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Governing from the Centre: The Concentration
of Power in Canadian Politics
by Donald Savoie. Toronto: University of Toronto
Press, 1999.
This book argues that the Canadian centre of government has evolved a great deal during the past 20
years. It presents a study of how the central agencies have changed between the 1970s and 2000.
Donald Savoie adopts the position that prime ministerial power has been enhanced in recent years.
However, a similar position was adopted by Thomas
Hockin years ago. This suggests that issues in public sector management are also the subject of continuous debate. The case for the power of the prime
minister is presented in Chapter 2, “The Centre Is
Born” (pp. 20-45); Chapter 3, “Render Unto the
Centre” (pp. 46-67); and in Chapter 4 (pp. 71-108).
These chapters are further supported by a separate
focus on the Privy Council Office (pp. 109-55); Finance (pp. 156-92); and the Treasury Board and the
Public Service Commission (pp. 193-238).
The author effectively employs the technique of
interviews and shows the effects of one who has had
access to the system. He emphasizes the importance
of interviews in the study of Canadian public sector
management relative to other countries (pp. 364-65).
Various studies of the central agencies have demonstrated this pattern in Canada. Savoie discusses
the most recent changes, especially during the
Part II of the book deals with the role of the prime
minister and the central agencies. The study points
to the inequality of ministers within the Cabinet.
Furthermore, the study points to the dominant role
of the prime minister in the system. The prime minister has a distinctive role in the appointment of
ministers, the Clerk of the Privy Council, and deputy
ministers. The prime minister and, to a lesser extent, the minister of finance and the president of the
Treasury Board Secretariat dominate the system
(pp. 71-238).
In his chapter on departments, Savoie indicates:
The background to the changes in the past 30
years can be related to the leadership of Pierre Elliott
Trudeau in 1968-79 and later between 1979 and
1984. The study examines the roles of the core central agencies: the Prime Minister’s Office, the Privy
Council Office, the Treasury Board Secretariat, and
the Department of Finance. The enhanced position
of the Privy Council Office and the Department of
Finance are significantly emphasized.
With respect to the power of the prime minister,
Savoie concludes:
In earlier chapters we have seen that whenever
the prime minister wishes to focus on an issue,
he or she will get their way. In addition, it is clear
that he and his Minister of Finance have a free
hand to establish their own priority projects. The
Prime Minister’s priorities will always see the
light of day pretty well as they were first envisaged. As for the rest, the centre of government
monitors, decides and lays the groundwork for a
consensus to emerge to resolve outstanding issues or to decide on a course of action (p. 317).
The prime minister is the key player in selecting
which people will be empowered. The Clerk of
the Privy Council and Secretary to Cabinet, key
staff members in the Prime Minister’s Office, the
Minister and Deputy Minister of Finance, two or
three ministers, and some deputy ministers are
extremely powerful in Ottawa circles because the
Prime Minister prefers it that way (p. 359).
Thus, a major departure from previous examinations of the central agencies is the assertion made
“Primus: There Is No Longer Any Inter or Pares”
(pp. 71-108). Chapter 4 suggests “that prime ministers leading a majority government can drive virtually whatever initiative or measure they might favour. Cabinet and Parliament are there, but with a
majority of seats, a prime minister can manipulate
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them when it comes to issues that matter a great deal
to him” (p. 106). Having established this conclusion, the author discusses the individual roles of the
following organizations: the Privy Council Office;
the Department of Finance, and the Treasury Board
and the Public Service Commission (pp. 109-238).
Accordingly, the author presents a contemporary
study of central agencies. Some of these issues were
addressed in the Politics of Public Spending by the
same author.
The interrelationships between the central agencies have been most intricate and complex and they
have been addressed by several research studies
ranging from the Glassco Commission in the early
1960s to the PS2000 Task Force in the late 1980s
and early 1990s. At the time of writing, these relationships are still being modified; especially the relationships between the Treasury Board Secretariat,
the Public Service Commission, and line departments (pp. 193-238). From this perspective, the
study provides useful information for a meaningful
discussion of the complex relationships which can
take place between these public sector organizations.
It makes a major contribution to our knowledge of
the system.
