REVIEW – MAY 07

THE POLITICAL ECONOMY OF STATE FINANCE

AK/SPPA 4115 6.0A

SYNOPSIS AND GENERAL OVERVIEW: THIS SECTION OF THE COURSE HAS BEEN DIVIDED INTO THREE SUBJECT AREAS: (1) GLOBALIZATION, (2) NEOLIBERALISM AND THE WELFARE STATE, AND (3) SOCIAL TRANSFORMATIONS IN CAPITAL, LABOUR AND CLASS.

*THE SOCIOLOGICAL KEY === IN THIS FIRST SECTION OF THE COURSE WE LEARNED ABOUT THE INTEGRAL RELATIONSHIP BETWEEN ECONOMY AND POLITY, AND HOW THE EXAMINATION OF THIS RELATIONSHIP (POLITICAL ECONOMY) IDENTIFIES CONTRADITIONS AND TENSIONS IN THE SOCIAL VALUES OF SOCIETY {WHO GETS WHAT, WHEN AND HOW}.

PART I --- GLOBALIZATION

THE DERIVATION OF THE TERM “GLOBALIZATION” IMPLIES THAT IT INVOLVES WORLDWIDE PROCESSES THAT ARE RELATIVELY NOVEL AND STILL UNFOLDING. THESE MULTIDIMENSIONAL PROCESSES ARE BEING EXPERIENCED UNEVENLY THROUGHOUT THE WORLD AND IN DIFFERENT SECTORS OF SOCIAL LIFE.

GLOBALIZATION IS A COMPLEX SET OF HUMAN FORCES INVOLVING THE PRODUCTION, DISTRIBUTION/ TRANSMISSION, AND CONSUMPTION OF TECHNICAL, ECONOMIC, POLITICAL, AND SOCIOCULTURAL GOODS AND SERVICES WHICH ARE ADMINISTRATIVELY AND TECHNOLOGICALLY INTEGRATED ON A WORLDWIDE BASIS

“GLOBALIZATION” AND “GLOBALISM” DIFFER ====> GLOBALIZATION REFERS TO A PROCESS OF TRANSFORMATION, WHEREAS GLOBALISM REFERS TO A NEOLIBERAL MARKET IDEOLOGY THAT ENDOWS GLOBALIZATION WITH THE FOLLOWING VALUES AND NORMS =====> PRIMACY OF ECONOMIC GROWTH, IMPORTANCE OF FREE TRADE FOR PROSPERITY, UNRESTRICTED FREE MARKET, INDIVIDUAL CHOICE, REDUCED GOVERNMENT INTERVENTION, AND A MODERNIZATION MODEL OF ECONOMIC DEVELOPMENT (STEGER, 2002)}.

DIMENSIONS:

1) ECONOMIC PHENOMENON: HIGH VOLUMES OF INTERNATIONAL COMMERCE AND INVESTMENT.

2) POLITICAL PHENOMENON: DIMINISHING STATE SOVEREIGNTY BECAUSE OF INTERNATIONAL CORPORATIONS AND REGULATORY BODIES.

3) CULTURAL PHENOMENON: POTENTIAL HOMOGENIZE CULTURES BECAUSE OF MARKET FORCES THAT DISRUPT LOCAL CONVENTIONS.

4) SOCIAL PHENOMENON: DISRUPTION OF COMMUNITY PATTERNS – E.G. URBANIZATION (DISPLACEMENT OF TRADITIONAL PRACTICES AND LIFESTYLES) AND GLOBAL MIGRATION.

5) COMMUNICATIVE PHENOMENON: NEW AND RAPID INFORMATION NETWORKS.

