Ed Balls embraces fiscal austerity at Labour Party conference: A Major error

The shadow British Chancellor Ed Balls speaking at the Labour party conference has foolishly embraced the fiscal conservative principle of no new deficit financed funding for education or social investment or infrastructure when and if Labour is in office. This despite the fact that the rise in indebtedness is almost entirely due to the crash brought about by the private banking system and deregulation and rise in unemployment that neo-con governments had introduced over the previous several decades.Check out these historical charts on the debt to GDP in the UK.the debt to GDP ratio and the deficit The debt to GDP ratio is nowhere near its historical maximum of over 250 % as the charts illustrate.Furthermore almost 70 % of the UK debt is held by domestic UK investors including the Bank of England .(See in particular the last chart on the page which plots the ratio of public sector debt to the GNP over the period 1692 to the present) The current level of close to 80 % is in fact moderately low when viewed over the history of British finance since 1692. It is currently elevated only because of the crash and crisis and its quite foolish and unnecessary to pledge no debt financed spending on capital account when there is such a large need for it in Britain and the neglect of it has helped fuel right wing political movements like UKIP and nationalist movements like the SNP. I t may seem appealing as a defensive measure against Tory charges of financial lack of discipline but Labour ought to educate their electorate about how damaging austerity has been, what the alternatives are and how to repair the damage. Instead Balls has boxed Labour in with his pledge. Too bad.

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United Kingdom breathes sigh of relief:Scotland votes no 55%to 45% yes,Devolution on the way

In a hard fought exciting Scottish referendum contest with an overall turnout of 84.6% the No forces have won a clear victory 55.3 % to 44.7% Yes. The final numbers were only completely counted in the early hours of the morning in Scotland but they revealed a clear cut victory for the no side. The no side received 2,001,926 votes compared to the 1,617,989 votes for the yes.Of the 32 councils reporting results the Yes side won only four of them and came very close in one other, Inverclyde known for its ship building industry. The four were Glasgow turnout 75% where the Yes won with 53.5 % of the vote 194,779 votes to the no 169,347 votes,46.5 %; Dundee turnout 78.8% yes 53,620 57.3% no 39,880 42.7 %; North Lanarkshire 84.4% turnout Yes 51.1% 115,783, no 48.9% 110,922 and West Dunbartonshire turnout 87.9% yes 54 % 33,720 and no 46 % 28,776. In most of the other 27 areas the No side won by relatively large margins. Unemployment was higher in the areas which voted yes.

However, the yes side did well enough with 44.7 % of the vote to bring about what looks like will be major changes in terms of additional powers given to the Scottish parliament and consequently a major debate about devolution of comparable powers to Northern Ireland and Wales and perhaps the establishment of an English Assembly and the principle of England’s voters representatives only voting on English issues and policies just as only Scottish MSPs will vote on Scottish issues and similarly for Wales and Northern Ireland. This will be a lively and difficult debate for the UK as a whole with the political parties disagreeing about the character and extent of devolution. For example Labour might well be reluctant to accept totally the principle that Scottish MPs at Westminister not be entitled to vote on devolved issues like health care and education because so many of their MPs come from Scotland and they might lack a majority among English MPs even if they become the Government of the UK after the next election.

At the other end of the spectrum the anti EU party UKIP is a strong advocate of the principle that only English elected MPs should vote on devolved policy areas.

So the road ahead will have many twists and turns as the United Kingdom evolves from a quasi unitary state to a close to federal state. As a Canadian observer I offer my best sentiments and wishes for success for the difficult debates and issues to come. There is much to be learned about the benefits of flexible federalism and sensitivity to regional minorities for healthy polities. We can learn much from each other in this increasingly democratic and integrated world.

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Scotland the brave: the road to the referendum

The spectre of Scotland voting yes to become independent of Great Britain in ten days haunts the British press and Britain’s political class. Like its cousin the Québec independence movement the Scotland referendum campaign has tightened into an apparently close horse race as the referendum day draws near. Many Canadians who follow politics and particularly Québecers are following this referendum closely. Many Canadians have Scottish or British roots and families. Many of us are very familiar with the excitement or dread that this sort of referendum can produce.The debate in Britain revolves around the traditional issues that bedevil these affairs. What are the terms on which Scotland would separate from its three hundred year old partner? Would Scotland have its own central bank and currency? The Scottish independence movement says it intends to negotiate a currency union with Britain but the Government in London insists that it won’t agree to a currency union. How would the national debt be divided between the newly recreated country of Scotland and its former partner? What role do ideological differences play in the debate? Can we make better sense of the debate by viewing it as a clash between neo-liberal politics and democratic socialist or social democratic politics? What would happen to Wales, England and Northern ireland if Scotland left? If Scotland votes narrowly no will this close call lead to federalist reform in Great Britain ? How much capital flight from Scotland will occur in the final days of the referendum campaign ? What would the consequences be of a yes vote in Scotland in Spain with its Catalan separatists, in Belgium, in France, in Québec ?

