Poli 489, 2016 the political economy of Inequality :course outline

Posted on January 2, 2016 by haroldchorneyeconomist

Poli 489 Course outline (under construction)
Professor Harold Chorney
Wed. H634
1:15-4:00

The real estate bubble and the crash of 2007 -09 uncovered serious strains in the economic and social fabric of global capitalism. The recovery from what turned out to be the most serious recession since the great depression of the 1930s has been slower than hoped for and very uneven. In North America largely because the Fed reinforced the Keynesian fiscal stimulus with significant quantitative easing thereby ensuring appropriately low interest rates, the performance of the recovery has been more solid than in Europe where the European central bank and the European Union have both retarded the recovery by refusing until quite recently to use quantitative easing and stressing fiscal austerity rather than Keynesian policies. As a consequence European unemployment is still very high in a number of countries and Europe appears to be teetering on the edge of deflation and stagnation. But in addition to these negative features of the recovery, the crash and slow recovery laid bare the terrible and widening gap in socio-economic inequality as well as growing poverty in many countries. This course will focus on the issue of inequality and equity in a number of leading global economies in an effort to document the problem, analyse emerging trends and evaluate policy proposals and programs designed to counter it.

Texts: Thomas Piketty, Capital in the 21st century , 2014 The Belknap press of Harvard University, 2014 also available in the original French edition Le capital au XXIe siècle editions du Seuil.
Joseph Stiglitz, The Price of inequality, Norton, 2013.Robert Reich, Saving Capitalism For the Many, Not the Few, 2015:Alfred Knopf.

Additional readings:
Peter Clarke, Keynes:the rise, Fall and Return of the 20th Century’s Most Influential Economist
Joeseph Stiglitz interview with Lynn Parramore in Salon magazine.
http://www.salon.com/…/joseph_stiglitz_thomas_piketty_gets_income_inequality_ wrong_partner/‎
Meghnad Desai, Marx’s Revenge:The Resurgence of Capitalism and the Death of Statist Socialism, Verso. 2004.
Amartya Sen, Development as Freedom, anchor books, NYC, 1999.,
Ethan Kapstein, Sharing the Wealth,W.W. Norton, 1999.
Frank Stilwell, Political Economy:the Contest of Economic ideas, Oxford University Press, 2012.
John Kenneth Galbraith, The Economics of Innocent Fraud,Houghton Miflin,Boston&NYC, 2004
Helen Sasson, Between Friends, Perspectives on John Kenneth Galbraith Essays by Derek Bok, Carlos Fuentes, Peter Galbraith et al, Houghton Miflin , 1999.
James Galbraith, Created Unequal:The Crisis in American Pay,Twentieth Century fund, The Free Press,Simon&Schuster, 1999.
Samuel Hollander,Classical Economics,University of Toronto Press, 1992.
Alvin Finkel, Our Lives:Canada after 1945, James Lorimer&Company, 1997.
Robert Heilbroner, The Worldly Philosophers,Simon%Schuster, NYC, revised edition 1965.
Between Capitalism and Socialism:Essays in Political economics, Vintage,Random House, 1970
Robert Lekachman, Greed is Not Enough, Pantheon, NYC, 1982.
John Porter, The Vertical Mosaic, University of Toronto Press
Wallace Clement The Canadian Corporate Elite
A.A. Hunter, Class Tells:On Social Inequality in Canada, 1986
David Harvey, Limits to Capital,Verso, 2006.
Thorstein Veblen, The Theory of the Leisure Class,Macmillan, 1912,Mentor edition 1953.
C.W. Mills, Power,politics and People
Steve Keen, Debunking Economics, Zed books, U.K.2001,London&NYC.
H.Bougrine & Mario Seccareccia eds. Introducing Macroeconomic analysis,Edmund Montgomery, Toronto, 2010.
Adam Harmes, The Return of the State, Protestors, Power Brokers and the New Global Compromise, Douglas and McIntyre, Vancouver&Toronto, 2004.
Tony Cutler, Karel Williams&John Williams, Keynes, Beveridge and beyond, Routledge&Kegan Paul,London&NYC, 1986.

