haroldchorneyeconomist

A theory of inflation (originally posted on my earlier blogspot blog Sept 19, 2010)
Throughout the history of monetary theory the subject of inflation and the role of the money stock has loomed large. One can go back to Copernicus and discover rudiments of the quantity theory of money .

The doctrine that there was a direct relationship between money stock, its speed of circulation and prices at which goods and services sold in the economy is a very old doctrine. The problem with it and the problem that writers and financial market actors had with the doctrine from John Law in the 18th century to Keynes in the twentieth century was that it developed into a dogma that aserted that any increase in money stock automatically led to price rise or inflation. The original classical statement of the theory that MV=PT argued that since both velocity was so stable so as to be a constant and T (transactions a proxy for output) was because of Say’s law and Walras’s law also a constant at full employment. Hence there was a direct relationship between money and prices.

The problem was, as Keynes and others pointed out, Say’s law that supply always created its own demand was false and Walras’s invisible auctioneer who cleared temporary gluts through the process of tâtonnement was not always operational and velocity also varied in unpredictable ways. The consequence then of moving from a barter economy to a money economy was therefore that money was not neutral, could be held for its own sake, markets would not always clear and thus the direct relationship between changes in the money stock and inflation did not always hold.

Instead it is more insightful to consider that money is a vector in the economy that operates along side other vectors to influence economic activity. Sometimes its force acts largely upon output other times largely upon prices but often affects both output and prices. Since the economy is measured by P*O increases in the money stock can act largely to increase O but also to affect P somewhat. But as the supply of unemployed factors drops, more of the impulses can affect prices.The neoclassicals argue that when this occurs in an accelerating fashion you have reached the point just beyond the NAIRU rate.But my argument is that they have set this rate far too high.

Hence , it is possible to have simultaneously both some unemployment and some price rise without experiencing accelerating inflation or inflationary expectations.In fact, some of this price rise is a necessary lubricant for the operation of the economy and the forward investment planning of the private sector. It ought not to be misdiagnosed as accelerating inflation.

The real economy,as opposed to the black box economy that the quantity theory operates with, is composed of many industries and sectors. In some, strong trade unions and powerful oligopolies dominate. In others, there are many very small firms and entrepreneurs and little opportunity for price rise until full capacity is reached. In the more oligopolized unionized industries the inflationary process can begin at much lower rates of capacity utilization.

Hence, to get the overall picture we have to aggregate all the industries and sectors with the appropriate weights given to each in order to see whether or not we are likely to experience price rises that can be called inflationary. We can think of the money stock as a wave of water that washes across the variegated economy , in some place simply lubricating investments and activity in other places facilitating inflationary price rise. Supply bottlenecks, wage push, profit push and elasticity of demand as well as the decisions to save and the decisions to invest will affect the overall outcome.

Any modern theory of inflation must also take into account internet technology, just in time production, globalization and free trade all of which act as anti-inflationary forces. The problem with our central banks is that they appear to be taking decisions based on a much more restrictive theory of the inflationary process. One that places excessive weight on inflationary expectations and a narrow conception of the quantity theory.

The equation for aggregate demand in the Keynesian system is as follows: C + I +(G-T) +(X-M) = D (Aggregate demand).C is consumption,I is investment, G is government expenditures, T is taxes, X is exports, and M is imports. Note that the equation does not specify the rate of interest that prevails nor the the ratio of monetized debt in relation to the broadly defined money stock M2B. This is because aggregate demand is usually thought of in the context of fiscal policy whereas the bank rate and debt monetization are part of monetary policy. But in fact the the two are both integral in shaping the macro-economic environment. Other things being equal it matters what interest rates prevail and therefore how much treasury debt in comparison to the broadly defined money stock the central bank is holding. The values for I  and C will be partly functions of these variables. So these equations are actually at a specific interest rate and a specific tax regime and a specific value for central bank holding of debt.

On the other side of the argument the monetarist school which is best identified with Milton Friedman who taught at the University of Chicago relies on a variant of the classical quantity theory of money. That is MV = PO where M is the money stock. V is the velocity of money in other words how many times the money stock circulates in a given time period P the price level and O the level of output. Because monetarists believe that the income velocity of money or the transactions velocity of money tends to be predictable and not vary much it can be treated as a constant. They also believe in Say’s law of markets that supply creates its own demand and hence involuntary unemployment is not possible since markets always clear hence O is always at the full employment level. In such circumstances they argue that changes in the money stock affect prices. Hence their concern with controlling the growth of the money stock over time to target low inflation. The Keynesian school denies this argument arguing Says law does not hold, involuntary unemployment is very possible and the velocity of money can vary and that there is a real demand in certain circumstances for cash balances.