Paul Krugman has written a piece in the NYT in which he argues that Canada is an independent Scottish proxy in North America, a successful much smaller independent country from the U.S. with its own central bank and currency and more left of centre in social and economic policy. So if Scotland wishes the same status it needs to plan for its own currency and central bank something its nationalist leadership has insisted won’t happen. But Canada never broke away from the US. rather it was the US that broke away from British North America a revolution that Canada refused to join. So the analogy is not a good one.Furthermore Canada like the U.S is a continental country with vast resources and a population that is over 35 million people.But Krugman is right to argue the importance of having ones own currency and central bank. Some years ago when the Canadian doller was trading in the low 60cents US band a number of misguided Canadian economists speculated on the wisdom of abandoning our currency in exchange for a new shared currency with the U.S. That would have been a very bad idea and looks particularly foolish now that the currency has traded at above par since then and in the 90cent range recently. I wish the Scots and Britons well in the coming tense days.

Personally I think a respectful rejection of the nationalist side is a better outcome for both Scotland and Great Britain. Creative federalism and devolution can solve most of the complaints. A renewed commitment to full employment and greater support for the NHS would also help considerably. Whatever the outcome from the wilds of the Grampian mountains to the beauty of the south Downs from the delights of Edinburgh to the grandeur of London Britain and Scotland will remain a diverse land rich in history, culture and natural beauty.

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Poli 204/2 2014 course outline (under construction)

Poli 204/2 2014
Introduction to Canadian Politics
Professor Harold Chorney
Course outline

The study of Canadian politics is a complex field which draws upon a number of traditions in Canadian political science including institutionalism, political behaviour, political theory, international politics, political economy, history, judicial and constitutional history and economic history. In a broad survey course lasting a single term we can only touch upon a number of key aspects of the field. In my view some knowledge of the key economic and political history of Canada and its initial colonial relationship to Great Britain and France and its relationship to the great republic to the south , the United States is essential in making sense of Canadian politics and its political history. The ongoing debate about the place of Québec in Canada can only be properly understood in the light of Canadian history and the history of the French fact in the founding of the country. Much has changed in Canada over the past half century. In 1941 Canada had a population of about 11.5 million people. Its population today is over 35.2 million. Whereas in the 1940s and fifties the major groups were those of British or French background and people from other ethnicities constituted less than twenty percent of the population this third group has grown substantially in importance. Canada can no longer be understood as a British country or a former French colony. This in strong contrast to the Canada of the early 1950s when both the Union Jack and the Red Ensign flew on the flagpole of my elementary school in Winnipeg and we were considered British subjects. Rather Canadian nationality has come into its own based as it is on a wide range of ethnicities , founding peoples and nations and immigrants from all over the world. We will likely be a nation of more than 40 million in the not too distant future and have in much of the country a strong pan Canadian national sensibility. Yet at the same time Québec maintains its identity as the very successful product of more than 4 centuries of French dominant presence in North America. This French presence and identity is also strong in several other regions of the country notably New Brunswick, Ontario and Manitoba. The partly bilingual character of Canada and the tension over Québec’s place in Canada are creative if difficult elements of the Canadian nation making process.

Text :Eric Mintz, Livianna Tossutti and Christopher Dunn, Canada’s Politics:Democracy, Diversity and Good Government. Pearson , 2014. Available at text bookstore.

Evaluation: An essay due in the first week of November on a topic chosen from a list of possible topics made available in the next two weeks. 50 %. A final exam 50 %.

Additional reading: I draw upon several other works in Canadian history and Canadian Politics . these include Alvin Finkel and Margaret Conrad’s two volume History of the Canadian Peoples vol.1 Beginning to 1867 (1993) vol.2 3rd ed. 1867 to the present; Stanley Ryerson, French Canada; Unequal Union; Craig Brown, the illustrated history of Canada, 2002; Donald Creighton, The Road to Confederation:The Emergence of Canada; Rand Dyck& Christopher Cochrane Canadian Politics Critical Approaches; Stephen Brooks, Canadian Democracy, Oxford U Press, 2012. Michael Hart, A Trading Nation:Canadian Trade Policy from Confederation to Globalization, 2002. Mel Watkins and W. Easterbrook, Approaches to Canadian Economic History, 1969.