Students will be asked to consult the quality and financial press including The Wall Street Journal, The Financial Times, the Guardianthe New York Times and the Globe and Mail , Le Monde ,Le figaro, Liberation various issues and weekly during the course for relevant articles to the discussion.

Evaluation:
Each student will required to present a topic in class in combination with one other student 20 % and make available a short 2-3 page synopsis of the presentation to all students and to me. Complete a term essay 40 % and write a final test 40 %.

Course weekly topics:

1.Introduction and overview:

2.The ethical basis of Democracy and markets :Flaws at inception.R.H.Tawney and the Acquisitive society.C.B. Macpherson, Hobbes, Locke, Bentham and Mill, Arrow, Debreau and Sraffa, Marx’s critique.

3. Keynes, full employment and the Beveridge Welfare state.the neo-conservative epoch and the return of inequality.

4.The crash and the sudden growth of inequality as an issue.

5. From Veblen to Keynes to C.W.Mills to J.K.Galbraith; James Galbraith.

6. Thomas Piketty and Joseph Stiglitz

7. Piketty and Stiglitz continued Robert Reich

8 .Reich, Piketty and Stiglitz continued

9. The Canadian case an exception? Innis, Porter, Clement, Hunter,John Macionis global inequality; The American case :Michael Hout, Inequality by Design.

10. Marx, Ricardo,Malthus Keynes and the distribution question in age of globalization

11. Distribution and development :Amartya Sen

12. Distribution and the environment, carbon taxes, stable states, guaranteed annual incomes, GDP and trade issues.

13. Review and conclusion.

Posted in Uncategorized | Leave a comment

Spain elects a new Congress:Mariano Rajoy’s Partido Popular loses a third of its seats , elects 123; Podemos 69 and Ciudadanos 40 members; Socialists 90 members.

Posted on December 21, 2015 by haroldchorneyeconomist

With 99% of the votes counted in the Spanish election the results show a divided Congress with a much weakened centre right party having lost about a third of its seats. Mariano Rajoy the incumbent Prime Minister will have to find coalition parties to support his government or he will be replaced by a broad coalition of the centre right and left parties including the radical populist party Podemos led by the charismatic Pablo Inglesias and the new populist party of the centre right, Ciudadanos led by Albert Rivera. The socialist party led by Pedro Sanchez lost 20 of its seats and ended up with 90 seats. Six other smaller parties captured a total of 28 seats. The vote split was as follows: Rajoy’s PP 28% 7.22 million votes; Sanchez’s PSOE 22% 5.5 million votes; Inglesias’ PODEMOS 20.6% 5.19 million votes; Rivera’s Ciudadanos party 3.56 million votes 14.6%.Spain continues to have the second highest unemployment rate in Europe after Greece and widespread underemployment. This has led to great dissatisfaction with the Rajoy government.It will be very interesting to see in the coming weeks what sort of government emerges in Spain and to what extent it will break with policies of austerity that have led the country to this crisis.

Posted in Uncategorized | Tagged | Leave a comment

Fed rate rise being signalled but data indicates no need to do so

Posted on December 16, 2015 by haroldchorneyeconomist

For many economists in the financial sector expectations are high that the US Federal Reserve has done the right thing in raising interest rates today by 25 basis points. This will be the first rise since the days in 2009 when the rate touched bottom in response to the financial crisis. Ever since then the rate has stayed low in the zero bound to 25 basis points range. Many bankers and financial services firms are pushing for the rate rise. However the data does not show any need for this measure as inflation is still very low in the US and unemployment while very much improved could still fall well below the 5 % level before the rate should have been raised.This is particularly true in a global climate of falling oil prices.The Fed in its announcement suggests that they may well keep the rate at this new level for some time. Given the data to do otherwise would be a major mistake.

Posted in Uncategorized | Tagged | Leave a comment

National Front shut out in second round of French regional elections:Union of right wins seven regions, the left win 5 regions strategic voting works effectively to block the FN according to exit polls.

