REVIEW – OCTOBER 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 [AS A SOCIAL CONTEXT AND OVERARCHING PARADIGM FOR UNDERSTANDING
SOCIETY], (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,
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
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:
1. UNIVERSAL PROGRAMS
OR ‘DEMOGRANTS’ WHICH APPLY TO INDIVIDUALS OF A UNIT.
2. SOCIAL INSURANCE
PROGRAMS WHICH PROVIDE BENEFITS TO CONTRIBUTORS.
3. SOCIAL ASSISTANCE
PROGRAMS WHICH PERTAIN TO THOSE BELOW A PARTICULAR INCOME.
CONTEMPORARY ISSUES
EMPLOYMENT INSURANCE – CUT
BACK OR MOVING FORWARD?
·
REDUCED HOURS
REQUIRED BEFORE BECOMING ELIGIBLE!
·
GREATER INCOME EARNING
ALLOWED BEFORE BENEFITS EFFECTED!
·
LONGER PERIODS
FOR RECEIVING BENEFITS!
·
GOVERNMENT HAS
IN EXCESS OF $41 BILLION IN EI SURPLUSES!*
IS IT OKAY FOR THE GOVERNMENT
TO SPEND THE SURPLUS ON OTHER PROGRAMS?
CPP – SUSTAINABLE
PORTION OF THE WELFARE STATE?
·
RELIES ON
PRESENT-DAY EMPLOYEES TO FINANCE THE PENSIONS OF THE RETIRED!
·
FUNDS HAVE BEEN
REINVESTED IN BONDS AND STOCKS!
CHARITIES – SHORING UP THE
WELFARE STATE
CHARITIES ARE BEING ENCOURAGED
BY GOVERNMENTS BECAUSE OF THREE TRENDS:
·
INCREASE IN
SOCIAL NEEDS DUE TO INCREASING LONG-TERM STRUCTURAL UNEMPLOYMENT
·
GROWING LIMITS
ON FURTHER EXPANSION OF THE SOCIAL WAGE
·
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
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
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) =====> HAS BEEN SIGNIFICANTLY
TRANSFORMED OVER THE LAST THIRTY YEARS. THESE CHANGES REPRESENT A SHIFT IN
FAMILY-MARKET-STATE RELATIONS AND A SIGNIFICANY REDUCTION IN STATE
RESPONSIBILITY FOR SOCIAL REPRODUCTION ====> IT IS EVIDENT IN THE
DOWNLOADING OF RESPONSIBILITY FOR SOCIAL REPRODUCTION TO THE MARKET,
HOUSEHOLDS, AND OTHER ORGANIZATIONS OF CIVIL SOCIETY =====>
[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 ====> 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)
====> 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 ====>
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
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) ====> 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) ====> 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 ====> 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
=====> 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) ====> 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) ==
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 ====> 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.