The discussion of the above is subsequently juxtaposed against the role of ministers and departments
in public sector management. In this regard, this
study can be meaningfully assisted by more detailed
case studies of departments (see pp. 274-310). At
this point, the author grapples with an old debate
concerning the actual relationship between central
agencies and line departments in public management. There are different views in the public service with respect to the relative power of the central agencies in relation to line departments. The
controversy continues in 2000 and beyond. Savoie
concludes that the power has shifted to the prime
minister and to the minister of finance and the president of the Treasury Board. However, experienced
officials in Canada and abroad have cautioned
against generalizations. One can recall the debates
that took place during the Trudeau years with respect to the relationship between the Prime Minister’s Office, the Privy Council Office, and the Department of Finance. Pursuant to the report of the
Lambert Commission, the Department of Finance
has performed a dominant role in public management.
The review of departments is captured between
Chapters 9 and 11, where the analysis indicates that
there are competing views concerning the relative
roles and power of central agencies versus line departments. These chapters make very interesting
reading about the politics of public bureaucracy. In
Chapter 9, an interesting analysis of staff-line relationships is presented (pp. 276-83). There is historical evidence to support the periodic emergence of
strong ministers and departments (pp. 274-310). For
example, the 1993 reorganization established some
super ministries such as Human Resources Development Canada, which perform major coordinating
roles in public sector management.
There is also the issue of horizontal roles in
government which continues to be a problem. This
debate has taken place with respect to fiscal policy
and human resources management (p. 61). The debate over the relationship between the Treasury
Board Secretariat and the Public Service Commission provides an example of the latter challenge
(pp. 193-238). There is also the issue of the need to
improve policy capacity within the public sector.
This has been addressed in the annual report of the
Clerk of the Privy Council.
Governing from the Centre: The Concentration
of Power in Canadian Politics is an important study
which captures several of the most recent developments in public sector management in Canada. The
book should be required reading for both teachers
of public administration and for practitioners in the
public sector. It is a natural sequel to another by the
same author entitled Taking Stock, which catalogued
several recent changes in public sector management.
This book, Governing from the Centre, is one of a
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series of studies that deal with problems of contemporary public sector management reforms. The
analysis presents information which points to the
complexities inherent in contemporary public sector management. The concentration of power cited
raises questions concerning the recent assertion that
responsive government means putting the needs of citizens first. It also deals with the perennial issue of cen-
tralization versus decentralization in the public sector
management. This study describes the role of central
agencies under the contemporary approach to public
administration labeled, “New Public Management.”
R.W. PHIDD, Department of Political Science, University of Guelph
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Regionalism, Multilateralism, and the Politics
of Global Trade
edited by Donald Barry and Ronald C. Keith. Vancouver: University of British Columbia Press, 1999.
Pp. xviii, 302, index.
This book, which gathers together papers presented at
a conference held at the University of Calgary in October 1997, provides a good overview of regionalism
and multilateralism, the two seemingly opposing political forces shaping the world trading system in a time
of increasing globalization. It makes an important contribution to the ongoing debate about whether regionalism is supporting or undermining the global trading
system. While written before the WTO Ministerial
Meeting late last year, it is also useful background reading for anyone trying to understand the underlying
forces and interests that prevented an agreement from
emerging in Seattle to embark on another round of
multilateral trade negotiations.
The introductory chapter by Donald Barry and
Ronald C. Keith sets the stage for the rest of the
book, nicely laying out the main themes and issues
to be explored. The body of the book includes: general chapters on regionalism and globalization; more
specific chapters on the European Union, the
NAFTA, and APEC as concrete examples of regional
agreements; chapters on interregional relations between the EU and the United States, between North
America and Asia, and between Asia and Europe
(the so-called Asia Europe Meeting); and three chapters examining the implications of regionalism and
multilateralism for Canada. The final chapter by
Charles Doran does a very good job of pulling together all the main conclusions of the other chapters. Indeed, the introductory and concluding chapters are so complete that the lazy or busy reader need
not read the whole book to pick up the most important points made at the conference and to see them
put into a broader perspective.