Posted on December 13, 2015 by haroldchorneyeconomist

According to the latest exit polls in the second round regional elections in France the National Front has been defeated in all 13 regions of France. The centre right Republicains have captured seven regions while the governing socialist party captured five regions. In the thirteenth region Corsican regional and local parties divided the seats. The strategy of the socialist party to withdraw from the second round in the regions where they had run third in the first round worked effectively to block the FN from coming to power and clearly benefited the centre right coalition. Voter turnout was up over the first round and clearly benefitted the socialist party or the centre right depending upon the region concerned. Despite their overall defeat the FN captured more council seats than ever before and showed that it is a major political force in French politics.In Provence Alpes Côte D’Azur Marine LePen’s niece won 47.4 % of the vote but was defeated by the Republicain candidate with 52.6 % of the vote. Marine Lepen herself won 42 % of the vote but still lost to the Republicains. In only one of the Parti socialiste’s victories did their candidate get more than 50 % of the vote. The FN got 27% of the vote winning 6.8 million votes and over 300 council seats compared to 9 % of the vote in 2010 and about 119 seats.

Posted in Uncategorized | Leave a comment

Marine Le Pen and National Front win first round of French regional elections:FN scores 28.2 % of vote ,Sarkozy’s Républicain coalition 27 % Hollande’s Parti socialiste 23.6%

Posted on December 7, 2015 by haroldchorneyeconomist

The first round of the French regional elections revealed a very strong showing for the right wing anti immigrant Front National led by Marine Le Pen. Her party is ahead in six regions and scored over 28 % of the vote.The moderate centre right conservative coalition led by Nicholas Sarkozy received 27 % of the vote and is ahead in four regions while the Parti socialiste led by Francois Hollande languishes in third place with 23.6% of the vote. It leads in just three regions. Before the election it controlled almost all of the 13 regions.During the second round parties which achieved less than 10% of the vote drop out and their voters have the opportunity to vote strategically for their preferred alternative.In many regions the parties who failed to make the ten % threshold are ecology parties or small parties of the left. This should result in the Sarkozy coalition party winning some of the regions where it is currently ahead or running a close second or even allow the PS to win where it now leads or trails the FN by a small margin depending on the vote split.
Nevertheless the first round result is a major triumph for Le Pen and a warning of what might lie ahead. In some regions the PS has already proposed dropping out to ensure that the FN does not win the region.Sarkozy on the other hand has rejected that strategy for his Républicains. Voter turnout was unimpressive just under 50 %. Part of the explanation for Le Pen’s popularity is a worsening unemployment situation. The latest quarterly unemployment rate rose from 10.4 % to 10.6 %.

Posted in Uncategorized | Tagged | Leave a comment

Further notes on Keynes, monetary policy and Debt Management.

Posted on November 25, 2015 by haroldchorneyeconomist

Monetizing part of the debt which I began writing about in 1983 as a strategy to make Keynesian stimulus more effective is as I have often pointed out something which Keynes himself advocated as early as 1933. In a letter to newly elected President Franklin Roosevelt, Keynes makes it clear that he understood the concept and in certain circumstances advocated its use.Writing of the best approach to take to get out of a slump he writes “Individuals must be induced to spend more out of their existing incomes; or the business world must be induced, either by increased confidence in the prospects or by a lower rate of interest, to create additional current incomes in the hands of their employees, which is what happens when either the working or the fixed capital of the country is being increased; or public authority must be called in aid to create additional current incomes through the expenditure of borrowed or printed money.

Later in the General Theory he reiterates this point that the method of financing can vary. Dudley Dillard later coined the term income creating finance as an alternative and more positive term for deficit financed spending.(See D.Dillard The Economics of John Maynard Keynes,NYC:Prentice Hall 1948 p.109 In Keynes’s preliminary draft of what later became his General Theory but at the time in 1932 what he called The Parameters of a Monetary Economy, Volume xiii Collected Works The General Theory and After Part 1, Preparation. p.405 Keynes wrote “The task of the monetary authority is to adjust to the best of its ability the quantity of money to changes in other parameters, so as to maintain as nearly as possible, an optimum level of output. we shall see..that the optimum level of output depends on the maintenance of an optimum level of investment , so that we can re-express the task of the monetary authority as being to maintain a rate of interest which leads to an optimum level of investment” So as early as 1932 Keynes was well aware of the importance using to the full monetary policy.

