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To describe Keynesianism 
is not to support it

Lewis is outraged by those who demand fiscal prudence.

– Shahrokh Shahabi-Azad, “A diehard Keynesian view of the world,” Inroads, Winter/Spring 2005

Paul Martin was … without question the finest Canadian finance minister of the postwar era.

– Timothy Lewis, In the Long Run We’re All Dead: The Canadian Turn to Fiscal Restraint

 

Dear Inroads editors,

While I am obviously not outraged by advocates of fiscal restraint, I am outraged by mendacious treatments of my work. Shahrokh Shahabi-Azad’s review of my book In the Long Run We’re All Dead: The Canadian Turn to Fiscal Restraint amounts to little more than a collection of misrepresentations that do violence to the book and deceive Inroads readers.

Mr. Shahabi-Azad organizes his claims through an overall thesis that In the Long Run We’re All Dead, and I, are hostage to a romanticized vision of failed Keynesian economic and social policies. My alleged ideological longing for a past golden age means the book misunderstands the policy issues faced and the decisions made by the Canadian government.

In fact, I state early in the first chapter that existing accounts of Canada’s turn to fiscal restraint are inadequate in part “because analysts have not been sufficiently disinterested. Instead of trying to understand ideational change, commentators have usually used the ideas that should be under the microscope to either applaud or condemn the changes at hand.” The book argues that over decades changing interests altered the viability of ideas about economics.

The interaction between interests and ideas moved the federal government and its institutions from a modestly Keynesian to a basically neoliberal rhetorical and policy framework that enabled deficit elimination, and deficit elimination in turn was a further moment in the unfolding of this neoliberal structure. Included in the argument is the claim that Keynesian norms persisted in federal budgeting longer than is commonly understood. While I allow myself the occasional political comment that is irrelevant to the core argument, my endeavour is explicitly not to support Keynesianism or to criticize balanced budgets, but to describe and understand how Canadian Keynesianism and its cognate ideas were supplanted.

Whether the book succeeds or fails in these or different terms may be for others to judge, but Mr. Shahabi-Azad’s judgements on the issues are both unsubstantiated and wrong. Space does not permit me to refute every claim – which is unfortunate, because the review flings so much mud there is always the risk some might stick. I will confine myself to identifying and contesting some specific examples.

Mr. Shahabi-Azad often employs vague terms such as seems, implies and tone as a springboard for his assertions. This technique is used precisely because there is no textual basis for his claims. Were there a textual basis, I presume Mr. Shahabi-Azad would have provided direct quotations.

Mr. Shahabi-Azad: “Lewis implies that there is nothing wrong with continued deficit finance, that a growing national debt is not a concern and that, even if there were high levels of inflation concurrent with high levels of unemployment, there is no proof Keynesian policies are to blame” (all emphasis in quotes is added).

I certainly say none of these things. I do argue that continued deficit finance, growing national debt and economic circumstances do not, in themselves, explain ideational or policy changes. These changes are ultimately a matter of politics, which is informed by fiscal and economic conditions. Mr. Shahabi-Azad may not understand the difference between arguing something does not explain change and arguing that something “is not a concern” or that “there is nothing wrong.” But that is his failing.

Mr. Shahabi-Azad: “He seems unable to comprehend that the change in public opinion toward deficit financing was not some purely ideological shift of the Zeitgeist.”

Ideological change is an important element of my argument, but it is not treated in itself as the source of this change in public opinion. In chapter 1 I criticize some analysts for relying on mere ideology as an explanation for change, and in chapter 7 I provide a detailed explanation of the public turn against deficit finance in terms not of ideology but of structural economic insecurity and the accompanying politics. Mr. Shahabi-Azad may not like my explanation, but he should not mischaracterize it.

Mr. Shahabi-Azad: “He reminisces about Keynesianism and seems to long for a return to deficit finance in the name of social justice and equity.”

I do go to great lengths to describe and understand the meaning of Canadian Keynesianism, how it was received, and its linkages to the development of the welfare state, particularly in chapter 2. Most people would recognize that to understand the decline of Keynesianism, we need to know what it was. Mr. Shahabi-Azad apparently thinks that to describe Keynesianism is to reminisce and to support it.

Of course, to be fair to Mr. Shahabi-Azad, his view that I “long for a return to deficit finance in the name of social justice and equity” may in part come from his ignorance of Canada’s political history. The one time Mr. Shahabi-Azad does quote a sentence I actually wrote, he states, “His motivations become clear when he suggests that Brian Mulroney’s victory over John Turner in 1984 was an ‘indication that the economics of the “just society” were increasingly out of fashion and the economics of Bay Street rather more in vogue.’ … To deviate from government tax-and-spend policies (or just spend policies) is to abandon the just society.” It should have been evident, also to Inroads’ editors, that the term “just society” was in quotation marks in that sentence of the book because the phrase refers to a common description of Pierre Trudeau’s amalgam of economic and social policies, not to some Platonic ideal of justice, and that the sentence is an observation rather than a judgement that previous policies were just.