While all the chapters of this book were of high
quality, the chapters by Robert K. McCleery on the
political economy of NAFTA expansion, by Carolyn
Rhodes on the relationship between the European
Union and the United States, and by Ronald C. Keith
and Patricia L. Maclachlan on Canada’s APEC
policy deserve special mention. The McCleery chapter, which is more quantitative than the rest of the
book, is more likely to appeal to economists. Its
quantitative nuggets include interesting data on trade
flows in the Western Hemisphere and a useful table
summarizing the estimates of gains from alternative regional trading arrangements in the Western
Hemisphere. The Rhodes chapter, which is apt to
be of more interest to political scientists, examines
the evolution of the most important bilateral relationship in the global economy, that between the EU
and US. It underlines the tensions that have developed as leadership in the global economy has progressed from US hegemony to US-EU bipolarity and
describes the efforts to resolve bilateral issues
through such institutions as the grand-sounding, but
relatively modest, Transatlantic Partnership. The
chapter by Keith and Maclachlan does an admirable job of explaining the unique Asian character of
APEC that makes it so inscrutable compared to more
traditional regional organizations.
This book will be of interest to economists, political scientists, lawyers, public servants, and
laypeople concerned about trade policy, trade law,
and international relations.
PATRICK GRADY, Global Economics Ltd.
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Gray Dawn: How the Coming Age Wave Will
Transform America and the World
by Peter G. Peterson. New York: Times Books, 1999.
Pp. 280.
In the unheralded 1980s movie Red Dawn, the omnipresent Reagan-era evil lurking over the horizon is
communism. In the 1999 book Gray Dawn that
omnipresent evil is the aging of the world’s population. In both cases, if a society lets its guard down
the inevitable apocalypse can only be overcome by
some extremely quick and drastic moves. To delay
means destruction. This is the message that continually emerges from Peterson’s book on how the coming age wave will transform America and the world.
The book is filled with metaphors rather than
academic research. On the dust jacket, global aging
is likened to a looming iceberg — failure to change
course now will result in disaster (read Titanic).
Peterson is ringing the alarm bell. And what new
directions are recommended to avoid this fate? With
the US firmly in mind, the author recommends
longer working lives, more immigration, increasing
fertility, stressing (his words) filial obligation, requiring individual retirement savings and targeting
public benefits on the basis of need.
Some background on the author may be useful in
providing a context for these recommendations.
Again the dust jacket is helpful. Peter G. Peterson
is a 72-year old former US Secretary of Commerce
who is currently chairman of an investment bank
and a director of the Federal Reserve Bank of New
York. He chairs the Council on Foreign Relations
and the Institute for International Economics. Perhaps of most importance, however, he is one of the
founders of the Concord Coalition, which he currently directs with Paul Volcker and others. The
Coalition claims success at achieving its first goal
of a balanced US federal budget and currently is
working on bringing the future cost of federal entitlement spending under control. Given this background, many readers would see this as another book
on apocalyptic demography promoting the neoCANADIAN PUBLIC POLICY – ANALYSE DE POLITIQUES,
conservative agenda to dismantle or hamstring
government on important issues of social and economic policies (Gee and Gutman 2000).
There is no doubt that the underlying premise of
this book is correct. Declining fertility rates worldwide and rising longevity, especially in the developed world, have resulted in population aging.
Moreover, he is also undoubtedly correct that this trend
will raise unprecedented political, social, economic,
and moral challenges in the new millennium. Also, he
is substantially correct in observing that policymakers
have largely ignored the implications of societal aging.
Whether it is a time bomb as he maintains, especially
for pensions and health care, or a growing challenge,
however, remains more of a judgement than the result
of research, especially in this book.
Raising the retirement age and immigration levels
are considered important to offset the emerging labour shortage and presumably, the inevitable rise in
wages and labour income. Increasing fertility and
filial responsibility (provide home care, etc.) repositions women in traditional roles, although
Mr. Peterson is far too politically correct to state
this implication. These roles likely mean withdrawing female labour from the workplace thereby potentially aggravating the impending labour shortage.
The direct contradiction of these recommendations
never seems to occur to Mr. Peterson.
Moreover, the recommendations demonstrate a
misunderstanding of current demographic facts.
Over the first decade and a half of the twenty-first
century in North America the children of the
“boomers,” the “echo” generation, enter the labour
market (Foot and Stoffman 1998). In the US this
group is now almost as large as their boomer parents because US fertility has remained around replacement levels (2.1 children per woman), which
is much higher than Europe (1.4) or Japan (1.3).