{FOR MORE ON THE DIMENSIONS OF GLOBALIZATION AS THE PRESENT STAGE OF CAPITALISM SEE CHANGING CANADA – MEL WATKINS “POLITICS IN THE TIME AND SPACE OF GLOBALIZATION” (PP. 8-9)} =====>

ECONOMIC OR CORPORATE GLOBALIZATION [FREE TRADE, UNLIMITED MOBILITY OF CAPITAL – TECHNOLOGICAL GLOBALIZATION [THE WIRED WORLD] – IDEOLOGICAL GLOBALIZATION [NEOLIBERALISM; FUNDAMENTALIST MESSIANIC CHRISTIANITY] – CULTURAL GLOBALIZATION [THE MONOCULTUAL AMERICANIZATION OF EVERYTHING AND ETHNIC FRAGMENTATION] – MILITARY GLOBALIZATION [THE AMERICAN MILITARIZATION OF EVERYTHING; HIGH-TECH WEAPONIZATION OF LAND AND SPACE; WORLD MARKETS FOR ARMS AND WEAPONS OF MASS DESTRUCTION] – POLITICAL GLOBALIZATION [THE INTERNATIONAL MONETARY FUND{IMF}; THE WORLD TRADE ORGANIZATION {WTO}; NORTH ATLANTIC TREATY ORGANIZATION {NATO}; EMPHASIZING THE ANALYTIC HUB OF LIFE IN “TRANSNATIONAL PROCESSES” BEYOND THE LEVEL OF THE NATION-STATE] – SOCIAL GLOBALIZATION [GLOBAL APARTHEID AND GLOBAL MIGRATION AND DISPLACEMENT] – THE GLOBALIZATION OF DISEASE – [PAN-EPIDEMICS OF AIDS MAD COW, FOOT-AND-MOUTH, ETC.,] - THE GLOBALIZATION OF DISSENT [WORLD-WIDE MOVEMENTS AGAINST GLOBALIZATION FROM CHIAPAS TO SEATTLE TO QUEBEC CITY TO GENOA]

PART II – NEOLIBERALISM AND THE WELFARE STATE

EX: “NEO-LIBERAL IDEOLOGY” VERSUS “THE WELFARE STATE”

DEF: NEO-LIBERALISM ===> A POLITICAL ORIENTATION ORIGINATING IN THE 1960S; BLENDS LIBERAL POLITICAL VIEWS WITH AN EMPHASIS ON ECONOMIC GROWTH.THE TERM NEOLIBERALISM IS USED TO DESCRIBE A POLITICAL-ECONOMIC PHILOSOPHY [[[AGAIN, THAT HAD MAJOR IMPLICATIONS FOR GOVERNMENT POLICIES BEGINNING IN THE 1960S & 70S – AND INCREASINGLY PROMINENT SINCE 1980]]] – THAT DE-EMPHASIZES OR REJECTS POSITIVE GOVERNMENT INTERVENTION IN THE ECONOMY, FOCUSING INSTEAD ON ACHIEVING PROGRESS AND EVEN SOCIAL JUSTICE BY ENCOURAGING FREE-MARKET METHODS AND LESS RESTRICTED OPERATIONS OF BUSINESS AND "DEVELOPMENT". =====> IT ALSO REFERS TO A SET OF ECONOMIC POLICIES THAT HAVE BECOME WIDESPREAD DURING THE LAST 25 YEARS OR SO. ALTHOUGH THE WORD IS RARELY HEARD IN THE UNITED STATES, YOU CAN CLEARLY SEE THE EFFECTS OF NEO-LIBERALISM HERE AS THE RICH GROW RICHER AND THE POOR GROW POORER....AROUND THE WORLD, NEO-LIBERALISM HAS BEEN IMPOSED BY POWERFUL FINANCIAL INSTITUTIONS LIKE THE INTERNATIONAL MONETARY FUND (IMF), THE WORLD BANK AND THE INTER- AMERICAN DEVELOPMENT BANK.

DEF: “THE WELFARE STATE” =====> A FRAMEWORK OF GOVERNMENT POLICIES, PROGRAMS, AND MEASURES ORIENTED TO THE PRESERVATION OF BASIC LIVING STANTDARDS AND OPPORTUNITIES FOR ALL WITHIN A NATION, REGARDLESS OF THEIR CIRCUMSTANCES. IT IS BASED ON THE VIEW THAT THE STATE SHOULD ACT IN THE PUBLIC INTEREST ON THE BASIS OF OUR SHARED RESPONSIBILITIES.

