Class 2: Implications of Federalism on Business. Business in the Canadian Context ADMS 1010 Instructor Alex Browning Email: [email protected] Web Site:

Class 2: Implications of Federalism on Business

Business in the Canadian Context ADMS 1010

Instructor

Alex Browning

Email: [email protected]

Web Site: http://www.geocities.com/adms1010g/bus_class.html


Agenda• Class Admin & Mid-Term 7:00-7:15

• Summary from Class 1 7:15-7:45

• Video – 7:45-8:30

• Break 8:30-8:45

• Introduction to the System of Federalism 8:45-9:00

• Requirements of Federalism 9:00-9:15

• Arrangement of Federal-Provincial Relations 9:15-9:30

• Government and Regional Diversities and Disparities 9:15-9:30

• Q & A 9:30-10:00


Outcomes

By the end of the night you will:

• Understand the importance of ideologies in today’s world

• Understand the system of Federalism and how it works in Canada

• Understand the competing forces that shape business and government interactions in Canada

Mid-Term Theme

THE GLOBAL ECONOMIC CRISIS

Available from my Web-site

Web Site: http://www.geocities.com/adms1010g/bus_class.html

Class Administration: Mid-Term

Grading Structure

• Mid-Term Assignment 40%

• SUBMISSION OF ASSIGNMENTS is due at the beginning of class Monday, October 26, 2009. Late submissions will suffer a 5 percentage point penalty and must be submitted at the beginning of class Monday, November 2, 2009 as per Section. No assignments will be accepted beyond the Seventh Week of the Term.

Business in the Canadian Context ADMS 1010Course Administration – Mid-Term

10 Double-Spaced Pages• Good Essay Writing Skills expected – Use of thesis statement

• Spelling and Grammar Count – Proof Read Your Work

• If in doubt contact and attend the workshops at the Writing Centre. The Writing Centre is on the first floor of Atkinson -- telephone: 416 736-5289.

• Referencing must be done: APA format preferred

• http://owl.english.purdue.edu/handouts/research/r_apa.html

• http://www.wooster.edu/psychology/apa-crib.html

• http://www.apastyle.org/faqs.html

• Quotation marks must be used for all direct quotes

Key to getting a good grade

• If asked take a position and defend it

• Each must have a thesis statement with supporting evidence linked back to the thesis

• Support points with extensive references for both Question 1 & 2 – Use quotations

• Cite all references in body of essay or with footnotes

• Number and Answer each question separately as an essay not bullet points

• You must have a reference sheet at end of each question- APA format

• Don’t plagiarize – See policy

• Spelling and Grammar is graded – so proofread your assignment

Mid-Term Requirements

• Example, In text Citation• "To compete internationally industry must be cost-competitive

as well as innovative. Competitive pressures ensure that a firm's comparative advantage can be quickly lost as competitors act to lower costs, compete on price, and continue the innovative process." (Barrows, 26)

• Example, Foot Note

• “Porter’s Diamond is based on the hypothesis that the factors that are the most significant determinants can be grouped in to the following categories1

Footnote

1. Barrows, D. Canada’s Global Competitiveness, p. 19


A Bibliography is required.• Arrange authors alphabetically.• Example• Barrows, David. “Canada’s Global

Competitiveness” in Tom Wesson Canada And The New World Economic Order, Third Edition, Captus Press, 2007

• Use the author of article not text in citation


A Bibliography is required.

For websites, the full URL address is required and the date on which you accessed the website, for example,

http://www.cbc.ca/news/yourview/2008/09/should_canada_expand_our_trade.html (September 20, 2009)


• Read the Question

• Extensive Use of Course Material

• As a guideline given that the value of the answer for both questions is 50 marks, your answer should be 5 pages long for each


• In preparing this assignment, you will be expected to present extensive and visible direct referencing from the two course Required Textbooks as stated in the questions as well as outside research.

• Do not use Wikipedia as a reference source. It is not a reliable source.


If you do not use Dr. Wesson's THIRD EDITION of Canada And The New World Economic Order, you risk receiving a failing grade in answering each question.

So, what is meant by visible and extensive use? Using only one or two articles and at that, scantly, will give you a grade of less than 15/30 in total for answering both parts of the question. No references to any of the assigned articles from Dr. Wesson's Third Edition will definitely give you a failing grade of 5 - 10/30 in total for both parts of the questions.