Modern monetarism from Friedman forward have attempted to integrate the quantity theory with Keynesian demand for money notions.Individuals hold their wealth in different forms according to Binhammer in his text on Money, Banking and the Canadian Financial system.These forms are: money; bonds and other interest bearing financial assets;equities;physical capital such as houses, automobiles; and human capital.The demand for money can be expressed as follows (Binhammer, p412)
Md/P = f(Yp, rm, rb, re (dP/P), h, u) where Md/P is the real demand for money, Yp is permanent income, rm is money’s own rate of return, rb is the rate of return from bonds and other fixed income financial assets, re the return from equities including dividends and capital gains, dP/P the expected rate of inflation, h the ratio of human wealth to total wealth, and u is tastes and preferences. Permanent income is defined as the average level of income expected to prevail over a long period of time. (Binhammer p412)

Monetarists like Friedman believe that the nominal demand for money is directly proportional to the price level and controversially that the data support his argument.

Stats Canada has released the July monthly growth figures. They show an overall growth rate of 0.3 %.positive for the second straight month. But it is odd that much of the growth occurred in the oil and gas, mining and quarrying sector which grew by 2.9 % largely because non conventional oil extraction grew by 9.1 %.In the U.S. oil production also grew by much more than was expected in July. If we put this sector aside and note particularly that in the coming months this sector will continue to be buffeted by falling prices and a global slump in the industry it is much less likely to contribute so positively to future growth . The growth was much more tepid in sectors like manufacturing   , retail trade , and negative in wholesale, and construction . The service sector which is also a very important large sector experienced some  growth but it was limited to certain sectors. Some service sectors showed negative growth including arts entertainment and recreation and information and cultural sectors. So the picture is mixed . If oil and gas shrink as is expected slow growth will likely continue.

Poli 463/2
Government and Business course outline :
Keynes versus monetarists before and after the crash of 2008
Prof.Harold Chorney
Fall/ 2015

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.This seems clear also from the current turmoil in the financial markets despite the steady progress in the U.S. on lowering the rate of unemployment to 5 % or less from its peak of 10 % after the crash.

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 year 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.Here in Quebec the Provincial Government is committed to austerity but on the Federal scene the Liberal party has come out against it during the current election campaign.Instead they have proposed a modest program of investment in infrastructure and social policy financed by deficits over the short run. Hence the debate between the two schools continues.The British coalition Liberal conservative Government under the leadership of David Cameron and Nicholas Clegg had 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.But Ed Miliband the Labour leader was unable to defeat the Cameron conservatives and Britain continues on an anti Keynesian path. In the current leadership campaign to replace him the leading candidate Jeremy Corbyn is strongly committed to Keynesian stimulation and quantitative easing but he is a controversial figure who is opposed by much of the British establishment including the Blairite wing of the Labour party.

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. Nevertheless it led to a steady fall in the unemployment rateIt 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 five works are basic texts and are on order at the text book store. The Deficit papers is available from me in electronic format and includes as well  a number of papers posted on my Word Press web site . It will be part of the assigned readings.

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

Joseph Stiglitz, Free Fall:America, Free Markets and the Sinking of the World economy , 2010,W.W. Norton&C0.

Paul Krugman, End This Depression Now,W.W.Norton&co.

Peter Clarke, Keynes:The Rise, Fall and Return of the Twentieth century’s most Influential Economist, Bloomsbury

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

Harold Chorney, The Deficit Papers available from me in electronic format.

Other core readings:

Hyman Minsky, Stabilizing an Unstable Economy

Can it Happen again? Essays on instability and finance

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

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).
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: two options: 1:Essay due mid term, the first week of November 50 %Final exam 50 %. or 2. Seminar presentation option  Essay 40 % final exam 40 % seminar presentation 20 %.

Topics

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 province 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.The European refugee crisis
Readings: Stiglitz, Chorney. The Greek crisis and debt management

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. ?

Poli 204/2 2015
Introduction to Canadian Politics
Professor Harold Chorney
Course outline

H531 Tuesday 2:45 to 5:30 pm

Office hours 3:30-5 pm on Thursdays other hours tba.

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 its history. New France in the 18th century had a European origin  population of about 70,000. In 1867 the population of Canada was 3.46 million people excluding the first nations’ population of about 120,000 people.In 1913 the population was 7.63 million. In 1941 Canada had a population of about 11.5 million people. Its population today according to Statistics Canada 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.The first nations’ and aboriginal population is now estimated to be over 1.4 million.

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.

This fall on October 19th Canadians go to the polls to elect a new Parliament. This so far appears to be a very closely hard fought election with three major parties each at this point according to the poll of polls having a good chance to elect the largest number of members and form a minority government. We will discuss the election in detail, including the leading policy issues, the nature of the voting system, the differences between the parties, Canadian electoral history and the issue of getting younger Canadians to vote in much larger numbers.

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; C.B.Macpherson, The Political Theory of Possessive Individualism:Hobbes to Locke;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.Bob Rae,Whats’s Happened to Politics. Simon&Schuster, 2015.

Topics:

1. Introduction and overview. The current Canadian election, issues , polls and media spin.The electoral system and the need for reform.

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 Tuesday 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.

13. Discuss the current Canadian election. In the end what do you believe determined the outcome :policy differences, the image of the party leader; regional differences; ideology; economic circumstances or media manipulation? What can polling tell us about this ? Does the election show us the need for reforming the electoral system?