III) SOCIAL TRANSFORMATIONS IN CAPITAL, LABOUR AND CLASS

{“THE DECLINE OF THE CANADIAN WELFARE STATE: POLICIES AND IMPLICATIONS OF RETRENCHMENT” – SOCIAL ISSUES AND CONTRADICTIONS, CH. 16 – GARY TEEPLE}

OVERVIEW: FOR ALL INTENTS AND PURPOSES THE TERM ‘WELFARE STATE’ REFERS TO: A CAPITALIST SOCIETY IN WHICH THE STATE HAS INTERVENED IN THE FORM OF SOCIAL POLICIES, PROGRAMS, STANDARDS, AND REGULATIONS IN ORDER TO MITIGATE CLASS CONFLICT AND TO PROVIDE FOR, ANSWER, OR ACCOMMODATE CERTAIN SOCIAL NEEDS FOR WHICH THE CAPITALIST MODE OF PRODUCTION IN ITSELF HAS NO SOLUTION OR PROVISION.

THE WELFARE STATE INCLUDES, BUT IS NOT LIMITED TO:

· REGULATION OF MINIMUM WAGE

· WORKING HOURS

· EMPLOYMENT HEALTH & SAFETY

· EMPLOYMENT INSURANCE

· PENSIONS

· HOSPITALS

· PUBLIC EDUCATION

· INCOME SUPPLEMENTATION

WHAT ARE THE COMMON ELEMENTS OF WELFARE STATES?

1.) IT IS A PRODUCT OF CAPITALIST SOCIETY

2.) ROLE OF GOVERNMENT IS TO ENSURE ITS MAINTENANCE AND REPRODUCTION

3.) WELFARE STATE IS DETERMINED BY THE BOUNDARIES OF THE NATION-STATE

WHEN DOES A STATE BECOME A WELFARE STATE?

A: WHEN CLASS CONFLICT, REDUCED TO THE CONTEST BETWEEN WORKERS AND THE REPRESENTATIVES OF CAPITAL, PRESENTS A CHRONIC THREAT TO THE STABILITY OF THE SYSTEM AND HAS TO BE INSTITUTIONALIZED (PLACED WITHIN

A LEGAL FRAMEWORK) AND WHEN THE MAJORITY OF SOCIAL NEEDS PERTAINING TO THE REPRODUCTION OF THE WORKING CLASSES ARE ADDRESSED FORMALLY (BY THE STATE VIA POLICIES) RATHER THAN INFORMALLY (VIA FRIENDS AND FAMILY).

THE MODERN WELFARE STATE IS REFERRED TO AS THE KEYNESIANWELFARE STATE (KWS), SO NAMED AFTER JOHN MAYNARD KEYNES =====> HIS PRINCIPAL ASSUMPTION WAS THE EXISTENCE OF A NATIONAL ECONOMY, IN WHICH, HE ARGUED, THE STATE COULD INTERVENE TO EFFECT LEVELS OF INVESTMENT AND DOMESTIC INCOME, AND THEREBY

PARTIALLY REGULATE UNEMPLOYMENT BY THESE NATIONAL “DEMAND MANAGEMENT” POLICIES.

WHY WAS THE POST WWII ERA RIPE FOR THE KWS?

· THE OVERWHELMING MAJORITY OF THE LABOUR FORCE WAS WORKING CLASS WITH SIZEABLE PERCENTAGES ORGANIZED INTO TRADE UNIONS.

· CLASS CONFLICT NOW IMPLIED A CHRONIC THREAT TO THE REPRODUCTION OF THE SYSTEM AND SO HAD TO BE CONTAINED BY INSTITUTIONAL MEANS.

· WITH THE TRANSFORMATION OF THE LABOUR FORCE AND DEMISE OF PRECAPITALIST MODES OF PRODUCTION, THE MAJORITY OF SOCIAL NEEDS NECESSARY FOR SOCIAL REPRODUCTION WERE NOT MET BY THE PRIVATE SECTOR AND COULD ONLY BE DONE THROUGH PUBLIC POLICIES, PROGRAMS, AND STANDARDS, THAT IS, MACROECONOMIC POLICIES BASED ON STATE INDEBTEDNESS AND THE SOCIAL WAGE.

