Montreal elects environmentalist and left of centre Valerie Plante as its next mayor

Montreal where I have lived ever since 1982 when I moved here from Toronto has once again turned to the left and to bicycle riding environmentalists and community activists for its new mayor and governing party. The election turnout was an unimpressive  42.5 % but the result was nonetheless spectacular.

Ms. Valérie Plante represents a fairly radical but highly creative force in Quebec politics. She defeated Denis Coderre decisively capturing 243,242 votes to Coderre’s 216,104 votes. Projet Montreal also won the majority of the seats on council -34 of the 65 available.This will enable them to implement their platform but also makes them vulnerable to arrogance in the exercise of power.

Ms. Plante is the first woman to win elected power as mayor in Montreal’s long history as a First Nations community and then European colonial outpost linked to the fur trade and later  entrepôt to the interior for the development of the Canadian  staple economy, head quarters  of the Grand Trunk Railway and then commercial capital of Canada rivalling New York  for control of trade to the hinterland and now second largest metropolis in Canada. Her party Projet Montréal originally established by an idealistic urban planner Richard Bergeron and outspoken advocate of much improved and ecological public transportation has previously been the major opposition force to more conservative centrist parties who governed Montreal during the difficult decade that included the economic slump and the corruption scandal.Mr. Bergeron had switched sides and joined the Coderre administration. He lost his seat on council in this election. Politics is often cruel and lots of very good people fall victim to the fickle electorate because of the allure of illusory fame or simply because they sincerely believe they can change things for the better.

Montreal is a particularly beguiling case.It is the only great metropolis in the world where two of the world’s great languages and cultures ,English and French, co-exist albeit uneasily. It has a dynamic multicultural personality where many languages are spoken and cultural influences from many parts of the world are encountered daily. Both Plante and Coderre were very open to this diversity. It also not unlike metropolises like Chicago and  New York has had larger than life personalities as mayors. In Montreal we have had several boss politicians like Camille Houde and Jean Drapeau who between them governed Montreal for close to 50 years !

I have explored Montreal’s diversity and the effect of linguistic duality in my research on cities , my writing on urban politics and the quest for community and the issue of class consciousness.(see my books City of Dreams :Social Theory and the Urban experience Toronto :1992&2002; Toward a Humanist Political Economy co-authored with Phillip Hansen Black Rose Books, Montreal: 1992) I have also written at length on the critical role infrastructure investment needs to play in our cities.I focus on this in  my numerous writings on Keynes, public finance, infrastructure investment and quantitative easing as a necessary policy to recover from severe business cycle downturns and restore lower unemployment.(See for example The Deficit and Debt Management:An Alternative to Monetarism, Ottawa, 1984:Canadian Centre for Policy alternatives; Revisiting Deficit Hysteria, Labour Le travail, No.54 Fall 2004; After the Crash, Rediscovering Keynes and the Origins of Quantitative Easing available on my  website haroldchorneyeconomist.com. paper presented to the annual meetings of the Canadian economics association, June 2011, University of Ottawa; John Maynard Keynes and the General theory after 75 years , preface to a presentation to the Canadian Economics Association special panel reconsidering Keynes in a time of crisis, June 3, 2011, University of Ottawa.See also Tim Thomas, ed. The Politics of the City Toronto:ITP Nelson, 1997 )

Mr Denis Coderre got elected to the job of mayor four years ago on a platform of restoring the city , rebuilding its infrastructure and metropolitan status and cleaning up corruption. In many respects he succeeded but he fell victim to some of the frustration felt by people over the  chaotic landscape that has emerged while Montreal rebuilds its autoroutes and replaces antiquated infrastructure in many districts of the metropolis.To be fair this is a problem that will be faced by by many  North American metropolises as they seek to repair their infrastructure and rebuild and expand public transportation. Along with the pressure of rising land values and inflating house  and condo prices and exorbitant rents these problems are increasing.

One has to go back to the regime of the late Jean Doré and the Montreal Citizens Movement which defeated the legendary conservative nationalist politician Jean Drapeau in 1986 to find as left wing and progressive a mayor as Plante aspires to be. Doré governed for 8 years and eventually  became more of a reforming technocrat than a left wing idealist. We shall see how political power and the challenge of meeting Montreal’s growing public transportation  and infrastructure needs transforms Ms. Plante and her party. In the meantime bonne chance !

