Why Can’t We Afford What We Used to Have?
In this age ofÂ austerity, we are constantly told by governments that we have to tighten our belts. Tuition fees have to go up; public pensions, Unemployment Insurance and social assistance benefits have to be cut; universal public health care is no longer affordable, and so on ad nauseam.
But, as my friend Peter Puxley recently reminded me,Â it is passing strange to argue that we can no longer afford what we could afford thirty years ago, when we were, as a society, much lessÂ affluent.
Perhaps the best single measure of what we can collectively afford is real per capita GDPÂ – national income per person adjusted for inflation. Statistics Canada has usefully provided a long term historical series in a paper and a new CANSIM series. (383-0027.)
Real per capita GDP in 2010 was 53.2% higher than in 1980, roughly when the era of welfare state expansion gave way to the era of retrenchment.
As shown below, the growth rate of real per capita GDP has slowed considerably in the age of austerity – which deserves extended comment – but it has by no means ground to a halt.Â This suggests austerity flows not so much from the lack of growth, as from the fact that more and more of that income growth has gone to the top 1% who just don’t want to share it with the rest of us.
Growth of Real GDP per capita, compound annual growth rates.
1960-69Â Â Â Â 3.42%
1970-79Â Â Â Â 2.80%
1980-89Â Â Â Â 1.90%
1990-99Â Â Â Â 1.60%
2000-10 Â Â 0.80%