1. Introduction and overview.

2. Geography and Economic history the role of the staple in French Canada and British North America.

3. Aboriginal peoples in pre European Canada. Aboriginal Rights and Governance. The Riel rebellions Manitoba and Québec.

4. The conquest and its legacy.Québec nationalism in twentieth and twenty-first century Canada.

5. Democracy and the Liberal democratic state.The 1837 rebellions and the chartists. The roots of confederation and the Canadian constitution.

6. The clash between labour and capital in the nineteenth and twentieth centuries and its impact upon Canadian politics and the political party system.

7. The Canadian economy, the business cycle, free trade , globalization and regional disparities.

8. Canada as an urban nation. The growth of diversity. Canada’s treatment of its minorities. Québec nationalism and Canadian federalism.

9. Canadian political culture and our place in global politics.

10. Political parties, interest groups and social movements. Democratic reform.

11. The constitution and the Charter of Rights. The Federal system and the economics of federalism.

12. The institutions of government: Parliament and the power of the Prime Minister.

13. The judiciary and the courts.

14. Summary and Review.

Essay Assignment: Due the first week in November Write an essay of between 9-10 pages on one of the following topics. The essay must include a bibliography of sources consulted. Sources should include scholarly books, articles from academic journals and where appropriate the quality press, for example The Globe and Mail, The New York Times, Le Devoir. Use a manual of style and proper citation.

Topics:(under construction)
1. “The Quebec Charter of Values was rooted in the Quebec nationalist opposition to Canadian federalism and the nationalists’ rejection of multi-culturalism.” Discuss critically explaining the roots of the debate over values in Quebec, the goal of a secular society in the light of Quebec history and your assessment of the claim that this Charter was simply a legitimate expression of the need to protect Quebec’s culture.

2. How can C.B. Macpherson’s notion of possessive individualism be used to construct a theory of Canadian politics? Explain his theory and explore Canada’s class cleavages and political economy in your essay.

3. Foreign ownership and control of the Canadian economy is still an issue of considerable importance in Canada’s political economy. Explain why and discuss how it has been integrated into our politics in the past and its current status.

4. Does Canada’s voting system of first past the post need to be reformed? What alternative systems are there, how would they work, why would they be better and how could they be implemented.

5.Discuss the power of the Prime Minister and his/her office. What checks if any need to be placed on it?

6. What ought to be Canada’s role in global affairs? Are we a peacemaker or a powder monkey ?

7. Discuss the relationship of Canada to the U.S. Given the close economic integration that the free trade pact has promoted explore what challenges this poses to our sovereignty and independence.

8. Analyze the problem of unemployment. What role has government economic policy played in this problem? What is the role of the Bank of Canada and the Department of Finance in managing this problem? Explain the competing approaches of Keynesianism versus monetarism with respect to this problem.

9. Discuss Canadian economic history from the point of view of staple development. Does staple theory still have explanatory power in the twenty first century?

10. Discuss the struggle for responsible democratic government in Canada and its roots in the 1837 rebellions, the Riel rebellion, the struggle of the suffragettes for women’s voting rights and the struggle of the aboriginal people for their rights.

11. What role have trade unions played in Canada’s political and economic development ? How have they enhanced democracy ?

12. Discuss the evolution of aboriginal rights and governance in Canada.

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Poli 463/2 2014 course outline (under construction)

Poli 463/2
Government and Business course outline :
Keynes versus monetarists before and after the crash of 2008
Prof.Harold Chorney
Fall/ 2014

Course overview:

This course explores the tools that are necessary to deal with the contemporary global economy and the public policy that is appropriate after the events in the financial markets these past six years.The crash of September 2008 in the financial markets,the financial bubble that preceded it, the global dimension to the recession which followed it and the presence of widespread significant fraud and excessive reckless risk taking obliges us to reinvigorate standards of regulation in the public interest and to understand the full dimension of financial instability.

Governments all over the world initially reacted by engaging in re-regulation, Keynesian deficit finance and a dramatic overhaul of policy to roll back the laissez-faire ideology that had come to dominate public policy over the past two decades. In recent years there has been some backtracking as the defenders of laissez-faire , particularly in Europe at the ECB and among leading technocrats of the European union and the Republican critics of President Barack Obama have reasserted the ”wisdom” of laissez faire against what they claim are the failures of liberal socialism and Keynesian intervention and social engineering. Jean Claude Trichet of the European central bank and his successor Mario Draghi to a somewhat lesser extent have also been outspoken in their defense of sound finance and budget balance. Just this past month the French minister for economics,Arnaud Montebourg resigned in protest over the austerity policies of the EU and the Hollande government of France. This has been less the case for Ben Bernanke and his successor at the Fed Janet Yellen who have emphasized the importance of reducing unemployment instead. Hence the debate between the two schools continues.The British coalition Liberal conservative Government under the leadership of David Cameron and Nicholas Clegg has unfortunately also embraced sound finance and budget slashing despite the severity of the recession in the U.K. and the evidence that Labour’s return to Keynesian stimulation was working.

