Economic Depression

Peter Taylor

Woe, Canada. How bad can it get? Family income has been falling since 1990. Household debt is at an all-time high. Home ownership is a fading dream for most young Canadians. In 1996, the polling firm Angus Reid reported that only 47% of us Canadians believe we are better off than our parents were at our age--down from 74% in 1989. Sixty-two percent think the next generation will be even worse off.

Just when we thought things couldn't possibly get worse, along comes the United Nations, which proclaims Canada the best country in the world to live in. Clearly, the UN just doesn't get it. We are an unhappy, put-upon nation with a declining standard of living, a usurious debt load and a dark pessimism about the future. Or are we?

The truth is that by almost every conceivable measure we are among the richest, most comfortable people in the world. We are also, without question, much better off than our parents. What has happened in the past few years is simply that, for the first time in memory, our greed has gotten ahead of our capacity for growth. Instead of adjusting our expectations, we've clung to the notion that things should always get better and better at a faster and faster rate. So we work harder, increasing our daily stress--and it has turned us into a nation of whiners and moaners.

Economic Boom

We weren't always so glum. Back in 1961, the Gallup Group found that only 6% of Canadians thought their standard of living was declining. Gallup declared: "We are cheerier than most." Cheery. There's a word that hasn't been used to describe Canadians for a while.

Of course, 1961 was in the middle of the longest sustained rise in incomes in history. The North American economy expanded by 6-7% per year through the 1950s and 1960s. With incomes rising annually, what families couldn't afford one year would be affordable the next.

Adding to the heightened expectations was the return of working women. After spending the first few decades of the postwar period at home, women began to enter the workforce again in dramatic fashion throughout the 1970s. The desire for personal fulfillment is usually thought of as the biggest reason, but sociologists and historians tell us that, in fact, women re-entered the labour force primarily to maintain household income growth and to enable their families to purchase luxuries.

"The psychology of society became `Of course, I should have that second car, or that vacation, or that cabin in the woods,' " says the University of Alberta's Doug Owram, whose history of Canadian baby boomers, Born at the Right Time, was published in 1996.

Unfortunately, no one told the baby boomers that the growth of the 1950s and 1960s was an anomaly, not the natural state of the world. By the time the boomers reached early adulthood, the party was winding down. Family income grew only 2.6% per year in the 1970s, and 0.44% in the 1980s. lt's been flat ever since.

Current Wealth

Does this mean things have gotten worse, that we would be better off living our parents' lives? Hardly. By almost every measure of wealth, we are still better off today than when our parents were cheery. Average household income, corrected for inflation, nearly doubled between 1961 ($29,109) and 1980 ($53,877); it was $54,153 in 1994. Those households with two income-earners, the ones who claim mother and father both must work to keep their heads above water, enjoy much higher incomes--$67,105. No matter what Canadians are telling Angus Reid, it is clear that among two-earner families, half the income could still provide a more comfortable existence than the father's one job did 35 years ago. And in 1961 families were larger by an entire person.

Moreover, our spending has continued to increase. Consumption grew 5% annually until the 1980s but has still grown 2.3% annually in the past ten years. We spend 18% more per person, adjusting for inflation, than we did in 1980. We are saving less and borrowing more to pull this off, but we are not, by any means, behaving like a society whose income has stagnated.

This is true even of the grim 1990s. Statistics Canada recorded a dramatic increase in VCR and CD-player purchases during the worst recession since the Great Depression. VCRs didn't exist until 1983; now 82% of Canadian families own at least one. Ninety-eight percent have colour TVs; 83% have microwave ovens; 49% have two or more vehicles. Overseas pleasure trips by Canadians have more than doubled since 1980. The share of our food dollar spent on restaurant meals also nearly doubled between 1967 and 1992.

Technological progress and international competition have helped make it all possible. Washers, dryers, lawn mowers and bicycles are cheaper today, measured in hours of work at the average industrial wage required to buy them, than they were 20 years ago.

This prosperity has not been accomplished, as has sometimes been argued, off the backs of the poor. According to the Canadian Council on Social Development, the poorest 20% of Canadians saw their after-tax income rise between 1984 and 1993. According to Statistics Canada, the percentage of income that the poor spend on the necessities of food, clothing and shelter has fallen from 70% in 1959 to 55% today. However, our very conception of poverty has been altered by the rise in living standards. The Social Planning Council of Metropolitan Toronto says that a family of four needs $39,900 a year to cover "basic family needs". This includes a one-week annual vacation, a recreation budget that outweighs the clothing budget, and $2,035 for alcohol and tobacco (more than is recommended for health care and life insurance combined). Today, 60% of households with incomes of less than $10,000 have VCRs. Gone are the days when only people without running water were considered poor.

Nor can debt justify our complaints. It is true that total household debt in Canada is now 92% of disposable income--significantly higher than the 1961 level of 50%. But consumer credit (credit card debt, loans to take vacations or buy cars, etc.) has remained virtually unchanged. The entire increase in debt is attributable to mortgages.

So what explains the spectacular growth in mortgage debt? Are houses that much more expensive than in our parents' time? Not really. In 1975, it took 4.5 years of work to buy the average house; in 1995, it takes 5 years. However, that average has been pulled up by two overheated markets: Toronto and Vancouver. In every province other than B.C. and Ontario, housing is now as cheap as or cheaper than it was in 1975.

