© 2005 by Nelson, a division of Thomson Canada Limited. 1 Business, Government, and Regulations +...

© 2005 by Nelson, a division of Thomson Canada Limited. 1

Business, Business, GovernmentGovernment, and , and Regulations Regulations + Canadian + Canadian Business Business IdeologiesIdeologies


Government’s Role in Influencing Business1. Prescribes the rules for business2. Purchases business’ products and

services3. Contracts power to get business to

do things it wants4. Is a major promoter and subsidizer

of business5. Is the owner of vast quantities of

productive equipment and wealth


Government’s Role in Influencing Business6. Is an architect of economic growth7. Is a financier8. Protects society against business

exploitation9. Directly manages large areas of

private business10.Acts as a social conscious and

redistributes resources to meet social objectives


Roles of Government and Business• What should be the respective

roles of business and government in our socioeconomic system?

• Which tasks should be handled by government and which by business?

• How much autonomy are we willing to allow business?


Canadian Business Ideologies

Government

Business

Liberals ConservativesNDP

Collectivism/Monopoly Mentality/Mixed Economy/Corporatism/Managerialism/Neo-conservatism

Left Right

Relative Involvement of Govt in Business


Roles of Government and Business

Business Beliefs• Maximizes concession

to self-interest• Minimizes obligations

society imposes on the individual (personal freedom)

• Emphasizes inequalities of individuals

Government Beliefs• Subordinate individual

goals and self-interest to group goals and group interests

• Maximized obligations assumed by the individual and discouraging self-interest

• Emphasize equality of individuals

Clash of Ethical Systems


Influence of Government on Business

Nonregulatory Issues

• Industrial policy• Privatization

Regulatory Issues

• Economic Regulation

• Social Regulation


Government’s Nonregulatory Influence on Business

Industrial Policy: Schools of Thought

1. Accelerationists2. Adjusters3. Targeters4. Central planners5. Bankers


Government’s Nonregulatory Influence

on Business

Pros• Decline of national

competitiveness• Use by other

nations• Ad hoc system

Cons• Reduces market

efficiency• Promotes political

decisions• Foreign success variable• National attempts

uncoordinated and irrational

Industrial Policy



Privatization• Producing versus providing a

service• Privatization debate

– Use markets to discipline delivery of goods and services– Federalization of certain functions

•Airport security



• Major employer• Large purchaser• Major influencer• Major competitor

• Major lender• Taxation• Monetary

policy• Moral suasion

Other Nonregulatory Influences


Government’s Regulatory Influence on Business

• Controls natural monopolies• Controls negative externalities• Achieves social goals• Other reasons

– Controls excess profits– Controls excessive competition

Reasons for Regulation



• Economic regulation– Transport Canada– CRTC

• Social regulation– Employment Equity– Occupational Safety and Health – Human Rights Commission

Types of Regulation



• Fair treatment of employees• Safer working conditions• Safer products• Cleaner air and water

Benefits of Regulation



Costs of Regulation• Direct costs• Indirect costs• Induced costs

– Effects•Reduced innovation •Reduced investment in plant and

equipment •Increased pressure on small business


Deregulation

• Purpose– Intended to increase competition with

expected increased efficiency, lower prices, and innovation

• Dilemma– Must enhance competition without

sacrificing applicable social regulations (e.g., health and safety requirements).

Purpose & Dilemma


Canadian Business Ideologies

Government

Business

Liberals ConservativesNDP

Collectivism/Monopoly Mentality/Mixed Economy/Corporatism/Managerialism/Neo-conservatism

Left Right

Relative Involvement of Govt in Business


Collectivism

• Control of economic activity by the state

• Socialist ideals• Govt needed to

correct defects of market

• Health care, CPP, NEP, subsidies

• ‘New Left’


Monopoly Mentality• Allowable domination

of sector by public or private ownership

• Canada’s markets are too small & spread out for US competitive ideal to work well

• Hudson’s Bay Co.• Canadian Wheat

Board


Mixed Economy

• Compromise of collectivism and conservatism

• Business and government cooperate informally

• Best description of how things actually work


Corporatism• Formalized

cooperation among business, govt and labour = Tripartitism

• Sweden, Japan, France

• ‘Quebec Inc.’• Can lead to

emergence of sector elites who decide what is ‘best’


Managerialism

• Competitive Enterprise System

• The Chamber of Commerce view

• Assume corporations operate in the best interests of society

• Trust it


Neoconservatism• Get government out

of business (and people’s lives in general)

• Privatize and let the market discipline

• Voucher systems• Social policy is

against subsidies, welfare, transfer payments

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© 2005 by Nelson, a division of Thomson Canada Limited. 1 Business, Government, and Regulations +...

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