In the past this course examined intensively the clash between the Keynesians and the monetarists and the impact of this paradigmatic debate upon public policy. It also examined the neo-conservative and neo-liberal ideology and the break these ideologies have made with post-war liberalism, progressive toryism and social democracy. It argued the case for a return to Keynesian public policy.

This has happened initially in the leading capitalist economies like the US and Japan, post crash. In many respects the new American Presidential administration of Barack Obama has led the way, although critics like Nobel prize winners Joseph Stiglitz and Paul Krugman argue that the American stimulus was too small and improperly focused. It has also been undertaken in Europe with Great Britain and to a lesser extent France leading the way, with Germany a very reluctant follower. Despite considerable resistance it has, in a much less dramatic fashion, been undertaken in Canada by the Harper conservative government.

We shall still do some exploration of the history of the previous monetarist classical macroeconomics paradigm but I intend to spend more time this year on deepening our understanding of how the Keynesian technique of demand stimulation is intended to work, the implications for public policy, and how I believe it should work given all of the economic and ideological changes that have occurred over the past thirty years.We shall also explore the emerging debate over growing inequality in much of the Western world by examining the work of Thomas Piketty, Capital in the Twenty-first century.

We also explore the environmental movement and assesses how environmentalism and green public policy can be integrated with Keynesian approaches to globalization.

We explore the transition from the Keynesian welfare state to the neo-con/neo-liberal doctrine of balanced budgets, free trade and unregulated globalization and to its consequences and now to the partial return of a refurbished Keynesian approach to public policy. The role of the media and popular culture in transmitting these changes is also explored.The impact of the successful Obama campaign for the Presidency will also be explored in terms of its impact upon public policy.

Texts and basic readings:

The first four works are basic texts and are on order at the text book store. The Deficit papers is available from me in electronic format as well a number of papers posted on my word Press web site will be assigned readings.

John Maynard Keynes, The General Theory of Employment, Interest and Money.

Joseph Stiglitz, Free Fall:America, Free Markets and the Sinking of the World economy , 2010

Paul Krugman, End This Depression Now, Penguin.

Thomas Piketty, Capital in the Twenty-first Century. Harvard university Press.

Harold Chorney, The Deficit Papers available from me in electronic format. As well a number of other papers which are posted on my blog will also be assigned as readings.

Other core readings:

Hyman Minsky, Stabilizing an Unstable economy

Can ”It” Happen again?:Essays on instability and finance

John Maynard Keynes

Kevin Phillips, Bad Money:Reckless finance, Failed Politics and the Global Crisis of American Capitalism

Peter Clarke, Keynes:The Rise ,Fall, and Return of the 20th Century’s Most Influential Economist.

David Mendell, Obama from Promise to Power

Harold Chorney, “On Manias, panics and bail-outs:further thoughts on the financial crisis” see my website.

Harold Chorney, Revisiting deficit hysteria, labour/Le travail, #54, 2004 available on the net

Harold Chorney, The Global Financial Crisis, the Re-emergence of Keynes and the Role of Quantitative Easing
paper Presented to the World Congress of Social Economics, Concordia university, Montréal, June 2010 A revised version presented to the Eastern economics association meetings in New York in 2011

Harold Chorney Restoring full employment:the natural rate of inflation versus the natural rate of unemployment paper presented to the Conference on Social Policy as if People Matter, Adelphi university, Garden City New York, November 12, 2004 (available on net)

Harold Chorney, Keynes, Lerner and Friedman in an Uncertain Age, paper presented to the Canadian economics Association meetings Vancouver May 2014.

Alvin Hansen, A Guide to Keynes (on reserve)

Sidney Blumenthal, The rise of the Counter-establishment:From Conservative Ideology to Political Power

Desmond King, The New Right:Politics, Markets and Citizenship

Brian Snowdon and Howard Vane, eds. A macroeconomics reader, 1997.

Snowdon and Vane, Modern Macroeconomics:its origins, development and current state.Edward elgar, 2006

The following are some selected basic supplementary readings.You are not expected to read them all but rather portions of some of them. Some of them will be placed on reserve. Others are available through the library .They are intended to help with your research papers and illustrate the breadth and richness of the literature in the area.