Dillard in his 1948 work The Economics of John Maynard Keynes discusses the various methods of loan finance from issuing bonds and selling them to private savers to selling them to the banks to having the Treasury issue non interest bearing notes to the Federal reserve banks “with instructions to increase the government deposit to the extent of the value of the notes. The government could then spend its balances in the usual fashion for public works and other expenditures.To ensure there is no danger of inflation from this strategy Dillard explains it should only be used when the economy is in a slump and output far below its potential and unemployment elevated.” (p114)

But he also points out that if inflation were to result it is not because of the method of financing but because of inappropriate and excessive monetary expansion. Dillard also makes the important point that when you are operating the economy at elevated unemployment rates and well below your potential output the cost of increasing output is essentially minimal. He states the case as follows.

” Obviously , it is not very convincing to tell an unemployed (person) that society cannot afford to burden (their) future by building them a house in which to live even though (they and their) fellow workers are doing nothing with their time and skill. The staunch advocates of annually balanced budgets are perhaps so accustomed to thinking in terms of the financial principles appropriate to an economy of full employment that they do not see the implications for public finance of an economy with widespread unemployment. When there is full employment, the real cost of hiring a (person) is what they produced in the job they give up in order to accept a new position.When there is unemployment the real cost of hiring an unemployed person is nothing, because nothing is sacrificed by the employment of their labour.This fundamental principle is not altered when money is brought into the picture in order to finance the employment “(Dillard, p.105)

These ideas and insights should not be forgotten in the debates to come over deficits, debt management, monetary and fiscal policy and the restoration of lower unemployment.

Posted in Uncategorized | Tagged , , | Leave a comment

Horrendous Act of Terror in Paris: Policy Review May Be Needed

Posted on November 16, 2015 by haroldchorneyeconomist

We mourn for the people who have been murdered.Our heartfelt condolences to all of the families and friends of the victims and to the Government of France and the French people who have been affected by these evil deeds. Paris is the capital of European enlightenment. It is the city of light the city of liberty, fraternity and equality. It is the city of love and beauty, poetry, architecture and music. It is the city of Picasso, Baudelaire,Matisse,Delauney, Soutine,Claudel, Rodin,Sartre,de Beauvoir,Victor Hugo, Emile Zola, Walter Benjamin and Charles De Gaulle. It must not be a city of fear blighted by terror.

France is one of our two mother countries. Its culture is part of our culture. More than seven million of our people speak its language on a daily basis,(ten million know how to speak it) consult its newspapers and magazines and enjoy its wines and cuisine.Canadian troops helped to liberate France from the grip of the Nazis in World War 2.The French are our close allies. Our new Prime Minister and his cabinet is committed to ending our participation in the bombing campaign of ISIS We need to carefully consider the decision and ensure that our alternative role contributes as much and more positively to the campaign to defeat terror. Secondly the government is committed to bringing to Canada 25,000 refugees from the war in Iraq and Syria as soon as possible. But heightened security now obliges us even more than before to thoroughly identify these refugees to ensure they are who they claim to be and whom the U.N. and our own security has approved as genuine refugees. We should take more time if necessary to do the job thoroughly, without retreating from our position to provide safe refuge.

We need each of us as Paris has always done to light a candle
against the darkness and illuminate the night . As le
crépuscule (dusk) leads to night l’aube (dawn) follows
faithfully.

