The political economy of debt and deficit politics in Canada

grantor: University of TorontoThis dissertation is concerned with changes in the public conceptualizations of deficit finance offered by Canada's federal government since the early 1970's. It seeks to explain how the Keynesian notion it is appropriate to run deficits to offset cyclical economic underperformance, which was very much alive in the 1970's, has been defeated such that in the conceptualizations publicly proffered since 1994, deficit finance is presented as serving no useful function. In addition to explaining this change, the dissertation is also concerned with detailing some of its effects. The argument is that a dynamic interaction of ideas and interests is the best explanation for this change. By the mid-1970's, Keynesian views were functioning in the context of a deteriorating underlying economy. Over time a new conceptualization of corporate economic interests emerged out of economic decline, and new policy responses which rationalized those interests were crafted. The Mulroney government was the vehicle for the expression of these interests. The Mulroney government failed markedly in terms of the fiscal goals it set for itself. This was because other structural reforms were prioritized over fiscal concerns, and also because persistent trace elements of Keynesian thinking continued to inhabit a dominant neoliberal economic model. However, over time, the economic restructuring in which the Mulroney government engaged, and the related recession in the early 1990's, changed the economic experience and interests of the mass public, and created the conditions for mass public support of fiscal retrenchment. When the Chrétien Liberals took office, the economic interests of citizens had been recast such that the Keynesian Welfare Stare, supported in no small part by deficits, was interpreted as protecting "special interests" and "bureaucrats" rather than the "average" citizen. As such, mass public approval for fiscal retrenchment was finally realized. Both a cause and an effect of this change in the interests of the mass public was the extinguishing from the public utterances of the federal government of any reference to the impact retrenchment might have upon economic performance. With the public end of Keynesian views regarding the value of deficit finance came the end of deficits. One result of these new conceptualizations and the accompanying retrenchment was a redefined role of the state in the economy.Ph.D