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President Trump selects Jerome Powell as new Fed chair replacing Janet Yellen

In what may well turn out to be a controversial decision President Trump has broken with precedent and decided not to reappoint Janet Yellen to a second term as Fed chair despite praising her for her excellent work as chair. Yellen is a high powered Keynesian economist with a very strong academic background. Her chosen successor Jerome Powell has served on the Fed board for a number of years has a strong background in business, a former partner in the Carlyle Group a major investment company and is a trained lawyer. He lacks formal training in economics however. So for the first time in  37 years the new Fed chair will not be an economist. In the past one of the longest serving Fed chairs William McChesney Martin (1951-1970) who served five presidents from Harry Truman to Richard Nixon and one of the most influential Marriner Eccles (1934-1948) did not have degrees in economics. However, both were effective chairs.Martin had a background in Wall Street and had done graduate work in economics at Columbia university although his first degree was in English and Latin from Yale. Also his father helped write the Federal Reserve Act in 1913 and was later governor and then president of the Federal Reserve of St. Louis. In Eccles’s case  he was a very successful businessman and banker who in some ways independently anticipated the work of Keynes.

Powell has voted with Yellen on keeping interest rates low for as long as was needed to promote recovery. But he is apparently more sceptical of quantitative easing. So it remains to be seen if once he assumes the chair next February he seeks to accelerate the unwinding of the program which clearly has played an important role in healing the American economy after the crash.Unemployment is now 4.1 % and trending  slowly downward. It would be a mistake not to let this trend continue by prematurely raising interest rates.

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Fed and Bank of Canada hold back on rate rises: Stimulus continues Smart decisions

Recently both the Federal Reserve  and the Bank of Canada made smart decisions not to increase rates despite pressure from some less well informed quarters that they should do so as believers in the NAIRU rate are still convinced that inflation will rear its head now that unemployment is 4 .2% in the US and approaching 6% in Canada. But the most recent inflation rate on all items excluding food and gasoline prices which were affected by hurricane disruptions shows no sign yet of approaching their targeted inflation rate of 2 %. The US rate was a mere 1.3 % and the Canadian rate was also below the 2 % target.

The Canadian Finance Minister Bill Morneau also delivered an upbeat fall economic statement that celebrated the fact that growth continued to be moderately strong, the projected budgetary deficit was expected to be lower than predicted and unemployment could well drop below 6 % in the coming months. All in all a vindication of the policy position I have been suggesting for a long time. The most effective way to respond to an economic shock like the crash and subsequent slump is to run a significant  budget deficit which invests in people, their social and educational needs and physical infrastructure combined with a strongly accommodating monetary policy using quantitative easing where appropriate to ensure low interest rates. This is what has been done and the results are positive.

 

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The JFK docs: Canada Cuba and the U.S.

The recent release of previously secret archival files in the JFK archive has come at a very busy time in American and world news. The release is a massive one which will take some time to absorb and analyze. So far my reading of the first batch of documents confirms that the Kennedy administration in the early 1960s was obsessed with Fidel Castro and Cuba and was prepared to consider assassination,kidnapping and sabotage of crops and agricultural Cuban workers and the training in secret of armed Cuban exiles to invade Cuba to overthrow Castro. Part of their motivation was the American  fury in discovering that the Soviet union had secretly installed missiles in Cuba which were a clear national security risk to the U.S. This was revealed to the American people on October 22 and the crisis was not resolved until October 28 1962 when JFK announced that Mr.Khrushchev had agreed to remove the missiles .Only later did we learn that the US agreed to remove its missiles from Turkey as a quid pro quo.

 

I remember these days very clearly as they dominated my high school experience. Part of it was the American  fear that Cuba would be a successful demonstration to Latin America that a communist society was possible and provide to the naïve the “demonstration “that  problems of poverty and underdevelopment could be solved by resort to communist and radical socialist ideology. At the time Canada also played a role in these events. One of the documents mentions consideration under the general rubric of operation Mongoose which had as its explicit goal removing Castro from power. ‘’  The objective of  operation Mongoose is the overthrow of the Castro regime’’ (p.20 Doc ID 32112987 JFK docs) It also contains the sentence” General Carter said that the CIA would examine the possibilities of sabotaging airplane parts which are scheduled to be shipped from Canada to Cuba. ” This sentence  appears in  the document on operation Mongoose on the 14th of September1962.(doc.ID32112987&doc.id 32112745)

 