MOST ASPECTS OF THE WELFARE STATE WERE DESIGNED TO REDISTRIBUTE APORTION OF WAGES AND SALARIES, COLLECTED BY THE STATE IN THE FORM OF TAX REVENUES, PREMIUMS AND DEFERRED INCOME. IT WAS NOT INTENDED TO REDISTRIBUTE SOCIAL WEALTH ======> MANY PROGRAMS IN CANADA SUCH AS UNEMPLOYMENT BENEFITS, PENSION PLANS AND HOSPITAL INSURANCE ARE FINANCED BY THE WORKING CLASS =====> SOME COSTS ARE SHARED BY CORPORATIONS, BUT MOST OF THE TAXES ARE FROM WAGES AND SALARIES.

THERE ARE TWO FORMS OF REDISTRIBUTION:

1.) THE GENERAL REDISTRIBUTION OF DEDUCTIONS FROM WAGES & SALARIES TO ASSIST THE WORKING CLASS TO REPRODUCE ITSELF. I.E. EMPLOYMENT INSURANCE

2.) REDISTRIBUTION OF REVENUES UPWARD IN THE SOCIAL STRATA SINCE THE WELL-TO-DO MAKE PROPORTIONATELY GREATER USE OF MORE COSTLY PROGRAMS. I.E. HEALTH CARE AND EDUCATION.

PRESENT STRUCTURE

“THE PRESENT STRUCTURE OF THE WELFARE STATE IN CANADA IS A ‘HODGE-PODGE’ OF POLICIES, PROGRAMS, LAWS AND STANDARDS STREWN ACROSS POLITICAL JURISDICTIONS, CATEGORIES OF PEOPLE AND TYPES OF NEEDS.”

THE MOST COMMON METHODS OF GROUPING THE PROGRAMS ARE BY:

A.) MODE OF FINANCING AND

B.) NATURE OF RECIPIENT.

THOSE DEFINED BY MODE OF FINANCING REPRESENT ATTEMPTS TO MODERATE PROVINCIAL DISPARITIES AND MAINTAIN NATIONAL STANDARDS ACROSS THE COUNTRY.

. THOSE DEFINED BY THE NATURE OF THE RECIPIENT HAVE THREE CATEGORIES:

. UNIVERSAL PROGRAMS OR ‘DEMOGRANTS’ WHICH APPLY TO INDIVIDUALS OF A UNIT.

. SOCIAL INSURANCE PROGRAMS WHICH PROVIDE BENEFITS TO CONTRIBUTORS.

CHARITIES – SHORING UP THE WELFARE STATE

1) CHARITIES ARE BEING ENCOURAGED BY GOVERNMENTS BECAUSE OF THREE TRENDS:

2) INCREASE IN SOCIAL NEEDS DUE TO INCREASING LONG-TERM STRUCTURAL UNEMPLOYMENT

3) GROWING LIMITS ON FURTHER EXPANSION OF THE SOCIAL WAGE

4) PLANNED REDUCTIONS IN THE WELFARE STATE

CHARITIES CONTRIBUTE TO THE DECLINE OF THE WELFARE STATE BY NOT ONLY REPLACING IT BUT BY ALSO ALLOWING DONATIONS TO BE TAX DEDUCTIBLE – A PLANNED PARADOX.

“CAPITAL ACCUMULATION AND STATE FORMATION: THE CONTRADICTIONS OF INTERNATION MIGRATION” – SOCIAL ISSUES AND CONTRADITIONS IN CANADIAN SOCIETY, CH. 3 – VIC SATZEWICH