I am looking for quality in the use of the assigned articles in Dr. Wesson's Third Edition.

Referencing for other course material essential for a strong mark


• Applying economic indicators of measuring international competitiveness, how does Canada gain to increase its global competitiveness in a free trade agreement with Europe? (50 marks)

• The assigned articles will provide assistance in answering this question. Ensure that your answer operationalizes what is meant by Canada gaining competitiveness in expanding trade with Europe.

• Fully discuss competitiveness

Mid-Term Requirement: Question 2

• What changes to Canada’s industrial strategy will need to be made in order for Canada to globally compete with European countries to gain global competitiveness? (50 marks)

• The assigned articles will provide assistance in answering this question. Again ensure you fully discuss global competitiveness and how it relates to Canada and Europe. Be sure to discuss the industrial strategies as they relate to Canada.

Summary of Class 1: Ideologies

How do we perceive our Economy?

Job loss Figures usually measured through changes to payroll date or Unemployment Rate The measure of jobs loindividuals currently looking for work. Current reading:The economy lost 7,400 jobs in June and the unemployment rate rose two basis points to 8.6% -- the highest rate since February 1998. The number of jobs in the economy has shrunk by 370,000 since employment peaked in October 2008.


Conference Board's consumer confidence index — The private sector think tank produces a group of its own indicators, including the well-followed consumer confidence number. The index is a survey of 5,000 households with the pollsters asking people how they see their near-term financial future and whether they will be out of work anytime soon.

Current reading: May's reading of 54.9 blasted past analysts' expectations and sent stocks higher as investors started seeing a consumer spending recovery in the cards.


Exports/Imports — Again, perhaps a bit obvious in that strong growth means businesses are selling more widgets to foreigners. But, the level of exports can be a better indicator of future expansion of facilities than employment growth.

Current Report Canada’s merchandise trade account to

slumped to a record deficit of $1.4-billion in May as energy and automotive exports decreased and the Canadian dollar shot higher, Statistics Canada figures showed.

The value of exports fell 6.9% to $28.4-billion in the month, while the volume was down by 4.1%, reflecting both weak demand and a 2.9% decrease in prices.


Case-Shiller Index — The housing price index, named after two of the economists who developed the measurement, is a way to look at housing prices in different regions of the U.S. The Case-Shiller indicator correlates with higher commodity prices and also, in a rising market, shows growing household net worth.

Current reading: The C-S housing marker was down 19 per cent for the first three months of 2009, the biggest drop in the index's history. More troubling, March's prices were down 18.7 per cent, a sign that the decline is not flattening.


Housing Starts: Measure of investor and consumer confidence and a leading economic indicator

Canada's housing sector continued on the comeback trail in August as home starts for the month jumped more than 12 per cent, according to new figures released Wednesday.

Thus, even with August's increase, housing starts were still down more than 25 per cent compared to the same month in 2008.


Baltic Dry Index — is a leading indicator phone survey of the price of shipping a commodity a certain distance. The index provides "an assessment of the price of moving the major raw materials by sea..

Current reading: By Peter Boockvar - September 18th, 2009, The Baltic Dry Index has fallen today to the lowest level since mid May, down for a 6th straight day at 2,356. It still remains 255% off the Dec lows but is now down 45% off the late May ‘09 high and is 80% below the record high in May ‘08.

Summary from Class 1

•Societal Changes drive changes to Economies

•Feudal

•Industrial

•Technological

• Informational

•The Economy affects all aspect of activity within Society

Government

Business

Individuals

Summary from Class 1

• Government has many roles, Guardian, regulator/law maker, benefactor, trade negotiator or protector

• Business and Government are highly inter-related

•Business benefits

•Business Hindered

• As business power grows – governments grow to oversee business

• Dominant Ideologies vs. counter ideologies

• Economy Ideology can define government and business interaction – Fasism, Capitalism Socialism

Major Political, Social and Economic Ideologies

Types of Social Ideologies

1. Collectivist Ideologies

2. Individualist Ideologies

Types of Ideologies

Collectivist ideologies: Rather than leaving the individual to pursue his or her own ends, the state ensures that the individual serves the interests of society when taken as a whole.

Collectivists focus on community and society, and seek to give priority to group goals over individual goals

Collectivist Ideologies

The Left: Holds that economic society is best arranged through the direct involvement of the workers from the bottom up.