But Mr. Shahabi-Azad does not need weasel words like seems to egregiously mischaracterize the book. More often, he does this directly.

Mr. Shahabi-Azad: “Furthermore, he treats international pressures, reduced trade barriers, openness of economies, capital flows and other such developments as if they were not factors.”

Apparently Mr. Shahabi-Azad missed chapter 2, which discusses these issues in relation to the embedded liberal compromise and Canada’s reception of Keynesianism, and chapter 5, which discusses these issues in relation to Keynesianism’s decline and the ascendance of neoliberalism. He also apparently read neither the preface nor chapter 6, both of which address specifically how international competition and globalization/economic integration relate to domestic outcomes. Mr. Shahabi-Azad may disagree with my analysis of how international pressures were factors in the decline of Keynesianism and the emergence of balanced budgets, but it is simply false and an outrageous disservice to readers to claim that I treat them “as if they were not factors.”

Mr. Shahabi-Azad: “For Lewis, government should be concerned about inflation under extreme circumstances only, perhaps under situations such as existed during World War II. Since the Canadian economy is far removed from any such scenario, Lewis is outraged by those who demand fiscal prudence.”

I am mystified as to the origins of these claims, and can only speculate. I describe in detail the postwar Keynesian emphasis on ameliorating unemployment rather than fighting inflation. I identify the Bank of Canada’s price stability policy as a crucial moment in the overthrow of Keynesianism and the ascension of neoliberalism. And I do describe the Bank of Canada’s price stability policy in the late 1980s and early 1990s as a “runaway anti-inflation” policy. But of course, descriptions and opposition to a specific anti-inflation policy in no way justify the conclusion that I think inflation matters only “under extreme circumstances.”

Nearly every other substantive comment in the review is similarly false.

Ideologues see analysis as inherently biased because it does not reflect back their own prejudices. As the quotations juxtaposed at the beginning of this reply suggest, I am confident that any reasonable reader of both In the Long Run We’re All Dead and Mr. Shahabi-Azad’s review would have little difficulty identifying which of us is a prisoner of ideology.

— Timothy Lewis

Timothy Lewis has both a doctorate in political science and a law degree from the University of Toronto. His book In the Long Run We’re All Dead: The Canadian Turn to Fiscal Restraint was published by University of British Columbia Press in 2003.

 

 

THE AUTHOR REPLIES

Dear Inroads editors,

In responding to Timothy Lewis’s rebuttal to my review of his book, I must reassure the readers of Inroads, and also Mr. Lewis, that, I had no intention of doing “violence” to the book, nor of “deceiving” Inroads readers. Even though I find his rebuttal slightly melodramatic, I do appreciate his clarification regarding the intended message of his book. I think, however, that some inconsistencies still remain.

I criticized this book for its lack of focus and inconsistencies, and Mr. Lewis once again reveals inconsistencies. He praises Paul Martin as “the finest finance minister of the postwar era,” while at the same time remaining critical of Martin’s economic policies designed to balance the budget and reverse decades of deficit finance. Lewis deeply admires a man who cut social programs in the name of fiscal prudence, all the while arguing in favour of deficit finance in the name of equity.

Lewis acknowledges in his rebuttal that he has allowed himself the “occasional political comment that is irrelevant to the core argument.” The readers of this book will note that unlike the “occasional” political comment, the “core” argument remains elusive, which hardly makes for an unbiased analysis of the shift in Canadian fiscal policy from Keynesianism to the “economics of Bay Street.” Perhaps if Lewis had resisted the temptation to insert “occasional” political commentary, the central message of his book would not have been lost and his work would really have been about the shift in Canadian fiscal policy.

Seeking to clear up some of the confusion surrounding what his core message really is, Lewis states, “My endeavour is explicitly not to support Keynesianism or to criticize balanced budgets, but to describe and understand how Canadian Keynesianism and its cognate ideas were supplanted.” The readers of the book can judge for themselves whether or not this book is an unbiased attempt to understand the shift in Canadian fiscal policy or is more accurately described as a critique of the shift.

If the motivation for writing this book is to really understand how Canadian Keynesianism was supplanted, then I feel correct in my initial assessment: Lewis ignores or underestimates the impact that economic forces played in bringing about this change and should be open to the criticism that he has invited. Keynesianism was supplanted because it simply failed as policy. It was ill equipped to deal with concurrent high inflation rates, high unemployment rates, high interest rates and growing national debt (granted, these came about as a result of exogenous shocks to the economy such as the oil crisis). If the failure of Keynesianism as policy had not been sufficient to induce a shift in fiscal policy, then it would have been time for new policy-makers.

— Shahrokh Shahabi-Azad



About the Author

Timothy Lewis





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