Chapter 4

The Role of Government in Business

Learning Objectives

1. Historical Role of Government2. Activities that impact business 3. Major crown corporations4. Federal budget and national debt5. Canada’s innovation strategy

Historical Role of Government in the Economy

Canada has a mixed economy – our various levels of governments play a large very role in our economy

From the start in 1867 the National Policy was to force trade to flow East-West

Tariffs were used to deter the natural North-South flow of goods

Historical Role of Government in the Economy

A railroad was built with government assistance to achieve national unity!

Americans have less government involvement in their economy – more goods and services are provided by the private sector. Following the terrorist attacks the federal government allocated funds to New York City and the airlines.

Systems of Survival - Ethics of Governance

The Book The Author

Systems of Survival - Ethics of Governance

The dynamic tension created by two value systems results in economic growth.

The ethics/values of each syndrome (guardian or commercial) are necessarily different

These are two different worlds with different rules of operation

Role of Government & Business

Sway Business Suasion Coercion Taxation Purchasing Promotion Subsidies Standards Access

Sway Government

Investment Employment Information Privatization Lobbying Contributions Litigation

Jane Jacobs Moral Syndromes

Commercial Shun Force Voluntary Agreements Be Honest Collaborate Easily with

Strangers & Aliens Compete Respect Contracts

Guardian Shun Trading Exert Prowess Be Obedient &

Disciplined Adhere to Tradition Respect Hierarchy Be Loyal Take Vengeance

Jane Jacobs Moral Syndromes

Commercial Use Initiative &

Enterprise Be Open to

Inventiveness & Novelty

Be Efficient Promote Comfort &

Convenience

Guardian Deceive for Sake of

Task Make Rich Use of

Leisure Be Ostentatious Dispense Largesse Be Exclusive Show Fortitude

Jane Jacobs Moral Syndromes

Commercial Dissent for Sake of

Task Be Industrious Be Thrifty Be Optimistic

Guardian Be Fatalistic Treasure Honour

Crown Corporations Governments own companies -

are called Crown Corporations Examples – AECL, CBC, Canada

Post, Bank of Canada, etc. Some provinces use crown

corporations to invest in the province - Caisse de Dépôt in Quebec is an example

The trend is towards privatization,

Crown Corporationshttp://www.canada.gc.ca/depts/major/depind_e.html

Website listing all the crown corporations and government agencies

Laws and Regulations

Nickels text says 4 sources

1. Constitution

2. Judicial precedents

3. Federal and provincial laws

4. Federal & provincial agencies

There is also

5. Municipal laws and regulations

• Water, Sewage, garbage pick-up

• Snowplowing, streetlights, police, emergency services

• Parks, libraries

• Building codes

Registration, Reporting and Information

Companies must register “Articles of Incorporation” with the government

The legal entity (new company) must file tax returns and financial statements with the government

Companies must file statistical data with the government as requested

Taxation of Companies

The federal government relies on income tax and other tax revenue to fund its activities

The provincial governments rely on income tax and sales tax for revenue

Municipal governments rely on property taxes for their revenue

All businesses pay various taxes ( a cost of doing business), which are passed on to the consumer in the form of higher prices

Government Spending of Tax Dollars

Fiscal Policy - how governments collect and spend tax dollars

The federal government is the largest buyer of goods and services

Federal procurement policies can be used to influence regional economies and companies

NAFTA places limits on the federal government’s ability to use this spending power

Government Spending of Tax Dollars

Monetary Policy - how governments manage the money supply

How many dollars floating around for people to use

Too much money around, we get inflation

Other Government Policies Strangely enough, provincial

governments put up interprovincial trade barriers

Provincial governments spend billions on health, education and services - these funds are directed to local companies

Various governments may cooperate to provide loans, grants or support for projects like Hibernia

The federal government has programs to assist business in depressed regions

Other Government Policies Transfer payments An issue among provinces as to who gets

what

Protecting Canadian Consumers

Industry Canada regulates food ingredients, clothing labels, measurement accuracy of scales and fuel pumps

Business must be aware that this department is responsible for product and consumer safety

There are legal responsibilities placed upon business by the federal government by various regulations and acts of Parliament

Other Government Departments Protect Consumers

CDIC insures all deposits in financial institutions up to $60,000

Provincial Governments regulate the stock exchanges in Canada, setting the rules for all public companies

Municipal Governments inspect buildings, set zoning regulations, license businesses, tax water, charge fees, regulate parking, etc.

Employment and Immigration

Two government departments have a large impact on business:

The Department of Citizenship and Immigration

The Department of Human Resources Development

National Research Council

Established in 1916 Employs over 3,000 scientists and

technicians Responsible for Science and

Technology Promotes Research and

Development Helps Canadian industry to

innovate and remain competitive

Canadian Farming High Risk - dependant upon

unreliable weather (floods, droughts, etc.)

Marketing Boards - developed by the government to stabilize prices and farm incomes

The Boards - control supply, imports, pricing, inventory and sales of some farm products

The trend is towards freer competition in this sector

Canada’s Innovation Strategy