Consequently the continuing labour force participation of the boomers in their fifties combined with
the labour force entry of their echo children in their
twenties result in no shortage of workers or taxVOL . XXVI , NO . 4 2000
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payers. Is this demographic fact ignored either because it requires more than a cursory knowledge of
demographics by the author or because it conflicts
directly with the neo-conservative political agenda
that underlies the recommendations?
Ignoring the resulting decline in dependency allows the author to proselytize on the total dependency fallacy. In essence he argues that because much
of the costs of dependency have been socialized and
seniors cost more than children (two to three times,
not ten times, as he implies), the impending demands
of the seniors for public pension and health care
outstrip any resources that will be released from
expenditures on the young, primarily education.
While this may be true in the US, it is not nearly so
apparent in the lower fertility countries of Europe,
Japan, and even Canada. However, even more revealing is Peterson’s belief that there is a fundamental difference between spending on one’s own children and on some anonymous retiree. This position
ignores the fact that the retiree may be one’s own parent and certainly reinforces the individualistic, selfinterested values underlying the recommendations.
This is not to say that there are not a few useful
insights in this book. Two examples will suffice.
First, mainly for the fertility reasons outlined above,
North America does not face nearly the aging crisis (!) that Europe and Japan face. This means in
the author’s view, that the coming upheaval and draconian policy measures will have to be even more
dramatic in these older developed nations. Second,
Peterson draws on personal anecdotal evidence to
reinforce his claim that the political response has
been denial resulting in political gridlock on aging
issues. Because the aging trend is gradual, current
politicians have little incentive to be proactive since,
as Peterson quotes, the problems “won’t hit on my
Perhaps surprisingly, Canada receives more than
passing recognition in this book. There are 18 page
references in the index to Canada compared to 41
for the United Kingdom, 15 for Japan, 14 for Swe-
den, 13 for Germany, 10 for Western Europe, 6 for
Eastern Europe, and 5 for Mexico.
For an academic audience this book smacks of
the alarmist journalism that has now become too
familiar in media that rely on sensationalist headlines to push their wares. The treatment of the issues is attention getting (not necessarily bad), superficial, and lacks careful research. Liberal use is made
of population projection data, but socio-economic
life-cycle data are ignored. For example, charitable
giving increases with age, yet there is no discussion
of the role of the not-for-profit sector in this book.
Also, saving for retirement peaks in one’s fifties
after family raising in one’s thirties and forties and
the vast majority of the boomers are not there yet,
so it is not surprising that surveys find that “onethird of boomers have saved nothing at all, and another third have saved too little to make a difference in retirement.” There are numerous other places
where references to life-cycle information could
have improved both the academic and policy content of the book.
It is interesting that all of Peterson’s recommendations from raising the retirement age and immigration levels through targeting benefits and stressing (read mandating) individual saving and filial
responsibility require a strong government for their
implementation. No responsibility is placed on the
corporate sector to contribute to the solutions either
through funding or through reduced profitability,
especially in the financial (pension management) or
health-care sectors. In this regard, the neo-conservative agenda of this book is also its Achilles’ heel. It
is doubtful if the challenges identified by the author and the implementation of his recommendations
can take place without the cooperation of individuals, strong governments, and business. To leave the
latter out of the solutions guarantees their failure.
Peterson’s book provides a useful international
perspective to the discussion on aging, but a different
agenda is required to deal successfully with the challenges identified here and elsewhere (Mullan 2000).
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Foot, D.K. with D. Stoffman. 1998. Boom, Bust & Echo
2000: Profitting from the Demographic Shift in the New
Millennium. Toronto: Macfarlane, Walter & Ross.
Gee, E.M. and G.M. Gutman, eds. 2000. The Overselling
of Population Aging: Apocalyptic Demography,
Intergenerational Challenges and Social Policy. Don
Mills: Oxford.
Mullan P. 2000. The Imaginary Time Bomb: Why an Aging Population is not a Social Problem. London: I.B.