Posted in Uncategorized | Leave a comment

So Far So Good:New Liberal Canadian Government Stands Behind Its Stimulus Infrastructure Plan

Posted on November 12, 2015 by haroldchorneyeconomist

It was good to see Minister of Immigration John McCallum who is an economist and the Minister of Finance Bill Morneau defend the Keynesian Liberal plan to use much needed new  investment infrastructure to promote economic growth, employment and innovation in the Canadian economy as a counter cyclical force to the slower economic growth that is emerging and that is predicted to accelerate by the parliamentary budget office and the IMF. As McCallum explained the slower growth is precisely why one needs to invest and it provides even greater justification for deficit financed investment in infrastructure. Mr. Morneau concurred in this judgement. The amount currently spoken of some 10 billion dollars in the first year is modest in relation to the GDP of 1.98 trillion Canadian dollars. The current anticipated deficit is 0.2 % of the GDP. It will initially rise by a small amount but as the employment created by these investment circulates throughout the economy affecting other proposed investments and states of confidence the impact will be multiplied modestly and the increase in the deficit even in the medium run will be lessened.In any case the parliamentary budget office is projecting a falling debt to GDP ratio which at the present is still historically quite low.It projects the debt to GDP ration falling from 31% to 26.1%. The strategy combined with the tax cut for the middle class should help diminish currently unspent quasi hoarded cash balances in the private and corporate sector and restore optimism  in expectations of private consumers and business investors.If the economy slows a great deal further and faster one might want to spend more of the allocated amount faster by front loading it  and consider expanding the program.

Posted in Uncategorized | Tagged , | Leave a comment

New Cabinet a Good mixture of Talent, Regional Roots and Values and Beliefs:Keystone XL rejection,TPP details obliges government to come up with a policy rethink particularly if economy should slow down in coming months

Posted on November 4, 2015 by haroldchorneyeconomist

The gradually emerging details of the T.P.P. trade deal and the decision of President Obama to reject the proposed Keystone XL pipeline presents the new Liberal government with both a challenge and an opportunity to rethink its policy agenda. This will become more urgent if oil prices continue to slump and if Canada’s manufacturing base particularly in heartland Ontario is damaged by low wage auto parts competition from Asia and Latin America.The new Government is interested in creating a more sustainable energy strategy. But to successfully do so the country from an employment point of view requires a more robust and competitive manufacturing centre which may well need greater short term protection from low wage competition from Asia than is on offer in the TPP.Apparently the Americans negotiated thirty years protection whereas our Harper government settled for only five years. There are a number of questions to be answered with respect to ensuring sustainable energy supply and management of our natural resources.Simply refining more of the oil in Canada is an intriguing possibility but this still would mean drawing on carbon heavy oil as the NYT diplomatically puts it. What about China and the proposed pipeline to the west coast? If no pipeline is built what about rail transportation? Already the Lac Megantic tragedy shows us the kind of problems that can arise.

The new Trudeau Liberal Government has got off to a good start with a very interesting mixture of old and new cabinet talent united behind a firm Prime Ministerial commitment to restore respectful debate and service to the Government of Canada and to be a progressive centrist government. All of the choices made by the new prime minister are good ones and introduce a very fresh face to the government . The choice of Bill Morneau as the new Finance minister is a very intriguing one since Mr.Morneau is a very successful Bay street executive with a substantial amount of family wealth and an annual income that makes him one of the richest politicians in the cabinet since Paul Martin. But this business success does not disqualify him from acting as an enlightened  reformer of the taxation system should he want to be and an excellent pragmatic  Keynesian leaning finance minister committed to investing in the infrastructure of the economy while being at the same time a prudent manager of operating expenditures seeking to balance the infrastructure budget over the medium to long term but the operating budget in the short term. This approach will work well so long as the economic slowdown currently underway does not worsen too much.