OVERVIEW OF (A) THE CONFLICTING INTERESTS OF INDUSTRIAL SOCIETIES (i) TO MAXIMIZE THE LABOUR SUPPLY AND (ii) TO PROTECT CULTURAL INTEGRITY {MIGRATION AS AN ASPECT OF “CAPTIAL ACCUMULATION”} AND MIGRATION AS AN ASPECT OF “STATE FORMATION”; (B) THE LINKS BETWEEN THE PROCESS OF MIGRATION AND THE CAPITALIST MODE OF PRODUCTION; (C) POTENTIAL SOCIAL AND ACCUMULATION PROBLEMS ASSOCIATED WITH “POPULATION AGING” AND “DECLINING FERTILIZATION;” AND (D) THE LINKS BETWEEN RACISM AND THE IMMIGRATION SELECTION PROCESS{CLOAKED RACIAL SELECTIVITY UNDER THE FACADE OF MORE POLITICALLY ACCEPTABLE CRITERIA} =======> THESIS AND THEMES: (A) THE “DERACIALIZATION”{THE PROCESS IN WHICH EXPLICITLY RACIST TERMS AND CONCEPTS ARE REPLACED WITH APPARENTLY NON-RACIST ONES, BUT WITH THE MEANINGS REMAINING IN TACKED}, AND THE “NEO-RACISM”{THE CLOAKING OF RACISM UNDER THE FACADE OF MORE POLITICALLY ACCEPTABLE CRITERIA}OF IMMIGRATION; (B) THE MARGINALIZATION OF IMMIGRANTS AS A SOURCE OF CHEAP LABOUR; (C) THE CANADIAN IMAGINED COMMUNITY (WHITE SETTLER SOCIETY AND THE RESISTANCE TO OPENNESS).

“POLITICS AND TRANSFORMATION: WELFARE STATE RESTRUCTURING IN CANADA” – CHANGING CANADA, CH. 5 – WENDY MCKEEN AND ANN PORTER

THESIS: THE ADOPTION OF THE NEOLIBERALISM PARADIGM (EMPHASIZING FREE MARKET FORCES, THE REDUCTION OF STATE EXPENDITURE, AND INCREASEED INDIVIDUAL RESPONSIBILITY AND CONSUMER CHOICE) HAS HAD A PROFOUND IMPACT ON THE STRUCTURE OF THE WELFARE STATE

THE WELFARE STATE AND SOCIAL REPRODUCTION (THE PROCESS WHEREBY PEOPLES BASIC NEEDS ARE MET) ==è HAS BEEN SIGNIFICANTLY TRANSFORMED OVER THE LAST THIRTY YEARS. THESE CHANGES REPRESENT A SHIPT IN FAMILY-MARKET-STATE RELATIONS AND A SIGNIFICANY REDUCTION IN STATE RESPONSIBILITY FOR SOCIAL REPRODUCTION =è IT IS EVIDENT IN THE DOWNLOADING OF RESPONSIBILITY FOR SOCIAL REPRODUCTION TO THE MARKET, HOUSEHOLDS, AND OTHER ORGANIZATIONS OF CIVIL SOCIETY ==è

[A] IN THE SHIFT TO A SO-CALLED TOUGH-LOVE PHILOSOPHY AND AN “EMPLOTYABILITY” MODEL WHEREBY A MAJOR FUNCTION OF SOCIAL POLICY IS TO “ENCOURAGE” PEOPLE TO TAKE OR TO STAY IN EMPLOYMENT

[B] AND IN THE RESTRUCTURING OF PROGRAMS THAT HAS RESULTED BOTH IN TARGETING TO THE POOR (E.G., FAMILY/CHILD BENEFITS) AND IN THE PRIVLEGING OF AN UPEPER TIER OF FULL-TIME STEADILY EMPLOYED WORKERS (E.G., CHNGES TO UI).

[C] THERE HAS BEEN A SHIFT IN THE SUBJECT OF BENEFITS FROM ADULTS (ESPECIALLY THE UNEMPLOYED) TO CHILDREN AND AN ACCOMPANYING OVERALL REDUCTION IN FUNDING AVAILABLE FOR SOCIAL PROGRAMS

[D] THESE CHANGES FORM PART OF A STRATEGY THAT HAS ENCOURAGED THE GROWTH OF LOW-WAGE INDUSTRIES.