Had the Diefenbaker government known this they would have raised a storm of protest. Diefenbaker was already alienated from the JFK government over disputes with  the U,S. over trade and recognition of Cuba and trade with China and other disputes over general trade issues and a certain poor personal relationship between the two leaders-they disliked each other and rubbed one another the wrong way. (See Knowlton Nash   Kennnedy and Diefenbaker the feud that toppled a Government McClelland and Stewart, 1991) As well the Americans wanted Canada to accept nuclear armed Bomarc missiles on its territory but Diefenbaker was reluctant to agree without certain American concessions on joint control.  Diefenbaker  lost his majority in  the election on June 18 1962 and was reduced to a small minority government which later in 1963 fell to the Lester Pearson led Liberals. Had the details of US consideration of sabotaging Canadian exports to Cuba been public knowledge the election might well have turned out differently.

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British national debt 1690 to 1910

(originally published on my blogspot blog in 2010)

 

Over the years that I have researched the question of the national debt and its impact upon an economy I have always been astonished at how boldly politicians, journalists and others ignore the lessons of historical experience.

For example, during the great depression of the 1930s one of the principal barriers to the relaunching of the British and North American economies was the obsession in balancing the budget despite the hardship that this act imposed and despite the negative consequences for the economy and the unemployed.In my writings I have drawn upon historical statistics to show that debt to GDP ratios were much higher than the levels reached in recent years and yet despite this the economies recovered and prosperity was restored and the debt ratio eventually dropped.

This was brought about through rapid economic growth and a sharp decline in the rates of unemployment. The notion that economic growth, wealth creation and prosperity are not incompatible with high debt to GDP ratios is crystal clear from the British case. The economic historian James Macdonald in his excellent work A free nation deep in debt makes exactly this point on pages 354-355.

He displays a chart which runs debt as a percentage of the GDP for Great Britain from 1690 to 1910. The ratio begins at 0% in 1690 runs higher and higher in a lurching manner until it peaks at about 300 % of the GDP in the late 1820s and then consistently declines with several brief upticks until it closes at around 20 % in 1910.As Macdonald states the debt was never lower than 100 % of the GDP for the century between 1760 and 1860 and averaged above 150 % from 1780 to 1845. “simplistic notions that national power and national debt are mutually incompatible are disproved by this single historical fact.” (p.355)

For it was during this period that Britain became the leading industrial power in the West.Similarly in the twentieth century the British debt to GDP ratio rose to above 200 % and despite this Britain remained an important industrial power with a very high standard of living.

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The Great Depression revisited

  ( Originally published February 20 , 2006 on my Harold Chorney political economist blog.I m republishing it here for the convenience of readers and students.   )

The Great Depression which began after the stock market crash in the fall of 1929 and lasted in its extreme form until 1934 and its aftermath form until 1939 was an event that marked the last century. Indeed such major collapses seem to be possible only once or perhaps twice a century in keeping with the long term business cycle theories of Kondratieff and Schumpeter. 


The exact nature of the depression and its causes are still much debated. In exploring this debate one can learn a great deal about business cycles, central banking policies, exchange rate management, international flows of capital and trade and stock market speculation.  


A number of influential authors have weighed in on the depression from both a Keynesian and monetarist perspective. These include Charles Kindleberger, Milton Friedman and Ana Schwartz, Gotfried Haberler,Peter Temin, Abe Safarian, Clarence Barber, Donald Moggridge, John Maynard Keynes, Friedrich von Hayek, Robert Lucas and many others. The reason for so much interest is not surprising. 


First of all this was a very major event that presaged and in many ways contributed to the rise of fascism and the Second World War. In economic theory terms if one can explain the causes of the depression one can learn from this and develop policies to prevent another such occurence. Here of course the medical model is influential. One studies epidemics to discover how to prevent them in the future. Charles Kindleberger has written a very comprehensive and fascinating guide to the great depression.The World in Depression 1929 -1939 enlarged edition 1986 University of California Press, Berkely, Los Angeles& London.


Kindleberger starts off by explaining that as a young man in the late 1920s he worked in the stock exchange in New York as a runner for a New York brokerage house.Despite the collapse in share prices he and his family were not severely affected and he was able to continue his studies including European travels and graduate work at Columbia University beginning in the winter of 1933.


He became fascinated with international exchange depreciation and later worked on his dissertation and got a job in 1936 in the International Research Division under Harry White who later played a key role in establishing the World Bank and the IMF along with John Maynard Keynes at Bretton Woods.Kindleberger later went to work at the Federal Reserve Bank of New York and the International Bank of Settlements.


