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PSCI 255 (10)

The Role of Politics in the Economy .docx

4 Pages

Political Science
Course Code
PSCI 255
Jingjing Huo

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The Role of Politics in the Economy Early interoperation of the Role of Politics • Liberalism • Buchannan: markets compensate the minority, politics does not ◦ Developer has to get at least 50% of the population in order to get the permit • Friedman: unemployment is natural (cannot reduce it without cost) ◦ phlilps curve shows the pattern of the level of unemployment and the level of inflation. ◦ when unemployment goes down, inflation goes up, it occurs when paying people wages without getting input/ productivity in return. When people has more money, the cost of living will be higher. The less educated/less productivity are more likely to be unemployed. • Inequality is natural ◦ wide gaps between rich and poor is beneficial ◦ incentive device to encourage people to work harder and study more ◦ inequality is not always good • Working Class ◦ solidarity(not charity) when giving poor money and expect returns ◦ full employment cash hand out To achieve these objectives, revolt or reform? - Revolutionaries and reforests splits • Two sharply alternatives 1. Pure politics: socialist economy and dictatorship 2. Pure market: capitalist economy and free elections free and democratize The role of politics in the economy become a fundamental question of regime • Mass unemployment discredited the "pure market" model 1 they can't get a job not because they are skilled 2 surplus of labour • Storage discredited the "pure politics" model 1 under employment 2 storage of good when people has money Postwar Interpretation of the Role of Politics • Concession from worker ◦ abandon central planing ◦ abandon nationalization ◦ give manager freedom • Concession from capitalists ◦ recognize unions ◦ actively combat unemployment • From two sharp alternative to one compromise solution ◦ retain capitalist economy, ◦ retain democratic politics ◦ use politics to combat inequality and poverty: the welfare state • the big question of regime disappeared, political economy become a question of "fine-tuning" what to do with unemployment? • not enough goods selling • not enough consumer demand(Keynes) ◦ Response: add money -> government spending • wages too high(Friedman) ◦ response: reduce money -> cut wages Compromise: full employment, moderate wages • golden age of compromise: first 20 postwar years • after the golden age - stagflation 1. "Neoliberalism" undermined the compromise conservative parties after the 1980s 3 Approaches to Welfare State Research 1. Functionalist ◦ assume the welfare will expand to function ◦ driven by need 3 logic of industrialism 4 economic development -> generous welfare state 5 most developed = greater inequality 6 family size- > wealthy economy=less children 1 pension for old people 7 health > wealthy economy = expand 8 skills > need school, training institutions 9 urbanization > greater urbanization > more unemployment benefits 2. Institutional ◦ political institution veto points - allows people to "veto" or more veto points 1 harder to expand welfare state 2 not let government carry o
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