DAVID K. FOOT, Department of Economics, University of Toronto
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Enter at Your Own Risk: Canadian Youth and
the Labour Market
by Richard Marquardt. Toronto: Between the Lines,
1998. Pp. ix, 165. $25.00.
The title of Richard Marquardt’s monograph on
Canadian youth and the labour market, Enter at Your
Own Risk, captures one of the new salient features
of Canadian society in the 1990s — the uncertainty
young people face in linking their education to jobs
and careers. Poll data show increasing public pessimism and anxiety about employment prospects of
the next generation. Thus, young people who are
entering the now more difficult terrain of the transition to adulthood can use Marquardt’s well-written
and thoroughly researched study as a guide. The
study has general appeal because, by drawing on
history, sociology, economics, and policy debates
across a fairly wide time span, Marquardt manages,
in a relatively few pages, to write a comprehensive
description and analysis of the issue of youth and
the labour market which is currently definitive.
Beginning with a chapter setting out the youth
employment issue, Marquardt then takes an historical tour of youth, family, education, labour market,
and the state in five periods between 1850 and 1945.
His next chapter focuses on the postwar years in
which Canada reaches its Fordist pinnacle, followed
by its transition to neo-liberalism and the risk society. The rapid moves after leaving secondary education into stable and well-paying, blue-collar work
and from universities into the professional and semiprofessional occupations of the expanding public
and private bureaucracies have given way to an uncertainty about whether young people will ever be
able to leave secondary labour market jobs for primary sector employment where their work will
match their educational attainment and their interests and be well-paid.
The four chapters that constitute the main portion of Enter at Your Own Risk focus on the contemporary period roughly from the 1980s — the
changes to and pressures on the educational system,
the restructuring of the labour market as a result of
de-industrialization and downsizing both in the private and public sectors, consideration of earnings,
income, and life-styles, and examination of public
policy responses to labour market restructuring especially various training programs. Here as throughout his book, Marquardt continues to emphasize the
complexity of the issue of youth employment. The
choices that youth (and their parents) make in the
transition to adulthood are very much conditioned
by class, gender, race and ethnicity, and by region,
the latter factor not only pointing to differences between provinces across Canada, but differences
within provinces including urban/rural contrasts.
The broad documentary evidence that Marquardt
brings to bear in describing the youth, education,
and employment relationship over time is an outstanding quality of his monograph. In addition to
drawing extensively on academic and non-academic
scholarship, he presents the arguments and data from
numerous government and other studies not generally known or now forgotten and many hard to locate. In his conclusion, Marquardt highlights policy
alternatives which relate to larger questions of how
citizens might shape their society. Readers may be
surprised to learn how closely Canada’s labour market strategies fit OECD policy analysts’ recommendations for a two-pronged (two-class) jobs strategy
that, while making a bow to the promotion of
knowledge-based, high-wage employment, really
expects that the vast bulk of future employment will
(and ought to) be based on the expansion of lowwage, low-skilled employment.
Enter at Your Own Risk, is an excellent background study of a major social problem area in Canadian society today. It is detailed because this particular problem has a long history and is complex
with respect to the social structural forces at work.
The analysis is linked to conceptual notions that can
be expanded by an instructor or followed up through
footnotes and the bibliography in more theoretical
works on the post-modern condition. In presenting
the problem of youth employment, for instance, the
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reader is invited to consider certain theorists
(Giddens, Beck) who argue that social institutions
and behaviour of the post-modern period have become de-traditionalized with social roles and commitments becoming expanded matters of choice.
Given the restructured economy, one can clearly
debate how such social change is experienced by
young people and whether more choice is more opportunity and freedom, or more uncertainty and risk.
Thus, Enter at Your Own Risk, is a welcome resource
in courses dealing with youth, inequality, employ-
ment and labour, Canadian society, and education.
An attractive aspect of the book is its set of a dozen
intriguing photographs of young people in work settings by Vincenzo Pietropaolo which visually invite
one to wonder about their subjects’ personal histories: How have they threaded their way into the
photo, and what are their hopes and aspirations as
part of Canada’s future?
T ONY TURRITTIN , Department of Sociology, York
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Canada: The State of the Federation 1998/99:
How Canadians Connect
edited by Harvey Lazar and Tom McIntosh. Montreal and Kingston: McGill-Queen’s University
Press for the School of Policy Studies, Queen’s
University, 1999. Pp. viii, 394. $24.95.