John McMurtry, Unequal freedoms:the global market as an ethical system.

Adam Harmes, The Return of the state: protestors, power brokers and the new global compromise, douglas and mcIntyre, 2004.

Henry M.Paulson,Jr. On The Brink, Inside the Race to Stop the Collapse of the Global Financial System, N.Y. :Business plus, 2010;

Scott Patterson, The Quants:How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It, N.Y.: Crown Business, 2010;

William Cohan; House of Cards:A Tale of Wretched Excess on Wall Street,N.Y.:Random House Doubleday, 2009;

Benoit Mandelbrot & Richard Hudson, The Misbehaviour of Markets:A Fractal View of Financial turbulence, N.Y.:Basic Books, 2004;

Kevin Phillips, Bad Money:Reckless Finance, failed politics, and the Global Crisis of American Capitalism, N.Y.:Viking, 2008;


Nouriel Roubini & Stephen Mihm, Crisis Economics:A crash course in the future of finance, N.Y.&London: the Penguin Press, 2010;

Paul Jorion, La Crise:Des subprimes au seisime financier planétaire,Paris, France: Fayard, 2008;

Richard Posner, A failure of Capitalism:The crisis of 08 and the descent into depression, Cambridge, Mass. and London U.K., 2009;

Bill Bamber & Andrew Spencer,Bear Trap: The Fall of Bear Stearns and the Panic of 2008, New York :Brick Tower Press, 2008;

Richard Bookstaber,A Demon of Our Own Design: Markets, Hedge funds and the Perils of Financial Innovation,Hoboken N.J., John Wiley & sons, 2007 )
John Kenneth Galbraith, The Great Crash,1929
Alvin Hansen, Monetary theory and Fiscal Policy.
Fausto Vicarelli, Keynes:The Instability of Capitalism
George Soros, The New Paradigm for financial markets..
Charles Kindleberger, Manias, Panics and Crashes.
The World in Depression:1929-1939.
David Colander and Dewey Daane, The Art of Monetary Policy.
J.A. Trevithick , Involuntary Unemployment:Macroeconomics from a Keynesian Perspective.
Robert Kuttner, Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency.
Tim Lewis, In the Long Run We`re all Dead: The Canadian Turn to Fiscal restraint.(on reserve)
Robert Ascah, Politics and Public debt:the Dominion, the Banks and Alberta’s Social Credit.
Doug Henwood, Wall Street.
Richard Parker, John Kenneth Galbraith: His Life, His Politics , His Economics.
Peter Clarke, The Keynesian Revolution in the Making.
Will Hutton, The Revolution that Never Was: an Assessment of Keynesian Economics.
Lawrence Klein, The Keynesian Revolution.
J.C.Gilbert, Keynes’Impact on Monetary Economics.
Axel Leijonhufvud, On Keynesian Economics and the Economics of Keynes.
Gary Teeple, Globalization and the Decline of Social Reform(reserve)
Jonathon Michie and John Grieve Smith eds., Managing the Global Economy.
David Held & Mathias Koenig-Archibugi, Taming globalization: frontiers of Governance.
Bao Gao, Japan’s Economic Dilemma:the institutional origins of prosperity and stagnation.
Sidney Blumenthal, The Rise of the Counter Establishment, From Conservative Ideology to Political Power.
Armand Van Dormael, Bretton Woods: Birth of a Monetary System.
Robert Lucas, Studies in Business Cycle Theory.
Milton Friedman,” The role of monetary policy” The American Economic Review, 1968, vol.58, March, pp.1-17 reproduced in Brian Snowdon and Howard Vane, A Macroeconomics Reader.
Alan Blinder, The fall and rise of Keynesian economics, Economic Record, 1988, December reproduced in Snowdon and Vane., A Macroeconomics Reader
James Tobin, “Price Flexibility and output stability:an old Keynesian view.Journal of Economic Perspectives, 1993 vol7, Winter. reproduced in Snowdon and Vane.a Macroeconomics reader
David Laidler, Monetarism:an Interpretation and an assessment.Economic Journal,1981, vol.91 March reproduced in Snowdon and Vane.
F.A.Hayek, The Fatal Conceit:The Errors of Socialism.
Allan Meltzer, A History of the Federal Reserve, Vol. 1:1913-1951.
James Rock ed. ,Debt and the Twin Deficits Debate.
Robert Heilbroner and Peter Bernstein, The debt and the Deficit:fal;se Alarms/Real Possibilities.
Harold Chorney& Phil Hansen, Toward a Humanist Political Economy
Joseph Stiglitz, The Roaring Nineties;
Making Globalization Work
Thomas Kuhn, The Structure of Scientific revolutions;
Adam Harmes, The Return of the State:Protesters, power brokers and the new global compromise;
Georges Campeau, From UI to EI:Waging War on the Welfare State;
Stephen Clarkson, Uncle Sam and Us.
Michael Woodin & Caroline Lucas, Green alternatives to Globalisation.
Al Gore, An Inconvenient Truth,the planetary emergency of global warming and what we can do about it.
Nicholas Stern, Review Report on the economics of climate change to the British government (available on the internet)
Gwyne Dyer, Climate Wars.
Rubin Simkin, Comments on Consumption, Income distribution and Growth (on reserve)
E.F.Schumacher, Small is Beautiful.(on reserve)
E.J.Mishan, the Costs of Economic Growth (on reserve)
J.Kenneth Galbraith, The New Industrial State (on reserve)
The Affluent Society (on reserve)
A Short history of financial euphoria.
Nicholas Georgescu-Roegen, The Entropy Law and the Economic Process (on reserve)
Joseph Schumpeter, History of Economic Analysis.
Paul Davidson, Post Keynesian Macroeconomic Theory.
H.Binhammer, Money and Banking and the Canadian Financal System
Alan Booth, British Economic Policy 1931-1949.Was There a Keynesian Revolution?
Anna Carabelli, On Keynes’ Method.
Leo Pliatzky, The Treasury under Mrs. Thatcher.
L.Randall Wray, Understanding Modern Money.the Key to Full Employment and Price Stability
William Greer, Ethics and Uncertainty, The Economics of John M. Keynes and Frank H. Knight.

