Economics in Crisis: Outline of an Alternative

Barbara Lenes is an Edmonton-based economist.

While the book starts out rather apologetically, it becomes, in fact, a
fairly thorough presentation of a different way of looking at the
current debt crisis in Canada. Rochon does this first by discussing the
inadequacies of orthodox neoclassical theory, second by disputing the
orthodox claim that it was Keynesian theory that was undermined by
simultaneous inflation and unemployment in the 1970s, and third by
presenting a post-Keynesian explanation of the same topics.

By asking the question “Who benefits?” Rochon is able to stand back
and dissect the national debt. He shows that the federal government has
run an operational surplus since 1989, and introduces a third element
into the reduce-the-deficit-by-cutting-spending-or-raising-taxes
equation by showing that the increase in the last 15 years is due to the
Bank of Canada’s monetarist policy of using high interest rates and
unemployment to bring down inflation rates. Rochon then follows with a
discussion of the income distribution interplay between three groups
(workers, owners of capital, and rentiers) that results in and takes
place during the phenomenon that is termed inflation. This in turn leads
to a dissection of unemployment, which he describes in Keynesian terms
as due to a lack of private investment, not to wage rigidity. Canada’s
high employment rate is therefore attributed to the multiplier effects
of high interest rates and subsequent low private investment on
consumption and further investment. He ends the book with a call for
national policies to facilitate bargaining between the three groups
vying for their share of income distribution.

This timely book should be assigned reading for undergraduate economics
students.