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
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