Students are also expected to read extensively the financial and quality press each week.These include The Financial Times, The New York Times,the Wall Street Journal, The Guardian,the Globe and Mail, and focus on stories on the economy, the financial crisis and the recovery.

Evaluation: Essay due mid term, the first week of November 50 %

Final exam 50 %.


1.Introduction and overview.The interface between economics and politics.The art and science of political economy. The recent financial crisis, sub -prime mortgages, bank bailouts and the crash of 2008. The need for stimulus and the revival of Keynes. The eclipse of monetarism.? The challenge of climate change and the protection of the environment. The impact of the crash and challenges before Barack Obama. The rise and fall of the new right.The Canadian response. the origins of macroeconomics. The issue of inequality.

readings: Chorney, On manias , panics and crashes; Chorney; the introduction to the Deficit papers,Chorney the global financial Crisis, re-emergence of Keynes and origins of Quantitative easing.the essay on Keynes in the Deficit papers;chapter one in Kuttner.Obama’s challenge.chapter one in Phillips. Kindleberger; Galbraith, on the crash and Minsky, introduction to Can it Happen again and editors’ introduction to stabilizing an unstable economy.
Piketty,part one.

2.Globalization and the ethical dilemma. Myths and truths about globalization.The environmental challenge.Economic growth and entropy.
Readings: Nicholas Stern, Al Gore;K.Phillips; Stiglitz, introduction and chapter one. John McMurtry pp.1-52.

3. The myth of no alternative.The role of regulation and public enterprise. Laissez-faire versus planning.Hayek versus Keynes. The eclipse of Marx.The rejection of Keynes. Daniel Bell and the End of Ideology. The rise of post-modernism and the new classical macroeconomics.
Readings :Chorney global financial crisis…; Chorney deficit papers :The future of crown corporations:government ownership, Regulation or market control,A Keynesian approach, 1998; Blumenthal; King, Hayek, Mcmurtry, Harmes, Lucas, Friedman,Laidler.

4.The role of the media; political pressure groups;democracy propaganda and the policy process. The rise of the neo-cons.
Media and popular culture in the post modern age.The post war consensus and how it unravelled. Stagflation
and misinterpreting the General theory.
Readings :Chorney the deficit papers: The economic and political consequences of Canadian monetarism; Keynes and the problem of inflation.Keynes, the General Theory The two postulates of classical economics; the possibility that labour markets do not clear; the notion of involuntary unemployment.
Blumenthal, King, Block, Chorney, the natural rate of inflation…, Keynes GT ch.1-3; Peter Clarke Keynes, introduction.

5. The consumption function. The multiplier. Savings and investment.The theory of interest rate determination.Readings: Keynes GT; Hansen a guide to Keynes.

