Chapter 14: Governing in an Age of Decline? Social and Economic Policy

Chapter Summary   Self-Study Questions   Something to Consider   Key Terms   Resources

 

CHAPTER SUMMARY

In the early twenty-first century, the dominant economic model is that of a market (or capitalist) economy, managed to a greater or lesser extent by the state in modern liberal democracies. Social and economic policy is made in this context, a product of the evolution of capitalism’s journey from laissez-faire (the minimal state) to the welfare state (and beyond). Along the way, the two dominant rivals to capitalism, feudalism and socialism, have failed to present an alternative that attracts the support of the population they would serve.

On the other hand, the journey from laissez-faire to the welfare state has reflected an inevitable clash between the promises made by economic models and the outcomes generated by political-economic reality. The political problem is to minimize the disruption for those who would otherwise be left behind by the “creative destruction” (Schumpeter’s description) of the capitalist economy.

The indebtedness of consumers and governments in the post-welfare state has meant a slow and difficult process of recovery from the Great Recession that began in 2008. Governments are challenged to manage record debt and deficit levels in an era when tax increases or new taxes remain widely unpopular and demand for continued investment in health care and education is strong. At the same time, the elimination of instruments for redistributing the wealth generated in a market economy has led to an increase in inequality almost everywhere.

The chapter speculates about various issues confronting policy-makers today and tomorrow, including global warming and the unlikely (but probably necessary) shift to a no-growth economy. It concludes with an appendix of economic statistics for the regimes within the liberal democratic data set.

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SELF-STUDY QUESTIONS
Multiple Choice

(Answer key below)

1. Which element of the welfare state has best resisted dismantling?

a. Full employment
b. Universal social programs
c. Income maintenance
d. None of the above

2. Prior to capitalism, wealth was primarily produced and extracted through which of the following?

a. Industry
b. Rent
c. Wages
d. None of the above

3. Which group is most likely to favour a minimal state?

a. Business elites
b. The middle class
c. Labour
d. All of the above

4. Monetarism is NOT associated with which of the following?

a. Supply-side economics
b. Influencing growth through control of the money supply
c. Manipulation of interest-rate policies
d. None of the above

5. Which of the following identifies the aggregate of individual transactions, purchases, and sales by individuals?

a. The market
b. The economy
c. Gross sales receipts
d. None of the above

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Short Answer

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SOMETHING TO CONSIDER

1. Infrastructure deficits continue to grow in Canada and the United States at a time when the ability of the state to finance new projects appears to be diminishing. What are the potential solutions?

2. Transfer payments—from governments to individuals or corporations—have the potential to be redistributive if the class of individuals receiving transfers is distinct from the class of individuals paying for them through taxes and other levies. A progressive schedule of income tax rates is one of the strongest means of ensuring that this situation will obtain. Policies calling for tax cuts and reductions in government transfers have the effect of minimizing the redistributive effects of the modern tax system.

3. How can climate change and the growing industrial pollution in the developing world be reconciled with the trend towards a less activist state in the developed world?

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KEY TERMS

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RESOURCES
Chapter References

Altman, Daniel. “Managing Globalization: Q & A with Joseph Stiglitz.” The International Herald Tribune (2006-10-11): n.p.

Heritage Foundation. Index of Economic Freedom 2011. January 2011: 460 pp. Electronic Copy

Jackson, Tim. Prosperity without growth? The transition to a sustainable economy. The Sustainable Development Commission (2009): 134 pp. Electronic Copy

Mishra, Ramesh. The Welfare State in Capitalist Society. Toronto: University of Toronto Press, 1990.

OECD. Divided We Stand: Why Inequality Keeps Rising. December 2011: 400 pp. Electronic Copy

_____. Growing Unequal? Income Distribution and Poverty in OECD Countries. October 2008: 310 pp. Electronic Copy

_____. OECD Population Pyramids in 2000 and 2050 (2007). Statistics Portal. Electronic Copy

Ringen, Stein. The Possibility of Politics. Oxford: Clarendon Press, 1987.

Sherk, James. “What Unions Do: How Labor Unions Affect Jobs and the Economy.” Backgrounder. The Heritage Foundation. Web. (May 21, 2009): 17 pp. Electronic Copy

Skinner, Andrew. “Introduction,” to A. Smith, The Wealth of Nations. Ed. A. Skinner. Harmandsworth: Pelican, 1970.

World Economic Forum. Positive Infrastructure: A Framework for Revitalizing the World Economy. 2010: 59 pp. Electronic Copy

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Further Readings

Antonio, Robert J., and Robert J. Brulle. “The Unbearable Lightness of Politics: Climate Change Denial and Political Polarization.” The Sociological Quarterly. 52.2 (Spring 2011): 195–202. Get Abstract

Bigelow, Gordon. “Let There Be Markets.” Harper’s Magazine. (May 2005): 33–38. Electronic Copy

Courchene, Thomas J. “Rekindling the American Dream: A Northern Perspective.” Institute for Research on Public Policy, Policy Horizons Essay (2011). Electronic Copy

Dorey, Peter. “A Poverty of Imagination: Blaming the Poor for Inequality.” The Political Quarterly. 81.3 (July–September 2010): 333–343. Get Abstract

Dunleavy, Patrick. “The Backlash against the State.” Political Insight. 2.1 (April 2011): 4–6. Electronic Copy

Einhorn, Eric S., and John Logue. “Can Welfare States Be Sustained in a Global Economy? Lessons from Scandinavia.” Political Science Quarterly. 125.1 (Spring 2010): 1–29.

Fraile, Lydia. “Lessons from Latin America’s neo-liberal experiment: An overview of labour and social policies since the 1980s.” International Labour Review. 148.3 (September 2009): 215–233. Electronic Copy

Jacobs, Alan. Governing for the Long Term: Democracy and the Politics of Investment. Cambridge: Cambridge University Press, 2011.
Electronic copy of front matter and chapter 1

Stiglitz, Joseph. “The global crisis, social protection and jobs.” International Labour Review. 148.1–2 (June 2009): 1–13. Electronic Copy

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Other Resources

Britannica Online Encyclopedia: Socialism
This article provides an overview and history of socialism from the Industrial Revolution to today.

Ecologic Institute—An International Think Tank for Environment and Development
Ecologic Institute is a private not-for-profit think tank for applied environmental research, policy analysis, and consultancy with offices in Berlin, Brussels, Vienna, Washington DC, and San Mateo CA.

The Heritage Foundation
Founded in 1973, The Heritage Foundation is a research and educational institution—a think tank—whose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.

Listen to 2008 Massey Lectures “Payback: Debt and the Shadow Side of Wealth” by Margaret Atwood

Listen to 2001 Massey Lectures” The Cult of Efficiency” by Janice Gross Stein

Listen to 1992 Massey Lectures” Twenty-First Century Capitalism” by Robert Heilbroner

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