THE IMPACT OF THIS RESTRUCTURING ==è AN INCREASE IN POVERTY, INEQUALITY, AND HARDSHIP, PARTICULARLY AMONG “MARGINALIZED” AND “RACIALIZED” GROUPS – THE WELFARE STATE HAS MOVED FURTHER FROM THE RECOGNITION OF THE INTERRELATIONSHIP OF CARE AND WORK (WITH WOMEN DISPROPORTIONATELY ASSIGNED TO THE LOW-WAGE, CONTINGENT WORK FORCE AND TO A GREATER BURDEN OF UNPAID CARE AND DOMESTIC WORK) =è THESE CHANGES HAVE SIGNIFICANT IMPLICATIONS FOR POLITICAL VOICE, AS THE DETERIORATING WORK AND CARE SITUATIONS HAVE REDUCED THE SPACE FOR A INDIVIDEUAL GTO EXERCISE POLITICAL VOICE OR PUBLIC ENGAGEMENT =è MOREOVER, AS THE TARGET OF SOCIAL POLICY HAS SHIFTED FROM ADULTS TO CHILDREN, THE NEED FOR ADULTS TO MOBILIZE COLLECTIVELY AGAINST ALL FORMS OF INEQUALITY AND INJUSTICES IS BECOMING LESS EVIDENT (IF MORE IMPERATIVE).

“TOWARD A NORTH AMERICAN COMMON CURRENCY?” – CHANGING CANADA, CH. 11 – ERIC HELLEINER

PROBLEM COMPLEX: ISSUING OF CURRENCY HAS LONG BEEN SEEN AS A SYMBOL OF SOVEREIGNTY – HOW IS THIS AFFECTED BY NEOLIBERAL MONETARY THINKING ABOUT “COMMON CURRENCIES”?

SOCIOLOGY/SYMBOLOGY OF NATIONAL CURRENCIES – (1) MAY CREATE A SENSE OF COLLECTIVITY BY FACILITATING “COMMUNICATION” AMONG MEMBERS OF THE NATION; (2) TOOL FOR NATIONAL MACROECONOMIC MANAGEMENT; (3) FOSTERING NATIONAL IDENTITIES; (4) AN EXPRESSION OF NATIONAL PURPOSE; (5) CREATE COLLECTIVE MONETART EXPERIENCES THAT MAY FOSTER NATIONAL IDENTITIES; AND (6) ENCOURAGE IDENTIFICATION WITH THE NATION-STATE AT A DEEPER PSYCHOLOGICAL LEVEL

TODAY, HIGH LEVEL DEBATE ABOUT THE NEED FOR A MONETARY UNIION IN NORTH AMERICA (NAMU) =è THE PUSH FOR NAMU IS DRIVEN NOT ONLY BY INTENSIFIED REGIONAL INTEGRATION BUT ALSO BY OTHER POLITICAL ECONOMIC TRANSFORMATIONS BOTH AT THE GLOBAL LEVEL AND DOMESTIC LEVEL – (1) FINANCIAL GLOBALIZATION, (2) THE POLITICAL GOALS OF THE QUEBEC SOVEREIGNTY MOVEMENT, AND (3) A NEW INTEREST IN NEOLIBERAL APPROACHES TO MONETARY POLICY

CANADA HAS A LONG HISTORY OF “MONETARY NATIONALISM” – AS FAR BACK AS 1853 WHEN THERE WAS A DECISION TO PRODUCE ITS OWN COIN, THE NATIONAL CURRENCY HAS BEEN SEEN NOT JUST AS AN ECONOMIC INSTRUMENT BUT ALSO AS A TOOL TO SERVE NATIONALIST POLITICAL OBJECTIVES ==è OBJECTIVES INCLUDED THE CREATION OF INTEGRATED NATIONAL MARKET AND THE STRENGTHENING OF A NATIONAL IDENTITY.

“MONETARY NATIONALISM” IN 1930S – ACTIVE MONETARY MANAGEMENT, NEW CENTRAL BANK AND FLOATING EXCHANGE RATE TO INSULATE DOMETIC MONETARTY PRIORITIES FROM EXTERNAL CONSTRAINT

