This chapter provides a motivation for this book, outlining the interests of economists in artificial intelligence, describing who this book is aimed at, and laying out the structure of the book.

In pursuit of its economic interests as a growing high income country, Australia continued to play an active part in world economic affairs during the ’sixties. Hitherto largely dependent on the West – particularly the United Kingdom – for much of its development capital and trade, it has increasingly felt negative pressures from Europe fortunately offset by positive opportunities in Asia and the Pacific. There has been a diversion of an increasing proportion of its trade to these latter areas, and a ready acceptance of a growing amount of capital from North America as well as from the United Kingdom.

Before 1939, Australia invariably looked to Britain for economic leadership. Britain held a key role in the world economy, and traditionally had been Australia’s chief customer, vendor, shipper, creditor and banker and the principal reservoir of Australian immigration. Insofar as Australia had an international economic policy, therefore, it was that of strengthening and adapting existing economic ties with Britain and the British Commonwealth, to Australia’s advantage; and, when the choice was required, of maintaining British relationships at the expense of those with the rest of the world. There was very little use of economic policy as an adjunct of foreign policy, possibly because Britain was regarded also as Australia’s mainstay of defence.

The baseline model in this chapter combines destabilizing Keynesian-Harrodian mechanisms with feedback effects from the labor market to firms’ output and investment decisions. The aggregation of micro-level output and investment decisions is analyzed explicitly and, following a Keynes-Marshall tradition, prices and profit shares adjust to clear the goods market. The flex-price assumption is empirically motivated: evidence shows that goods prices are much more flexible than commonly believed. The model produces limit cycles around a locally unstable steady growth path. A variant of the model that may fit parts of the service sector takes output as perfectly flexible, while the real wage is fixed. The reduced-form relations and dynamic patterns of this variant are virtually identical to those of the flex-price model, suggesting that these reduced-form equations may be a good starting point for analyzing business cycles in the aggregate economy. Reinforcing this conclusion, simulations of an extended version that uses empirically plausible parameters and includes fiscal and monetary policy shows a remarkable correspondence to cyclical patterns for the US.

Chapter 6 traces the meaning of ‘modernisation’ in Labour’s economic policies. ‘Modernising the economy’ to achieve sustainable growth was a consistently crucial idea for Labour from Wilson to Blair. Notwithstanding the abandonment of nationalisation, the endurance of state-led ‘modernisation’ in Labour’s economic imaginary reveals a continuing strategic role for the state, even for New Labour. After establishing this continuity, the chapter highlights a crucial change. In the 1970s and 1980s, Labour policymakers assumed that manufacturing was the key sector to ‘modernise’. Yet, under the influence of deindustrialisation, ideas of ‘post-Fordism’, and New Keynesianism, by the early 2000s manufacturing had been usurped by ‘human capital’. For New Labour, education and training became the new ‘commanding heights’ and the foremost economic priority for the active state. These developments show the ongoing influence of technocratic, social-democratic thought worlds, and thus expose the inappropriateness of shoehorning New Labour into ‘Thatcherism’ and ‘neoliberalism’. But they also speak to important, and ambivalent, shifts in British political economy by the twenty-first century.

The final section of the book examines how the social exclusion of people with mental health conditions can be tackled. Health services can play a part in improving health, but these services have traditionally been focussed on treatment and have a limited effect on the broader social determinants. The health of a nation is highly dependent on social, economic, and political forces and broader government policies. The occurrence, course, and outcome of physical and mental health conditions are socially determined and are inequitably distributed in the population. Therefore, broader social, economic, and fiscal policies are needed to address these health inequalities and, in turn, the social exclusion of people with mental health conditions. A public mental health approach is also required. Mental health services play a crucial role in enabling social inclusion for the people they work with. There are continuing challenges for services in preventing the marginalisation of those with the most severe and complex needs. There is a growing evidence base for the effectiveness of specific social interventions that operate at the service or individual level on social inclusion outcomes. For successful implementation, authentic, multi-level stakeholder support and adequate investment is required.

While the foundations of the fiscal-military state changed little either side of 1830, the new Orleanist regime did much to extend the state’s developmental dimension. The government took responsibility for the development of the railway network, which entailed extensive public investment in the 1840s. In part, this extension of public works was motivated by a desire to manage the ‘social question’, the fear of a potentially subversive underclass; indeed, despite the limited extension of the franchise after 1830, the July Monarchy was attentive to public opinion. The desire for popular legitimation also pushed the regime to seek glory abroad through the conquest of Algeria, which entailed higher military expenditure, as did an international crisis in 1840. As under the Restoration, the growth of public expenditure was financed through credit, which enabled the government to avoid painful tax reforms, while increasing the numbers of people invested in public credit and thus with a stake in the social and political order.

France was at the centre of a transnational process of nineteenth-century European state formation. Since states have often reformed themselves as a result of interaction with one another, the book begins by taking a wide angle on the development of the French case, situating it within the context of state formation in Europe and the Americas. Not only were the French influenced by the progress of rival states, they also shaped the way in which other European and American states were formed. Under Napoleon, for instance, the French exported their tax system across Europe, shaping the subsequent development of taxation in large parts of Germany, Italy and the Low Countries. Also discussed here is the historiography of the French state, and its emphasis on the Revolutionary and Napoleonic period of 1789–1815 as the formative years of the nineteenth-century French state. This book, by contrast, demonstrates the importance of the post-Napoleonic period in state formation, and the opening chapter outlines this argument.

The mid-1850s were years of economic boom, which gave way to a slump at the end of the decade. To maintain railway construction, the ongoing rebuilding of French cities and to counter economic malaise, government spending on public works rose. The regime also sought to stimulate the economy through fiscal reform; a trade treaty with Britain in 1860 formed part of a programme intended to reduce taxes and streamline the state. Affairs abroad, though, complicated this agenda. Profiting from the destabilisation of the international order that followed the Crimean War, France intervened militarily in support of Italian unification, while simultaneously seeking greater prestige through a policy of all-out global interventionism in the Middle and Far East and Mexico. The costs of interventionism abroad, combined with ongoing expenses in Algeria and on public works, eroded the regime’s latitude to lower taxes, straining the legitimacy of the fiscal system. Meanwhile, defeat in Mexico added to this discontent, producing a crisis of the fiscal-military system, which weakened the regime, easing its collapse in 1870 during the Franco-Prussian War.

Restored at the allies’ behest in 1814 and 1815, the Bourbons felt considerable pressure to bolster their legitimacy by asserting their nationalist credentials. Consequently, in the 1820s the French exploited the possibilities of public credit to finance a highly aggressive foreign policy, intervening in Spain in 1823, Greece in 1827–9 and Algeria in 1830. Thus, Restoration France became a quintessential fiscal-military state on the model of eighteenth-century Britain. Moreover, the growing French reliance on public credit stimulated the rise of the Paris Bourse as a major international financial centre. French governments thereby gained a new diplomatic tool that facilitated foreign government loans in Paris. The restored Bourbons also sought to use public credit to reinforce the regime by ‘closing the last wound of the Revolution’, compensating those who had lost property following the Revolution through the proceeds of a debt conversion. However, his idea proved highly controversial – though less because it would compensate formerly exiled aristocrats than because it would reduce the income of small rentiers and civic institutions with endowments invested in rentes.