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Canada's Economy Today

by Anu J
7 Pages
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Social Science
SOSC 1340
Kean Birch

Anushree Joshi DAY 5 LECTURE – October 5th Outline - Outline of today’s lecture o Government, states o Government intervention in the economy o Crisis of the 1970s (following the Golden Age of capitalism) o Neoliberal response (1980s-1990s) o Contemporary Canadian economy o Global financial crisis (2008+) Key Concepts and Terminology - Mostly about the government and states - Have to understand the role of the government in the economy (why it should or shouldn’t interfere with the economy) - State = political organization of geographical area o Also called a nation-state o Includes the legal system, various organizations (i.e. police, universities, schools, ministries, embassies, parliament, courts, bureaucracies, agencies, etc.) o Legitimate sovereign power (ability to govern the people and the country) o Provider of public goods (i.e. security, army, anti-terrorism squads, welfare systems, etc.) and collective goods (i.e. railroads, street lights, roads, etc.) Government Role in the Economy - Areas of intervention o Regulation and law  Regulates production of goods  Regulates economic activities  Establishes property laws i.e. property laws, real estate laws, shareholder and ownership rights, intellectual property rights, etc. (mostly intangible) o Monetary policy  Controlling inflation  Stabilizing crises o Infrastructure  Building roads, railroads, energy power plants, canals, fresh water extraction sources, etc.  Capital goods for the economy o Public sector employment  Employing people in healthcare, education and other agencies o Welfare  Safety net for people  Health insurance, EI, etc. Professor: Kean Birch Business and Society (SOSC 1340) Tutor: Julian Germann Anushree Joshi DAY 5 LECTURE – October 5th o Public ownership  i.e. Ontario Hydro o Industrial & research policy  Investing in new scientific discoveries  Promoting new kinds of technology - Debate on whether or not the government should be involved in the economy or not? o In 1800s, the emergence of economists and economic theories, saying governments shouldn’t intervene with capitalist economies o In 1900s, socialist revolutions, socialism, central planning of the economy - Two perspectives on government intervention (see lecture slide #9) Crisis of the 1970s - Pre-crisis o The Golden Age of capitalism o Rising levels of GDP (people have more purchasing power) o Government focused on: expanding trade, ensuring full employment, increasing purchasing power of consumers, providing welfare - Keynesianism = pro-state intervention o Government didn’t have much control over the people; on the brink of a labour movement; didn’t want to shift from capitalism to communism like Russia, so introduced Keynesianism as an interim want for government intervention o Who was Keynes?  British economist 1883-1946  “I’m going to save capitalism from itself” o Keynesian demand management  For central planning by the government  Increasing government spending during recessions  create jobs  people have money  people have more purchasing power  people create demand  economy runs Professor: Kean Birch Business and Society (SOSC 1340) Tutor: Julian Germann Anushree Joshi DAY 5 LECTURE – October 5th  Thought governments should be focused ensuring full employment  People have jobs  people have more purchasing power  they buy things  It was the government’s job to provide welfare o Canada’s post-WW2 government policy  Focus on welfare  Health  Unemployment  Giving resources and capital to all provinces o Didn’t work out too well because Canada focused on mostly natural resources o The end of Keynesianism  Neoliberal view of why it happened:  Unemployment o Governments misunderstood unemployment; they thought it goes up and down o Governments protected old, inefficient industries instead of allowing new, dynamic industries to flourish  Inflation o Impact of 2 oil crises on inflation o Crises raised inflation o US government spending in the war pushed up inflation as well  Power o Trade unions and governments have too much power  Alternate views:  Revolt of the rich o As inflation rose, it threatened their wealth  Domestic economies were being opened to global pressures o Countries around the world were competing in the production of manufactured goods o Shift from Keynesianism to Neoliberalism  Neoliberals obsessed with inflation  Cutting back on welfare, government spending  Decrease government intervention  Allow the markets to play out and adjust as naturally as they could  Key advocate for neoliberalism: Milton Freidman - Canadian Fordism o Named after Henry Ford o System of production (mass production, assembly line)  Individual tasks in an assembly line to create a whole product  Made the production of things cheaper Professor: Kean Birch Business and Society (SOSC 1340) Tutor: Julian Germann Anushree Joshi DAY 5 LECTURE – October 5 th o Government intervention post-WW2 encouraged Fordism  Social compact  Trade unions, workers, governments would work together  Domestic economy  National issues  Taking care of the nation to address smaller issues  Promoting manufacturing  Promoting production of new goods  Mass production enabled mass consumption  Economies of scale made each successive goods cheaper and cheaper, allowed buyers with rising wages to have increased purchasing power  Prime example: automobile industry in Ontario o Car parts o Assembly lines o Branch plants o Auto-Pact of 1965  Lowered the taxes on imports/exports of cars and car parts Neoliberal Response (1980s-1990s) - Set of ideas in which government intervention in the economy is seen as negative because it interferes with the working of the free market o Free market runs itself o Supply and demand mana
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