So in many ways Kindleberger was ideally placed to write a history of the Great Depression. His perspective is that of an insider to the events that he describes in such effective detail. Kindleberger eschews econometric techniques and instead relies upon narrative history and a profound understanding of economic theory and the events themselves. He is convinced that the international monetary mechanism played a very important role in the depression. In addition Kindleberger shows how countries like Japan anticipated much of the thrust of Keynesian deficit financing policy as early as 1932. 


Keynes first broached the subject of public works in a letter to the Times on Aug 7, 1929 as well as in earlier writings in 1928. Similar proposals were made by the German progressive economist W.S. Woytinsky in the International Labour Review in January, 1932.(p.171-172)Woytinsky drafted along with two other labour economists a plan for domestic public works for the German Federation of trade unions in December 1931. Arthur Gayer wrote about the strategy of using public works to stabilize the cycle for a study published in New York in 1935 by the National Bureau of Economic Research , Public works in Prosperity and Depression. 


The Swedish economists associated with the Stockholm School developed similar notions in 1932. See the work of Eric Lindhal,Offentligaarbeten i Depressionstider with commentaries by Bertil Ohlin, Gunnar Myrdal, G.Bagge and J. Akerman;( Nationelonomisaka Foreningen, Forhandlingar, 1932 Stockholm, 1933). As far back as 1857 public works such as street cleaning and stone quarrying had been urged by the Mayor of New York as a program to assist the unemployed during the then depression. In 1855 workers were sent to work on the Erie Canal when they applied for assistance.


What this analysis of Kindleberger shows is that along with our knowledge of Kalecki`s work in the early 1930s and the pathbreaking work of R.F. Kahn and several other lesser well know theorists Keynes was not alone in breaking with orthodoxy and developing the intellectual apparatus necessary to justify this new path. But on the whole the fiscal conservatives , the advocates of balanced budgets and deflation were more numerous and overall in charge of policy until well into the 1930s.The automatic deflationist bias of the gold standard and the stubborn insistance of so many countries in trying to cling to it was also to blame. 


In addition from a game theoretic point of view Kindleberger points out the necessity of one major power acting as the responsible underwriter of the international economic system. It was the inability of the British to continue in that role from the late 1920s on and the “reluctance of the United States to take it on until 1936 “ that caused so much damage. (p.11) (more to come)

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Condolences to all those affected by the tragic events in Las Vegas and the terrible hurricanes, the earthquake in Mexico and a suggestion to help repair the damages.

Many millions of people in the US. have been tragically affected by the terrible hurricanes that swept through Florida, Texas, Louisiana,Puerto Rico, the Caribbean islands and now the horror of a mass shooting in Nevada.Mexico also suffered a tragic loss of life in the recent earthquake.

Some Canadians were also victims in the hurricanes in the Caribbean and also in Nevada four Canadians were among the 58 killed and several wounded at the concert shooting . We send our condolences to all those affected.We also send our best wishes for a full recovery to those who were hurt.We wonder whether these events like the Lisbon earthquake in the eighteenth century will cause a major rethink of the prevailing view and ideology about climate change and regulation of fire arms. The Lisbon earthquake of 1755 certainly had a major impact as Voltaire’s Candide made clear.

Let us begin with the large outstanding public debt of Puerto Rico. President Trump has floated the idea of forgiving some of that debt. That is a smart idea. The U.S. GDP was          $ 18.56 trillion (2016) The broadly defined money stock M2 is as of Aug. 2017,  $13.649 trillion. It would very easy to refinance Puerto Rico’s debt- it is about $70 billion over a fifty year period- by having the Fed acquire the debt by retiring the outstanding Puerto Rican  Bonds and gradually reissuing them a low rates of interest as the economy there is rebuilt and recovers and amortizing it over fifty years . In addition to help with the necessary rebuilding of Texas, Florida, Louisiana and other areas hit by natural disasters it would be a good idea to create a special infrastructure fund under the auspices of the Federal reserve whereby bonds which financed the essential repair of damaged infrastructure could be issued guaranteed by the Fed and where necessary purchased by the Fed. the bonds could also be long term bonds and managed to keep interest rates low. A one trillion dollar fund would be possible without having an inflationary impact. M2 has increased from 2008 by about 50 % or five trillion  without any real appearance of inflation. These measures would increase M2 by about 8 %  and help solve some problems that the US faces in the short to medium run in the  aftermath of these terrible events.

 

 

 

 

 

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