandemic crisis. At the same time, there is broadening awareness that we live in an era of entrenched and increasing economic inequality. In this pandemic time, many have also awoken to the ugly ways that racism operates in our society.

There is a collective recognition that we need to create a new normal. Although Canada is frequently ranked as one of the best places to live, poverty and inequality are deeply woven into our country’s fabric. The trend has been growing for more than a generation.

Is this the moment when we start to reverse that trend for a new generation?

The paradigms

In living memory, two political and economic paradigms have dominated our discourse about how best to ensure the public good. Although each embodies a range of theories and belief systems, for our limited purposes let’s call them the alpha paradigms — ‘right’ and ‘left’. 

One favours market forces and smaller government to create fertile ground in which individuals can strive and thrive.  The other calls on government to tax, regulate, and invest in people and infrastructure — thus countering some of the undesirable consequences of the market approach.

But a new paradigm – let’s call it ‘the beta paradigm’, or ‘populism’– has sadly emerged in our times.

As economic inequality grows, a political and economic  system can evolve to the point where those without resources spend all their time struggling to survive. Meanwhile, those with resources get more and more focused on inhabiting and advancing their personal lives. The system keeps refining itself to the advantage of those with resources and power.

A discussion paper for the International Monetary Fund puts it this way:

“Individuals have an incentive to divert their efforts toward securing favored treatment and protection, resulting in resource misallocation, corruption, and nepotism, with attendant adverse social and economic consequences. In particular, citizens can lose confidence in institutions, eroding social cohesion and confidence in the future.”

Internationally and in particular south of the border, frustration and anger has built in those who have been working hard to be successful in a system that is not designed to reward them. There is an urgency to “fix it” that is resulting in a lack of empathy for the perspectives of others and a fierce advocacy for poorly thought-out solutions. People with very little power are becoming so frustrated that they are even willing to trade their own self-interest for an illusion of power and control.

Enter a demagogue. A right-wing demagogue? A left-wing demagogue? Doesn’t matter. When inequality gets really bad, demagogues get traction. The idea of the general public good becomes grossly distorted. Damage gets done and takes decades, and billions, to repair.

In Canada, we have increasingly entrenched paradigms on the right and the left, but we have not yet lost ownership of our collective future. In fact, we have experienced a moment of convergence in the face of a common crisis.

Is there more that we can do with this moment?

Through the lens of ‘possibility’

We tend to oscillate in favour of one or the other of the two alpha paradigms and their competing visions of how to achieve growth and prosperity. This back and forth is costly. We waste money when we lurch from one approach to the next, doing and undoing, and lose valuable time while the problems keep piling up opening us up to increasing frustration and anger.  We cannot afford to do this anymore.

We need an understanding that neither paradigm is perfect, neither will win. A democratic system ensures, and requires for its own health, that political leadership change from time to time. But we believe that much of the oscillation inpolicy should end, in favour of a shared vision of what it means to thrive.

To thrive is to flourish, grow, and prosper. This is a broadly valued outcome for all Canadians, embraced by both the right and left paradigms. It means individuals and families have the ability and opportunity to progress towards personal, community, and national goals. To thrive is not just to survive. It is to be resilient.

We need to focus on how best to get where we all want to be. What would a system designed to encourage a thriving Canada look like? To figure this out, we need to stop the ideological back and forth and focus on outcomes. It means taking an approach that:

  1. Holds a collective threshold of success as a desired outcome
  2. Enables accessible pathways to desired outcomes  
  3. Eliminates systemic barriers to outcome achievement
  4. Thinks in generational timeframes. 

Such an approach requires that we shift our focus away from the interests of particular groups and issues. Instead, we need to clarify and advance what’s needed for all Canadians to thrive.

Such an approach requires a sharp eye for the places where people are striving to thrive against sullen, rooted, systemic barriers to equality – as opposed to the healthy frictions of social and commercial competition.  It also requires mechanisms that create positive feedback loops toward our collective threshold of success.

An example: Inequality and wages

There is a growing consensus among thinkers who adhere to both the right and the left alpha paradigms that extreme inequality is incongruent with a healthy economy and a healthy society. Thinkers on the right are more inclined to believe that inequality is in the natural order of things. But a more nuanced discussion is quite possible around the point at which inequality begins to be detrimental. It is logical from a business perspective to agree that at some level, inequality becomes a deterrent to advancing a thriving Canada.

If we can agree to that, then we can agree that wages are an important intervention point. Average wages have stagnated for the last 40 years. Precarious employment has increased by 50% over the last twenty years. Current minimum wage levels result in an annual salary of $25,000 or a monthly salary of just over $2,000. With today’s housing and living costs, this is insufficient to enable the average Canadian to survive — much less thrive.[1]

There are numerous proposed approaches to this problem, including:

  • A guaranteed basic income
  • A commitment to living wages
  • Tax incentives and penalties related to employee wage levels, perhaps taking into account the ratio between CEO pay and the lowest paid employee. 
  • Mechanisms to curb the disproportionate allocation of resources to management and capital gains.
  • A thorough look at what is needed to make employment within a ‘gig’ economy more equitable.

Thinkers on the left and right differ on the need for reducing wage inequality and the appropriate policy approaches. For example, many advocates on the left argue for increases to the minimum wage. Market champions argue that this is not an effective poverty reduction strategy and in fact has negative, unintended consequences for the working poor.

Our proposed approach avoids trying to resolve any of the core beliefs of the two dominant paradigms. We are in favour of focusing on collaboration to achieve mutually desirable outcomes. That means developing a comprehensive strategy that takes into consideration the benefits, challenges and ability of each policy mechanism to contribute to a collectively desired set of outcomes.

Moving forward

This approach contrasts drastically  with what is happening today. First, there is no shared understanding of a threshold of success — what it would mean, for example, in terms of wages and income, for members of Canadian society to thrive.

Second, the lack of collective commitment to a desired outcome encourages stakeholders to invest all of their time and resources in advocating for one particular policy option. This limits our advancement, as we need a variety of mechanisms to curb inequality and to achieve our desired threshold of success.   

A collective focus on desired outcomes, enabling accessible pathways, and eliminating systemic barriers will work to avoid the social, economic, and political upheaval caused by growing inequality. That in turn will help us to avert the threat and impact of populist non-solutions.

Monica Da Ponte Shift and Build

John Stapleton Open Policy Ontario

November 2020

[1] We are not just talking here about poverty reduction. Families thrive when they have security and sufficient resources. They do not automatically thrive once they cross a poverty line that says they can afford a certain basket of goods and services. Poverty lines simply point to the prerequisites of survival.