How Canadians Connect is published by the Institute of Intergovernmental Relations in association with
the School of Policy Studies at Queen’s University.
Publication has been supported by Heritage Canada.
Its title suggests a focus on 1998/99. But the book
proves not to be so “dated.” Some chapters are significant reviews of related literature, policy initiatives, data analysis covering lengthy time frames,
and a wide ground of issues including suggestions
for reform. For these and other reasons How Canadians Connect is a provocative book which will
prove useful for some time to come. It is well-worth
consideration as a possible text book.
It is an excellent survey, from a diverse group of
authors, of the economic, political, and social forces
that act on Canada and Canadians from within and
without and that alter our institutions and domestic
and international relationships, particularly the role
and significance of the state. It has, in tandem, a
major focus on the question of whether Canadians
are “more or less attached to their country.” On this
the evidence is mixed. On the economic front, for
example, interprovincial trade connections seem
stronger, of “tighter weave,” including Quebec, than
one might expect given the FTA and NAFTA and
generally globalization. Yet other facts are particularly damning, for example, “the federal party system in Canada has broken down,” “national parties
no longer serve as the sinews of a healthy federalism,” and “the Liberals essentially govern by default.” Each political party and institutional grouping has much to learn from this book, clearly, “some
of the lessons are less than flattering.” Each ought
to assess its current standing and contributions to
the strengthening or weakening of the social democracy that is Canada and the Canada that might be.
Thus, How Canadians Connect is a “must read”
for all “identity” groups and political parties, labour
and business organizations. Teachers of, and students in, both discipline-based social science and
related courses including interdisciplinary Canadian
Studies at senior undergraduate and graduate levels
will find it a mine of suggestions for debate and research on important social questions and policies.
This is particularly so since the book’s 18 authors
emphasize issues and assess the roles of groups,
interests, and voices that range over the political
spectrum. Their contributions are found in 13 chapters, organized into six parts, Overview (F. Lazer
and T. McIntosh, How Canadians Connect); Role
of the State (R. Whitaker, Canadian State; and
A. Eisenberg, Two Pluralisms); The Economic Context (J. Helliwell, National Economy, M. Vachon and
F. Vaillancourt, Interprovincial Mobility, and C.
Sjolander, Foreign Policy); The Societal Context
(T. McIntosh, Organized Labour; K. Day and
Q. Grafton, Student Mobility; B. Tanguay, Political
Parties); Identity, Citizenship and Culture
(M. James, Redress Politics; D. Pritchard and
F. Sauvagau, Values of Professional Journalists;
F. Graves, T. Dugas and P. Beauchamp, National Attachments) and Chronology 1997-98 (M. Kluger).
How Canadians Connect seems to guarantee reflection and debate on what is right and what is wrong
and how we are to improve, or not, the lot of Canadians in an increasingly integrated world economy. What
seems to be the desired end is the creation of institutions and values of social democracy at home, consistently connected to international institutions that,
together, induce creativity, equality, and communitymindfulness and that, in turn, generate improvements
in technical and social efficiency, fairness, and democracy. These institutional ends and the implied human
nature are contentious and far from certain.
W. ROBERT NEEDHAM, Director of Canadian Studies,
University of Waterloo
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The Asian Financial Crisis: Causes, Cures, and
Systemic Implications
by Morris Goldstein, Policy Analysis in International Economics No. 55. Washington, DC: Institute for International Economics, 1998. Pp. xi, 77.
Global Economic Effects of the Asian Currency
by Marcus Noland, Li-Gang Liu, Sherman Robinson
and Zhi Wang, Policy Analyses in International Economics No. 56. Washington, DC: Institute for International Economics, 1998. Pp. xi, 104.
Restoring Japan’s Economic Growth
by A. Posen. Washington, DC: Institute for International Economics, 1998. Pp. 186.