6. The controversy over debt and public finance.readings:Cavenaugh, Rock; Eisner; Heilbroner and Chorney: Rediscovering deficit hysteria, The deficit: hysteria and the current crisis and Chorney commentary on the FT’s austerity debate plus U tube video on deficits and debt.

7. The strategy of stimulus. investment in infrastructure. Investment versus tax cuts. The impact of capital flows.
Readings :Chorney blog entries on stimulus and the strategy behind it plus others tba.

8. The roots of neo-conservatism.The cold war. The Vietnam war and the sixties. The OPEC crisis of the 1970s. Stagflation. Thatcher Reagan and Mulroney in the 1980s. The Clinton, Blair and Chretien third way.The Bush and Blair war in Iraq. The challenge of Afghanistan.The resurgence of liberalism in America. Obama’s challenge.
Readings: blog; Stiglitz Free Fall; Stiglitz The roaring nineties;globalization and its discontents.Chorney and P.Hansen Toward a Humanist Political economy, The falling rate of legitimation ; introduction and Neo-conservatism, social democracy and provinve building;King and Blumenthal.

9. The roots of monetarism.Hayek versus Keynes in the thirties. Friedman versus neo-classical Keynesianism in the sixties and seventies. The post-Keynesians and John Kenneth Galbraith. Towards a new Keynesian paridigm.The return of regulation and the state. The bail-out of the banks , Freddie Mac and Fannie Mae and AIG insurance ; cleaning up the bubble,Readings :Stiglitz,Paulson,Phillips, Tobin; Blinder; Davidson;Harmes; Chorney

10. Post and neo-Keynesian policy in the age of OPEC. readings:Davidson,Harmon , The problem of growing inequality, the Piketty thesis.

11. Development issues. The IMF and the World Bank. The turn to the left in Latin America. The return of full employment ? Capitalism in Asia.
Readings: Stiglitz, Chorney.

12. Prospects for democracy, balanced ecologically sound growth and the compassionate society in the new world order.

Weekly notes: I will use this space to refer students to readings, updates sources etc.

Please note that the reading Harold Chorney,”On manias, panics and bailouts:further thoughts on the financial crisis” is available by referring to my blog. Jan.14, 2009 On manias, panic and bailouts: further thoughts. There are also numerous copies of Keynes’s GT in the libraries around town including Concordia and it is also accessible on line. Begin reading the first 50 pages and we will discuss it in class.

Please go to the PBS.org site and watch their excellent documentary Inside the financial Meltdown which was broadcast on Frontline.It provides an insightful and personal look at the financial crisis as it unfolded in New York and Washington in 2008.

Essay assignment due in class in the first week of November.
Please research and write a 12 to 15 page essay on one of the following topics or if you prefer propose an alternative topic to me. Be sure to use a manual of style, include a full bibliography and proper notes identifying your sources. Sources should include books, periodical literature, quality financial papers like the Wall Street Journal, the Globe and Mail, The Financial Times or the New York Times well as internet sources.

Possible topics include:

1. Discuss the root causes of the financial crisis. Explore the factors that influenced its unfolding as it has. What are the principal flaws in the economic theory that business leaders and policy makers relied upon that led to this crisis? How must economic theory be reconstructed to avoid these policy failures in the future?

2. Compare and contrast the monetarist approach to public policy and management of the business cycle with the Keynesian schools’ approach.Why and how did monetarism displace the Keynes style approach in the 1970s? Does the current crisis suggest another paradigm shift?

3. Discuss the controversy over government use of deficits to stimulate the economy in an economic downturn.Explore the role of deficits in the current policy environment. How did the Canadian Harper stimulus compare with that of the Obama administration? What is the appropriate monetary policy in conjunction with stimulative deficits ? What impact have the austerity policies in Europe had on the European economy ? What about the U.K. ?

4. Explore the roots and current operations of the IMF and the World Bank.
What reforms appear necessary at these institutions. Give concrete country based examples.

5. Explore panics, manias and crashes in financial history. How does this panic compare with previous ones ?

6. Explore the theory of the multiplier and Keynes’ theory of investment. How ought we to modify Keynes’ theory of investment to adjust to the current circumstances of globalization ?

7. Explore the roots of neo-conservatism. Does it have a future ?

8. Explore the environmental aspects of economic stimulus. Is there an inherent contradiction between stimulus leading to full employment and sound environmental policy ?

9. What would constitute a viable and contemporary theory of economic liberalism that would respect the social and economic needs of people but at the same time be open to global values ?

10. Discuss in detail the inequality argument of Thomas Piketty. How has inequality evolved in Canada as opposed to the U.S. ?