Housing-market analyst Frank Clayton notes, as well, that Canadians aren't buying the same houses their parents did. The new homes have higher building codes, and they're bigger than the 1,000-square-foot bungalows of the 1950s. The biggest reason for high mortgage debt is that the aging of the baby boomers has plunked a huge portion of the population into its prime mortgage-paying years. And a house is an asset, not evidence of impoverishment.

The middle class is also alive and well. A study for the C.D. Howe Institute found that the Canadian middle class (those making between half and one-and-a-half times the country's average income) was 61% of the population in 1972, and is still 59% today.

Rising taxes can't explain our gloom either. After-tax income has flattened since the 1980s but has not declined. And those tax dollars pay for the health care and education systems that allow us to rank so high on the United Nations index.

What's more, working conditions have improved as factories have given way to offices, infant mortality is at its lowest point in history, and our homes are filled with labour-saving devices that just a generation ago were the stuff of science fiction. American research even shows that, due to environmental regulations, the air is cleaner, the water purer and the forests larger than 20 years ago.

Gordon Anderson, an economist at the University of Toronto, says, "It always surprises me that the average Canadian is so down at the mouth. . . . Things are much better here than in the United Kingdom, and yet I don't find the same degree of contentedness here."

Stress

If objective measures can't explain our despair, something else must. Pollster Angus Reid thinks the answer lies deeper. He says that there is a great deal of insecurity, for two reasons. The first is fear of the future. We are moving from an industrial to a post-industrial economy, from factory production to an information-centred economy. Because this entails large-scale job losses, our lives are less predictable, and therefore scarier.

It's worth noting that the last economic transformation of this magnitude--the Industrial Revolution, the move from an agrarian to an industrial economy--produced the same kind of worry. But the results were universal education, scientific health care, mass-market consumer goods, a middle class and the possibility of upward mobility through hard work.

The second reason for our insecurity is the collapse of expectations that has come with flattened growth. "What is missing today is not the standard of living, which is quite high, but the knowledge that it will keep improving," says Doug Owram.

That may not make sense, but it's really just human nature. There can never be an end to our quest for a better lifestyle. In The Joyless Economy, economist Tibor Scitovsky argues that unsatisfied wants are the very premise of modern society: Move into a new house, and it will give you satisfaction for only a short while; within a few months, you will want a bigger house or a cottage or a faster car.

When one-income families were the norm, the requirements of middle-class living could be purchased with the $29,109 that father brought home. As two-income families became more prevalent, the "requirements" rose.

Proof of this comes from a Royal Trust survey of the richest 10% of Canadians. Of those with incomes over $70,000, only 3% considered themselves wealthy; most claimed they were middle class. If even the rich won't admit they are rich, how can we expect the middle class to think they are doing okay?

This constant absorption of luxury and wealth is what yesterday's communists liked to call decadence. Others call it progress. Few like to call it greed. Robert Glossop of the Vanier Institute of the Family says, "We are a greedy people." But he blames this on advertising and society at large, not individuals, noting that if we were less greedy, then society would worry about the low number of housing starts or new car sales.

In Beyond Poverty and Affluence: Towards a Canadian Economy of Care, Dutch economists Bob Goudzwaard and Harry de Lange argue that the way out of our pessimism is simply to eliminate greed. They advocate lowering wages, banning labour-saving technology and taxing big cars and other large consumption goods out of existence. Society, they claim, is like a fruit tree. As our population grows, there will naturally be less fruit for everyone. We should just learn to be content with less, work fewer hours and play more. It sounds attractive, and it has the virtue of getting at the other great cause of our moaning--stress.

A 1992 Canadian Mental Health Association study revealed that 47% of Canadians feel stressed or very stressed at least once a week, and that stress levels are rising. The two-income family is probably the key factor. We now rush to drop junior off at daycare, rush to work, rush home, rush through dinner and then hurry off to bed. This pattern is probably at the root of our notion that things were better in our parents' day, when everyone was poorer. After all, isn't life supposed to get easier as we get richer?

Swedish social scientist Staffan Linder (The Harried Leisure Class) argues that wealthy societies are by their very nature more stressful. During the Middle Ages, when the standard of living was lower, one day in three was a holy day for the typical peasant. When your income is practically zero, it costs nothing to take the day off to dance in a meadow. As income rises, time becomes too valuable to spend goofing off. And as we become wealthier, it also takes more and more time to consume everything we can now afford, which leads to even more stress.

The Canadian Mental Health Association survey reveals that those earning over $100,000 a year have a 66% chance of feeling stressed at least once a week; those earning less than $30,000 reported stress only 45% of the time. If you still think you'd rather live your parents' lifestyle, it is a simple choice to make. Pare down to one earner per family, get rid of the second car, quit going on vacations and eating out so often, forsake the VCR, microwave oven and 27-inch TV, move into a 1,000-square-foot bungalow, and live the life your parents lived--on $29,109 a year. If you are not prepared to do this, then quit complaining.

Peter Shawn Taylor is a freelance writer from Waterloo, Ont. This article is adapted, with permission, from the May, 1996 issue of Saturday Night magazine.

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