His tenure as finance minister and the pressure he will come under to be more fiscally conservative(which he should resist) will bear watching in the months to come. The appointment of Stephane Dion as Canada’s foreign minister should work well and offer important challenges to Dion who is a solid Québec intellectual. Dominic LeBlanc as house leader and chair of six cabinet sub committees is also an important choice. LeBlanc is close to Trudeau and will provide excellent backing to the Prime Minister. John McCallum is a very interesting choice as the new Minister of Immigration tasked with the top priority of admitting 25,000 refugees in the next short period of time. This will be a major challenge which will tax McCallums administrative and political abilities. But given his personal history and long experience in Ottawa I expect he will succeed. Ralph Goodale another veteran of previous Liberal cabinets is Minister of public safety tasked with among other things revising Bill C51 so that there is a better balance in the law between legitimate security concerns and protection of Canadian values and civil liberties. All of the new faces in the cabinet and the veterans are people of substance who begin their jobs with a large amount of goodwill from much of the Canadian electorate. But as the excitement of a new government wanes and the pressure of tough decisions in tough times grows Canadians will be watching to see if promises are kept and the government’s welcome idealism is maintained. The appointment of 15 women alongside 15 men is a progressive step forward. Many of these women face important challenges in their portfolios right from the get go. This is very true of Chrystia Freeland who has to grapple with the T.P.P. and its potential negative consequence for employment and Canadian control of our economy, Jody Wilson Raybould with the key justice dossier and restoring a more balanced policy to criminal justice, and Maryam Monsef the reform of the electoral system, and Carolyn Bennett Indigenous and Northern affairs

The Conservatives have made a very intriguing choice for their interim leader Ms Rona Ambrose is an articulate multilingual right wing experienced former cabinet minister who I think will make a very effective leader. It also positions the party progressively on the issue of women in politics. Only the Liberals at the Federal level have yet to have had a women leading the party something the Conservatives like the New Democrats can now boast about, each having had two.

The NDP for its part still needs to conduct its inquest into what went wrong and think again about its leadership.

Posted in Uncategorized | Tagged | Leave a comment

Elections Canada reports final election results

Posted on October 26, 2015 by haroldchorneyeconomist

With 99.8 % of the polls counted the results are as follows:

Liberals 184 seats 6,930,136 votes 54% of seats and 39.4% of the votes

Conservatives 99 seats 5,600,496 votes 29.3% seats and 31.9% of votes

New Democratic Party 44 seats 3,461,262 votes 13 % seats and 19.7% of votes

Bloc Québécois 10seats 818,652 votes 3% of seats 4.7 % of votes

Green party 1 seat 605,864 votes 3.4 % of votes 0.3 % of the seats

Total votes cast 17,559,353
Total eligible registered voters 25,368,379 voter turn out 68.4% does not include voters who registered on election day. There were 19 other parties, as well as independents, who ran in the election who with the exception of the independents 40,000 votes, Libertarians 37,407, and the Christian Heritage Party 15,284 received fewer than 10,000 votes each.

The results show a clear Liberal victory but one which the first past the post system exaggerates and unfairly penalizes three, of the leading opposition parties the NDP, the BQ and the Greens. The Conservatives had a very efficient vote distribution winning in seats close to their share of the popular vote.In a proportional system they would have had 108 seats rather than 99. The Greens with 3.4 % of the vote in a proportional system would have got 11-12 seats rather than one. The NDP with 19.7% would have got 66-7 seats rather than 44 and the Liberals would have received 133-4 seats rather than their 184. The BQ would have elected 16 seats rather than the ten they received.

The Liberals were awarded one seat for every 37,663 votes; the Conservatives one for every 56,570 votes; the NDP one for every 78,665 votes, BQ one for every  81,865 votes and the Greens, 605,864 votes for only one seat.

Let us now see what this Parliament does about reforming our voting system to strengthen its democratic efficacy since the new Governing Liberal party has committed itself during the election to studying and implementing a reform of the system.

If we also examine the change in vote from 2011 it is striking to note that the Liberal party increased its vote from 2011 by 4,1156,961 votes. The New Democrats lost 1,047,212 votes compared to 2011 while the Conservatives only lost 231,905 votes compared to 2011. The total of votes cast rose to 17,559,353 as compared to over 14.6 million votes cast in 2011. This means that most of these new votes went to the Liberals along with the most of the lost NDP and Conservative votes from 2011. Some voters from 2011 have passed on or did not vote as well.So the Liberals were very successful in bringing out new voters. The New Democrats were very unsuccessful in holding on to their vote from 2011.

Posted in Uncategorized | Tagged , | Leave a comment