These studies are a trilogy published by the Institute for International Economics to examine the
Asian financial crisis which shook global financial
markets after June 1997. The first two chapters of
Goldstein’s work chronicle the origins of the crisis
documenting the imbalances and weaknesses in the
domestic banking sectors and foreign borrowing
activities of the ASEAN-4 economies of Thailand,
Indonesia, Malaysia, and the Philippines in the early
1990s. In retrospect, their economies were characterized by excessive credit expansion and reliance
on short-term foreign borrowing coupled with an inadequate regulatory oversight and supervision. Compounding these weaknesses were several aspects of
their international trade relationships such as large
current account deficits, concerns over the quality of
domestic investment spending and appreciating real
exchange rates. Foreign investors dramatically downgraded their confidence in the region culminating in
the July 1997 floating of the Thai baht and contagion
effects on the currencies and economies of other Asian
countries. The final three chapters constitute the bulk
of the study. They address policy issues including the
author’s prescriptions and a careful review of the debate over the contentious IMF restructuring packages
negotiated with Thailand, South Korea, and Indonesia
in the late fall of 1997 and early 1998. The importance
of Japan and China’s getting their houses in good
economic order is viewed as a prerequisite to achieving a sustained recovery from the crisis. The study
finishes with Goldstein’s cogent “top ten list” of lessons learned which constitute a set of sensible prescriptions for avoiding future major crises and include
strong support for a continuing role for the IMF.
Noland et al. use a multi-sectoral, multi-country,
computable general equilibrium model of real trade
flows, trade balances, world prices, and real exchange
rates to simulate the effects of alternative Asian currency devaluations and negative supply-side shocks on
trade balances, GDP and real absorption in 17 regions,
which together comprise the global economy. The authors support using this type of analytical framework
to explore the global economic implications of the
Asian financial crisis by arguing in the first chapter
that the crisis and attendant exchange rate changes
should be viewed as reflecting fundamental and persistent weaknesses in the financial affairs of the countries concerned. They reject an alternative view which
would see the crisis as a reversible event hinging upon
expectational factors, especially moral hazard considerations (foreign investors expected to be bailed out).
This also happens to be consistent with Goldstein’s
analysis. Their model is able to take into account, sector by sector (agriculture, mining, machinery, etc.), the
effects of simultaneous complex multilateral exchange
rate changes such as the fact that while the crisis
brought about a depreciation of the Japanese yen visà-vis the United States and Western Europe, the yen
appreciated relative to the ASEAN-4 and South Korea. Also interesting is the analysis of the effect of the
crisis devaluations on China and their model’s indication that only a modest competitive devaluation by
China would be required to restore its trade balance.
Another major focus of the study is the negative impact of the Asian devaluations on the US trade balance and the possible protectionist trade policies that
could be precipitated.
Though not concerned per se with the Asian crisis,
Posen’s work provides a useful Japanese backdrop.
Both Goldstein and Noland et al. stress the critical
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creased absorption of goods from its Asian neighbours
to a regional return to economic well-being. Posen’s
study is a comprehensive analysis of the genesis of
the Japanese malaise of the 1990s. The root cause was
not structural (insufficient reliance on free markets),
cultural (too powerful interest groups) or demographic
(concerns for an aging society). Rather it arose from
ill-conceived macroeconomic policies characterized by
excessive austerity, asset price deflation, and a lack of
financial reform. Posner’s prescription for improved
economic health correspondingly includes fiscal expansion (using permanent tax cuts funded with shortterm debt), monetary stabilization (announcing a 3
percent inflation target and the desire to avoid yen
depreciation), and a financial reform package (limiting bank bailouts, re-capitalizing solvent banks, improving banking supervision, and limiting government
competition with private bank deposits). Throughout
this study Poser demonstrates an expert knowledge of
macroeconomic literature as it pertains to Japan and
OECD countries generally. The extensive bibliography is very useful. He displays a commanding knowledge of the recent behaviour of the Japanese economy
and an intimate acquaintance with the Japanese macropolicy-making system.
While these three books are published as a trilogy, they are very different in focus and in level and
depth of analysis. The Goldstein book is a good general treatment of the Asian financial crisis and international financial policy issues and would be a
good addition to intermediate level courses in international finance. Because of the quantitative techniques employed, Noland et al. would better be
found on the reading list of advanced undergraduate or graduate courses in macroeconomics. Posner’s
book, because of the depth and detailed nature of
the analysis, would be a valuable addition to any advanced level macro or public finance course in which
a focus on Japan, perhaps as a case study, would be
useful or where the objective is to understand how
excellent macro policy analysis is carried out.
JOHN N. BENSON, Department of Economics, University of Guelph
VOL . XXVI, NO. 4 2000