POSC 1000(056) Introduction to Politics

Russell Alan Williams

Part One: IntroductionPolitics and the Economy

Required Reading: Mintz, Chapter 3, pp. 52 74.

Unit Objectives: To explore the relationship between politics & economicsTo examine how economic systems impact politics

Outline:1. Introduction2. Types of Economic Systems3. Why do modern governments intervene in the

economy?4. Economic sources of political conflict5. For next time

1) Introduction:i) Politics and economics?

Politics = struggle over public policiesAuthoritative allocation of resources . . .

Similar definition to economics

Economics focuses on how markets workSeparation of economics from politics?Ignores degree to which politics supersedes markets???

Political impacts on economy:

Theoretical: Markets cannot exist without political order

E.g. private property

Practical: Governments are major players in the economy

• E.g. Taxes, spending and employment

ii) Economic systems generate “inequality”:

 

Countries with highest inequality Gini index Poorest 20% Wealthiest 20%

 1. Sierra Leone 62.9 1.1% 63.4%

 2. Central African Republic 61.3 2.0 65.0

 3. Swaziland 60.9 2.7 64.4

 4. Brazil 60.7 2.2 64.1

 5. Nicaragua 60.3 2.3 63.6

 6. South Africa 59.3 2.9 64.8

 7. Paraguay 57.7 1.9 60.7

 8. Colombia 57.1 3.0 60.9

 9. Chile 56.7 3.3 61.0

10. Honduras 56.3 2.2 59.4

 

Countries with lowest inequality

Gini Index Poorest 20% Wealthiest 20%

 1. Slovakia 19.5 11.9% 31.4%

 2. Belarus 21.7 11.4 33.3

 3. Hungary 24.4 10.0 34.4

 4. Denmark 24.7 9.6 34.5

 5. Japan 24.9 10.6 35.7

 6. Sweden 25.0 9.6 34.5

 7. Czech Republic 25.4 10.3 35.9

 8. Finland 25.6 10.0 35.8

 9. Norway 25.8 9.7 35.8

22. Pakistan 31.2 9.5 41.1

23. Canada 31.5 7.5 39.3

Political struggles often about public policy impacts on equality

Inequality rising . . . .

Question: Should governments redistribute wealth?

E.g. Provide basic services regardless of ability to pay?

2) Types of Economic Systems:

i) Pre modern market economies:Free exchange of goodsMost production for personal consumption

=Low inequality

=Inefficiency

ii) “Mercantilist Policies”/Economics:States organize economy to achieve “national interests”

Development and industrialization• Protectionism• Monopolies• Exploitation of colonies

=increased scale of production=increased power of dominant states

Problems? -Inefficiency-Little international trade

iii) “Free-Market Capitalist System”:Based on:• Private ownership of production – decisions made

to profit investors, not national interest• Economic activity organized through voluntary

markets• Little role for state in economy – politics is residual

Efficient!• Links production to what consumers want• Incentives for innovation – new

technology– E.g. Competition

Problems?

a) High Inequality: Political challenge?

b) Concentration: Development of monopolies

E.g. Rogers - Suggests need for government intervention/regulation

c) Concentration and politics: Produces an economic elite who may be able to dominate politics – risky• Can abuse political system to undermine market

iv) “Socialist Economic Systems”: Based on: “Public” ownership of businesses and economy State “central planning” of production replaces

markets– E.g. State officials make decisions about

what should be produced

Examples?

=Lower levels of inequality

=Central planning can stimulate industrialization

Problems: Inefficiency -poor goods; or not available

Corruption

v) “Mixed Economy”: Mixture of socialism and free market capitalism

Much production organized by private investorsLarge state involvement (public ownership) in some areas of economy

Examples?

Benefits?Open to debate . . .

Controversy:

Large state involvement in economy corresponds to higher equality

Lower state involvement corresponds to better economic growth

E.g. globalisation – economies with low state involvement “rewarded”

Important modern debate – what kind of mixed economy do we want?

Very ideological . . .

3) Why do gov’s intervene in the economy?Practical reasons:

i) Protect environmentIntervention = regulation of pollution

ii) Protect consumersMarkets do not always protect health and safety of consumers• Intervention = product safety standardsMarkets too concentrated• Intervention = Ownership restrictions or

state ownership

iii) Protecting citizensE.g. High level of inequality• Intervention = “Welfare state”: Policies

to ensure minimum standard of living – EI and social assistance– Health care, housing and education

• Right of citizens regardless of market outcomes

Question: Status of the welfare state in Canada????

iv) Protect the economyCapitalism = volatility in economy – “boom and bust”• Intervention = Government

macroeconomic policies

=“Keynesianism”: Gov’t increases spending or cuts taxes to stimulate economy during recession

=“Monetarism”: Gov’t intervenes in markets to control supply of money – promote stability– Keep inflation low– Keep currency stable

Bottom Line:

Political interventions are commonDebates over whether interventions are in the “common good” or not

Modern “neo-liberal” economists think most interventions economically bad

Yet, intervention still common . . . .

4) Economic sources of political conflict:

All economies generate conflicting economic interests

Manifested in “political cleavages”

i) “Social Class”: Group of people who have similar position (or interests) in economy

• E.g. “Merchant class”

Political importance depends on existence of “class consciousness”• Group has to see them selves as class

with shared interests

• Do classes exist in Canada . . . ?

ii) Geographic divisionsEconomic development is uneven• Urban centres “better off” than rural areas• Manufacturing based economies better of

than natural resource based economies

Can cause geographic cleavages• Rural residents demand special status

E.g. Increased electoral representation

• Irony: Rural residents tend to be less supportive of state intervention in economy

iii) Gender and Race: Economic benefits uneven based on social groups

E.g. Aboriginal Canadian Unemployment• Leads to demands for “Affirmative

Action”

E.g. Women's “income gap”• Leads to demands for “Pay Equity”

Close link between these cleavages and new forms of “identity politics”

Conclusions:

1) Politics often involves debates over how, or whether to intervene in economy to redistribute resources

2) Economics and politics are interactivePolitics sets ground rules for economyEconomic system creates political cleavages

Political Science Political Science MixerMixer

Friday, 18 September 2009Friday, 18 September 2009

UC 2001 – Council ChambersUC 2001 – Council Chambers

5pm – 8 pm5pm – 8 pm

All political science faculty and All political science faculty and students are welcome to attend!students are welcome to attend!

6) For next time:Unit Three: Politics and Ideology

(September 23)

Required Reading:Mintz, Chapters 4, 5 & 6, pp. 75 -148.