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French Economics Minister Arnaud Montebourg resigns in opposition to misguided counterproductive austerity policies

M.Arnaud Montebourg has openly protested against the austerity policies of the Hollande Government headed by Prime Minister Manuel Valls. He correctly denounced the policies as absurd and counterproductive in the fight against unemployment and the deficit. As a consequence of his very public denunciation of the policies, President Hollande has dissolved his government and asked his prime minister to form a new cabinet purged presumably of any Keynesians. But the brave statement of Montebourg which he correctly stated required both intellectual and political courage ought to serve as a rallying cry for those enlightened French politicians, civil servants and public intellectuals who share the perspective and who would like to see a long overdue shift in policy in France and Europe generally.I strongly encourage them and assure them they are correct in their diagnosis which is backed up by more than eighty years of scientific debate and the results of the last great depression and the delayed economic recovery which only occurred after the obsession with austerity was overcome by the requirements of the war time for greatly increased public spending. But it was not the war, per se, which solved the problem . Rather the war removed the political barrier to the increased investment and boosting of aggregate demand which was the necessary fiscal part of the solution.It became unpatriotic to oppose public spending and unemployment reduction. As a consequence the fiscal conservatives and anti deficit balance the budget fanatics melted away. As the economy recovered the positive business cycle and low unemployment allowed the debts that were incurred to shrink over time as a proportion of the GDP so they were no longer an issue for many decades. This positive growth cycle can be restored in Europe but it will take courageous politicians, public intellectuals,academics, journalists and business people like M.Montebourg to speak out to promote the necessary sea change in policy. Merci beaucoup M. Montebourg. Votre courage est une inspiration.

Posted in austerity, deficit hysteria, European unemployment, France politics+economy | Leave a comment

Economic stagnation persists in Europe: austerity policies are the cause

This week Stats Canada has announced it is recalculating its employment numbers because of a processing error in its July tabulation. It will be interesting to find out in what direction and way they erred in their earlier release. The new data is due to be revealed on August 15th , coincidentally my birthday. But the concern over unemployment and the apparent slowing of growth in Canada has prompted me to do some investigation again of how employment is faring elsewhere, particularly in the U.S. and Europe.

This has been a troubled summer with several horrible wars in the Middle East and beyond, understandably affecting the mood and business outlook for many countries. The latest round in the Palestinian Israel conflict, the war in Syria and Iraq and the conflict between the Ukraine and Russia and the creeping march to a new cold war between the West and Russia raise both human considerations of how such horrible wars and hatred are still possible in the twenty first century and concerns about how they may impact on the global economy.

But beyond this context there is still operational in Europe the dogmatic anti Keynesian obsession with budget cutting and austerity in a number of European countries including France where unemployment is stuck at 10.3 % (June 2014); Finland 8.8 %; Portugal 14.1 %; Spain 24.5 %; Greece 27.2 % (May, 2014);Cyprus 15.2%; Italy 12.3 %; Ireland 11.8 %; Sweden 8.0%; Latvia, 11.4%; Lithuania, 10.5 %; Poland 9.5 %; Belgium 8.5 %; Hungry 8.1 and Slovakia 13.8 . Only Germany at 5.0%; and Austria 5.0% could be considered to be doing well.The U.K. which is significantly not in the Euro zone and therefore not subject to the draconian anti Keynesian position of the European central bank is at 6.5% unemployment well below the European average but still elevated unemployment and with a government still committed to austerity.U.S. unemployment is 6.1% and Japan 3.5 %. Luxembourg which neighbours France, Belgium and Germany has an unemployment rate of 6.3 % , the Czech Republic 6.1% ; Belgium 8.5 %; the Netherlands and Denmark 6.5 % (All the data courtesy of Eurostat)

From this picture what sort of tentative conclusions can we draw? For one the European union’s insistence that budget deficits be kept to less than 3 % of the GDP and the central bank’s obsessive support for austerity policies are clear factors in the unemployment problems of many European countries.This would definitely seem to be the case in France, Spain, Portugal and Greece.Geographic contagion also plays a role, as Eurostat’s map of unemployment illustrates. It pays to be close to a well performing country like Germany and Austria.Although this seems less the case in France which in addition to Germany also shares a border with high unemployment Italy, Spain and Belgium. It is well long over due for the European union to modernize and jettison its austerity high unemployment policy paralysis but barring major political shifts this seems unlikely for the near future.

Posted in deficit hysteria, deficits and debt, European debt crisis, European unemployment, fiscal policy, France politics+economy, full employment, Greek sovereign debt crisis, monetary policy, Spain, treasury view, U.K. economy, unemployment | Leave a comment