Neoliberalism vs. Keynesianism
Presenter: John Pope
Neoliberalism is a name given to the market-driven approach to economic and social policy based upon neoclassical theories of economics. Keynesianism is an economic theory stating that active government intervention in the marketplace and monetary policy is the best method of ensuring economic growth and stability.
In the 1970’s Canada, along with most other developed Western nations, began abandoning Keynesian economics adopted after WWII, and began to embrace neoliberalism. Has it improved things for the average Canadian?
Your homework is to briefly research both neoclassical economics (neoliberalism) and Keynesian economics. We can then discuss and assess the values of each with regard to Canadian prosperity and social well-being over the past 40 years or so.
Questions to ponder:
- Has prosperity in Canada increased or decreased since the 1970’s? Are we better off now?
- Should governments respond with legislation or regulations to wild fluctuations in the markets?
- Does ‘trickle down’ economics bring benefits to average Canadians? Is it always good for Canadians if it is good for the markets?
- Should government policies be introduced to provide for a smooth running market place, or should governments stay away from influencing markets?
- We are often told that consumer spending drives the markets and should be encouraged to produce growth. Are Canadians working for the economy, or is the economy working for Canadians?
- Is there any problem with the fact that the difference in income and wealth between the rich and the poor is increasing? Won’t this gap become smaller in the future as the wealthy become more free to invest in the economy by creating jobs?
“Neoliberalism: origins, theory, definition” by Paul Treanor http://web.inter.nl.net/users/Paul.Treanor/neoliberalism.html
“Keynesian Economics” by Alan S. Blinder http://www.econlib.org/library/Enc/KeynesianEconomics.html
I hope everyone has done their homework on neoliberal and Keynesian economics. I would like to present to you now a summary of what the switch from Keynsianism to neoliberalism has meant for Canadians in my opinion.
We have gone through a 30-year period where consumer products were relatively inexpensive, and easy to obtain. This has been mostly because borrowing was made easy, and people could live well beyond their means believing that their income eventually would be able to cover their debt loads. This belief was slowly eroded over the years, and finally, when homeowners began defaulting on homes they could not afford, it triggered a monumental global financial meltdown. Financial institutions found themselves holding bundles of bad debt that they could no longer sell. People lost their jobs and their homes. Giant financial institutions were on the brink of ruin. It was the unmasking of neoliberal economics.
So, lets look at a list of what the neoliberal policies brought us over those years before, and after the 1980 meltdown:
1. A huge tax shift from corporations to households, from richer to poorer ones; from taxing incomes to taxing spending.
2. The lowest rates of spending and revenue collection by the federal government since the late 1940’s.
3. A vastly smaller safety net for average Canadians, and more expensive basic services like education and housing.
4. Median wages remained stagnant while prices went up.
5. Greater inequality: the bottom 40% of Canadian families raising kids are worse off now than 30 years ago. Only the top 10% are better off now.
6. Record high household indebtedness.
7. Less regulation on investments and credit creation.
8. More foreign ownership of Canadian businesses.
There are more factors which I’m sure we will hear about around this table.
It’s been like a giant ponzi scheme where we are borrowing from future generations to satisfy our desire for growth today. As we continue to rape our environment to get at the basic resources we need for growth, this ponzi scheme goes into high gear. Not only will future generations have to pay back what we’ve stolen, but they also have to deal with depleted resources and climate change.
We have left our grandchildren with a huge problem. Their world will be far less prosperous than ours, and our era will be viewed by them as selfish and wasteful.
Can we avoid this scenario? I personally doubt it. Maybe somebody here can provide evidence that this is not what the future will bring. Can technology spring to our rescue? Will we see our way through to a continuing healthy environment, and a stable and life giving economy that benefits all?
The table is open for comments.