The Role of the State

1
The Role of the State

• Nov. 12

2
State

• Leo Panitch, Canadian Encyclopedia.
• - The state is a broad concept that includes
  government as the seat of legitimate authority in
  a territory but also includes bureaucracy,
  judiciary, the armed forces and internal police,
  structures of legislative assemblies and
  administration, public corporations, regulatory
  boards, and ideological apparatuses such as the
  education establishment and publicly owned
  media.

3
State Panitch, Canadian Encyclopedia.

• - the large role of the state was not
  antithetical to the development of the capitalist
  economy in Canadathe state providedmuch of the
  technical infrastructure and economic regulation
  necessary to keep capitalism viable. The state
  tried to create a favourable fiscal and monetary
  climate for economic growth it underwrote the
  private risks of production at public expense
  through grants, subsidies and depreciation
  allowances it played a crucial role, via land
  and immigration policies, in developing the
  labour market and, more recently, in absorbing
  the social costs of production through sanitation
  services, medicare, employment insurance,
  educational facilities, etc and it very often
  directly built the infrastructures for economic
  development (canals, railways, airports,
  utilities) when this was too risky or costly for
  private capital.

4
State Panitch, Canadian Encyclopedia.

• - the globalization of capitalism does not mean
  that states are no longer significant actors. It
  only means that their role is restructured.

5
The neo-liberal ideal

• At least in theory, advocates of the free market
  (neo-liberals or neo-classical economists) argue
  for a minimalist state.
• In this view, the states role should be as
  limited as possible to defending property rights,
  maintaining law and order, and providing national
  defence.

6
The reality of the capitalist state

• The only problem is that capitalism never
  resembled that free-market, minimalist-state
  ideal (Stanford, 2008 226).
• Even in its early days perhaps especially
  during its early days capitalism was guided by
  a strong, focused, central government. In fact,
  the state played a crucial role in the very
  emergence of capitalism (Stanford, 2008 227).

7
The Developmental State Britain

• industrial capitalism was born in Britain in the
  eighteenth century. Britains relatively
  centralized and powerful state, which was willing
  and able actively to support private-sector
  investment and production, was a key reason why
  capitalism began there (Stanford, 2008 227).

8
The Developmental State Germany, USA, Japan

• if anything, capitalisms subsequent expansion
  to other jurisdictions first to continental
  Europe, then America, the around the world was
  even more dependent on powerful state leadership
  (Stanford, 2008 227).

9
The Developmental State Canada

• The National Policy
• introduced by Sir John A. Macdonald
• involved
• tariffs (protectionism)
• railways
• immigration to and settlement of the west

10
The Modern Capitalist State

• Governments continue to intervene to regulate
  and create markets, support private investment,
  protect private property, and facilitate the
  actions of capitalists in many different ways
  (Stanford, 2008 229).
• See Stanford, Table 19.1, page 229.

11
Why Kind of State Intervention?

• there is no real debate over whether governments
  should intervene in the economy they always
  have, and always will. The real questions are
  rather different. How does government intervene
  in the economy? And in whose interests?
  (Stanford, 2008 229-230).

12
Liberal Democracy, Capitalist State

• The notion of political equality (one person, one
  vote) inherent within liberal democracy is
  confronted by the economic inequality of a market
  economy.
• To what extent is political equality eroded by
  economic inequality?

13
Liberal Democracy, Capitalist State

• the state in modern developed capitalist
  economies demonstrates a kind of split
  personality. Its natural tendency is to focus on
  the core function of protecting and promoting
  private wealth and business (Stanford, 2008
  231).
• Yet, Thanks to centuries of popular struggle for
  fundamental rights, capitalism has become more
  democratic (Stanford, 2008 231).

14
Capitalism vs. Democracy?

• No capitalist country is truly democratic so
  long as those with wealth and power are able to
  exert such disproportionate influence over
  political decisions (Stanford, 2008 233).

15
Fiscal Policy

• Fiscal policy The spending and taxing activities
  of government.
• Where Your Federal Tax Dollar Goes
• Presentation from the Federal Finance Department,
  based on 2007-08
• http//www.fin.gc.ca/taxdollar/09/mm-eng.asp

16
Federal Government Revenues
17
Federal Government Expenses
18
Total Govt Spending - G7

• Fiscal Reference Tables
• Table 54
• Canadian state spends more than USA and Japan,
  but less than rest of G7 (Germany, UK, France,
  Italy).
• http//www.fin.gc.ca/frt-trf/2009/frt0909-eng.asp
  tbl54

19
Govt Financial Balances - G7

• Fiscal Reference Tables
• Table 55
• Since 1997 (until 2009), total government
  finances (federal and provincial) in Canada have
  generally been in a surplus position, unlike the
  rest of the G7.
• http//www.fin.gc.ca/frt-trf/2009/frt0909-eng.asp
  tbl54

20
Deficit to Surplus to Deficit
21
The Surplus/Deficit in Context
22
Budget 2009 and Sept 09 fiscal update

• In January 2009 the federal government projected
  deficits of
• 1.1 billion in 200809, actual 5.8 billion
• 33.7 billion in 200910, now 55.9 billion
• 29.8 billion in 201011, now 45.3 billion
• 13.0 billion in 201112, now 27.4 billion
• 7.3 billion in 201213 now 19.4 billion
• and a surplus of 0.7 billion in 201314. now
  projecting 11.2 billion deficit to be followed
  by 5.2 deficit in 2014-15.

23
Canadian governments return to deficits

• Federal-provincial deficits to hit 90B TD
• Canada's federal and provincial deficits will
  total 90 billion dollars this year, a study by
  the Toronto-Dominion Bank predicted Tuesday Oct.
  20, 2009. The report said the shortfall could
  even reach 100 billion. The bank said
  Saskatchewan would be the only province able to
  avoid a deficit even that remains uncertain.
  The federal finance department recently estimated
  Ottawa's deficit would hit 56 billion. TD said
  the cumulative total of all federal deficits
  the national debt will amount this year to six
  per cent of the total value of all goods and
  services produced annually in Canada. A little
  over a year ago, Ottawa and the provinces were
  all reporting surpluses.
• http//www.cbc.ca/money/story/2009/10/20/td-predic
  ts-90b-deficit.html

24
The Accumulated Federal Debt
25
The Debt in Context
26
The debt

• What is the impact of public debt?
• When does the debt become a problem?