Transcript November 12
The Role of the State Nov. 12 “State” Leo Panitch, Canadian Encyclopedia. - “The state is a broad concept that includes government as the seat of legitimate authority in a territory but also includes bureaucracy, judiciary, the armed forces and internal police, structures of legislative assemblies and administration, public corporations, regulatory boards, and ideological apparatuses such as the education establishment and publicly owned media.” “State” Panitch, Canadian Encyclopedia. - “the large role of the state was not antithetical to the development of the capitalist economy in Canada…the state provided…much of the technical infrastructure and economic regulation necessary to keep capitalism viable. The state tried to create a favourable fiscal and monetary climate for economic growth; it underwrote the private risks of production at public expense through grants, subsidies and depreciation allowances; it played a crucial role, via land and immigration policies, in developing the labour market and, more recently, in absorbing the social costs of production through sanitation services, medicare, employment insurance, educational facilities, etc; and it very often directly built the infrastructures for economic development (canals, railways, airports, utilities) when this was too risky or costly for private capital.” “State” Panitch, Canadian Encyclopedia. - “the globalization of capitalism does not mean that states are no longer significant actors. It only means that their role is restructured.” The neo-liberal ideal At least in theory, advocates of the free market (neo-liberals or neo-classical economists) argue for a minimalist state. In this view, the state’s role should be as limited as possible to defending property rights, maintaining law and order, and providing national defence. The reality of the capitalist state “The only problem is that capitalism never resembled that free-market, minimalist-state ideal” (Stanford, 2008: 226). “Even in its early days – perhaps especially during its early days – capitalism was guided by a strong, focused, central government. In fact, the state played a crucial role in the very emergence of capitalism” (Stanford, 2008: 227). The Developmental State: Britain “industrial capitalism was born in Britain in the eighteenth century. Britain’s relatively centralized and powerful state, which was willing and able actively to support privatesector investment and production, was a key reason why capitalism began there” (Stanford, 2008: 227). The Developmental State: Germany, USA, Japan “if anything, capitalism’s subsequent expansion to other jurisdictions – first to continental Europe, then America, the around the world – was even more dependent on powerful state leadership” (Stanford, 2008: 227). The Developmental State: Canada The National Policy introduced by Sir John A. Macdonald involved: tariffs (protectionism) railways immigration to and settlement of the west The Modern Capitalist State “Governments continue to intervene to regulate and create markets, support private investment, protect private property, and facilitate the actions of capitalists in many different ways” (Stanford, 2008: 229). See Stanford, Table 19.1, page 229. Why Kind of State Intervention? “there is no real debate over whether governments should ‘intervene’ in the economy: they always have, and always will. The real questions are rather different. How does government intervene in the economy? And in whose interests?” (Stanford, 2008: 229-230). Liberal Democracy, Capitalist State The notion of political equality (one person, one vote) inherent within liberal democracy is confronted by the economic inequality of a market economy. To what extent is political equality eroded by economic inequality? Liberal Democracy, Capitalist State “the state in modern developed capitalist economies demonstrates a kind of ‘split personality.’ Its natural tendency is to focus on the core function of protecting and promoting private wealth and business” (Stanford, 2008: 231). Yet, “Thanks to centuries of popular struggle for fundamental rights, capitalism has become more democratic” (Stanford, 2008: 231). Capitalism vs. Democracy? “No capitalist country is truly democratic so long as those with wealth and power are able to exert such disproportionate influence over political decisions” (Stanford, 2008: 233). Fiscal Policy Fiscal policy: The spending and taxing activities of government. “Where Your [Federal] Tax Dollar Goes” Presentation from the Federal Finance Department, based on 2007-08: http://www.fin.gc.ca/taxdollar/09/mm-eng.asp Federal Government Revenues Federal Government Expenses Total Govt Spending - G7 Fiscal Reference Tables: Table 54: Canadian state spends more than USA and Japan, but less than rest of G7 (Germany, UK, France, Italy). http://www.fin.gc.ca/frt-trf/2009/frt0909-eng.asp#tbl54 Govt Financial Balances - G7 Fiscal Reference Tables: Table 55: Since 1997 (until 2009), total government finances (federal and provincial) in Canada have generally been in a surplus position, unlike the rest of the G7. http://www.fin.gc.ca/frt-trf/2009/frt0909-eng.asp#tbl54 Deficit to Surplus to Deficit The Surplus/Deficit in Context Budget 2009 [and Sept 09 fiscal update] In January 2009 the federal government projected deficits of: $1.1 billion in 2008–09, [actual $5.8 billion] $33.7 billion in 2009–10, [now $55.9 billion] $29.8 billion in 2010–11, [now $45.3 billion] $13.0 billion in 2011–12, [now $27.4 billion] $7.3 billion in 2012–13 [now $19.4 billion] and a surplus of $0.7 billion in 2013–14. [now projecting $11.2 billion deficit to be followed by $5.2 deficit in 2014-15]. Canadian governments return to deficits Federal-provincial deficits to hit $90B: TD “Canada's federal and provincial deficits will total $90 billion dollars this year, a study by the Toronto-Dominion Bank predicted Tuesday [Oct. 20, 2009]. The report said the shortfall could even reach $100 billion. The bank said Saskatchewan would be the only province able to avoid a deficit [even that remains uncertain]. The federal finance department recently estimated Ottawa's deficit would hit $56 billion. TD said the cumulative total of all federal deficits — the national debt — will amount this year to six per cent of the total value of all goods and services produced annually in Canada. A little over a year ago, Ottawa and the provinces were all reporting surpluses.” http://www.cbc.ca/money/story/2009/10/20/td-predicts-90b-deficit.html The Accumulated Federal Debt The Debt in Context The debt What is the impact of public debt? When does the debt become a problem?