TODAY SUPPORTERS OF NAMU ARGUE THAT U.S.-CAN TRADE WOULD BE FOSTERED BY A REDUCTION OF CURRENCY-RELATED INTERNATIONAL TRANSACTION COSTS (ASSOCIATED WITH EXCHANGING NATIONAL CURRENCIES AND COMPARING PRICES BETWEEN TWO DISTINCT CURRENCY ZONES) ==è OPPOSITION TO NAMU IS BASED ON FACT THAT THE LOW CANADIAN DOLLAR BENEFITS CERTAIN PARTS OF THE BUSINESS COMMUNITY, ESPECIALLY EXPORTERS – AND – A KEY REASON FOR THE LONGSTANDING DISINTEREST IN FIXED EXCHANG RATES OR CURRENCY UNION MAY BE MJUCH OF U.S.-CAN TRADE IS INTRAFIRM TRADE, CONSISTING PRIMARILY OF BOOKKEEPING ENTRIES WITHIN A FIRM’S OVERALL ACCOUNTING ==è CRITICS ALSO OPPOSE NAMU ON THE GROUNDS THAT AN INDEPENDENT CURRENCY IS A CRUCIAL TOOL FOR NATIONAL MACROECONOMIC MANAGEMENT

POLICYMAKING ELITES HAVE BECOME MORE CONCERNED ABOUT THE MACROECONOMIC EFFECTS OF EXCHANGE RATES ==è THEIR CONCERN HAS BEEN GENERATED LESS BY FREE TRADE WITH THE UNITED STATES THAN BY THE DRAMATIC GROWTH OF GLOBL FINANCIAL FLOWS (IN TODAY’S STMOSPHERE OF HIGH INTERNATIONAL CAPITAL MOBILITY, COUNTRIES WITH FLOATING EXCHINGE RATES HAVE OFTEN EXPERIENCED SIGNIFICANT SHORT-TERM EXCHANGE RATE MISALIGNMENTS THAT HAVE BEEN QUITE COSTLY FOR OPEN ECONOMIES IN A MACROECONOMIC SENSE) ==è IN THE WAKE OF THE INTERNATIONAL URENCY CRISES DURING THE 1990S, SOME CANADIAN POLICYMAKERS HAVE BECOME CONVINCED OF THE NEED TO ABANDON FLOATING EXCHANG RATES AND TO CREATEE AN IRREVOCABLEY FIXED EXCHANGE RATE THROUGH A CURRENCY UNION.

SOME OF THE MOST PROMINENT SUPPORTERS OF NAMU IN CANADA ARE QUEBEC SOVEREIGNTISTS WHO SEE IT AS A WAY OF EASING THE PATH TO QUEBEC INDEPENDENCE (QUELLING THE FEAR OF MASSIVE CAPITAL FLIGHT AND MONETARY INSTABILITY IF QUEBEC WERE TO VOTE FOR INDEPENDENCE) ==è ARGUMENT: GLOBAL FINANCIAL MARKETS HAVE ALREADY RENDERED MONETARY SOVEREIGNTY A HOLLOW SHELL

INTEREST IN NAMU IS ALSO DRIVEN BY GROWING DISILLUSIONMENT AMONG ECONOMISTS WITH THE KINDS OF ACTIVIST NATIONAL MONETARY POLICIES THAT BECAME POPULAR IN THE KEYNESIAN AGE. THIS SENTIMENT EMERGED PARTLY OUT OF THE EXPERIENCES OF INFLATION AND PARTLY FROM THE “RATIONAL EXPECTATIONS REVOLUTION” IN THE DISCIPLINE OF ECONOMICS OVER THE LAST TWO DECADES ==è CRITQUE OF THE KEYNESIAN NOTION THAT THERE IS A LONG-TERM TRADE-OFF BETWEEN INFLATION AND UNEMPLOYMENT. BY HIGHLIGHTING HOW EXPERINCES OF INFLATION OVER TIME MAY ENCOURAGE PEOPLE TO ADJUST THEIR MONETARY EXPECTIONS, IT IS ARGUED THAT ACTIVIST MONETARY MANAGEMNTY WOULD SIMPLY PRODUCE STAGFLATION. {IT IS ARGUED} TO BREAK INFLATIONARY EXPECTATIONS AUTHORITIES WOULD HAVE TO REESTABLISH THEIR CREDIBILITY AND REPUTATION FOR PRODUCING STABLE MONEY BY A STRONG COMMITMENT TO PRICE STABILITY.