The Right: Holds that the owners of the means of production arrange economic society from the top down.

Collectivist Ideologies

Collectivism has found varying degrees of expression in the 20th century in such movements as socialism, communism, conservatism and fascism. The least collectivist of these is social democracy,

Communism

Calls for violent overthrow of capitalist system because capitalist class will not share power

Workers will have direct input into economic management

Everyone will contribute based on ability and receive based upon need

Democratic Socialism

Does not see capitalism as an evil that needs to be overthrown through revolutionary means.

Instead, tends to accept elements of capitalism, however, desires that government play an interventionist role in the management of the economy and markets.

Classical Conservatism

Stemmed from reaction to French Revolution

Man is rational but passionate. Passion needs to be restrained.

Only the state has the power to restrain man’s passion. Other traditional institutions must exist to do this. Church, Family

The state exists not to protect the individual, but, the past, present and future.

It is dangerous for government to interfere in economies

Change should be gradual Belief in Class

Edmund Burke 1729-1797

Neo-Conservatism

More individualistic than conservatism Challenge the very principle of the welfare state Do not believe government has a responsibility to maintain a

standard of living Programs such as education, welfare and health which cost

the most should be reduced Business should be less regulated, markets should be free.

Including privatization of State owned enterprises (SOE). Less taxation and less government spending Minimal but strong centralized government Believe in preserving traditional values and institutions Believe Government should be tough on crime.

Individualist Ideologies

The individualist theory of government holds that the state should take a merely defensive role by protecting the liberty of each individual to act as he or she wishes as long he or she does not infringe on the same liberty of another.

Ayn Rand (1905-1982)

Individualist Ideologies

Utilitarianism Liberalism Libertarianism

Ayn Rand (1905-1982)

Liberalism

Value of a society is measured in terms of the satisfaction of the individual.

Personal freedom leads social progress.

Laissez-faire and individualism

Governments do not give people rights their job is to protect them

Proponents include Thomas Hobbs

Leviathan

Liberalism

Classical liberals emphasize free private enterprise, individual property rights, laissez-faire economic policy, and freedom of contract, and oppose the welfare state. Classical liberals support equality before the law, and hold that economic inequality, arising from competition in the free market, does not justify wealth redistribution by governments.

Adam Smith 1723-90

Economic Liberalism

Laissez-Faire Capitalism. No government intervention in economy Adam Smith, The Wealth of Nations If man is left to pursue his own interests, he will contribute

to the common good. “Government is best which governs least” Markets are self regulating and will control man’s

excesses. (The Invisible Hand).

Neo-Liberalism

It has as its basic concern the development of the free-market. Globalization and Neo Liberalism are often interchanged The rule of the market — freedom for capital, goods and

services, where the market is self-regulating allowing the “trickle down” notion of wealth distribution. It also includes the de-unionizing of labor forces and removals of any impediments to capital mobility, such as regulations. The freedom is from the state, or government.

Reducing public expenditure for social services, such as health and education, by the government

No protection of class or social order or institutions

Neo-Liberalism

Deregulation, to allow market forces to act as a self-regulating mechanism

Privatization of public enterprise (things from water to even the internet)

Changing perceptions of public and community good to individualism and individual responsibility.

The role of government should be confined to creating and defending markets, supporting business, protecting private property and defending the realm

Neo-Liberalism vs Neo-Conservatism

Many neo-liberals have been defined as neo-conservatives and vice versa. The main difference between the two groups has mainly to do with defence and foreign policy.

Neo-conservatives favor huge defence budgets and foreign interventions. Neo-conservatism seeks to maintain the status quo, traditional values

Neo-liberals are opposed to government spending since it leads to large deficits and debt and see no role for governments interfering with business. Governments role is to ensure global free markets support business

Economic Ideologies

Capitalism Communism

The Concepts of Capitalism

Refers to an economic system where the means of production, or capital, is owned primarily by individuals.

Economic decisions are made by market forces.

The Concept of Capitalism

Focus is on an open system of: Pricing Profits and Losses Private Property Ownership Capital Movement

Differing Models of Capitalism

1. Pure Capitalism Defined by lack of government regulation Laissez-faire approach by government

2. Mixed Economy Mostly privately owned, however, some degree of

government intervention Most modern developed economies have this element

Theorists of Capitalism

Adam Smith Alfred Marshall Joseph Schumpeter John Maynard Keynes

John Kenneth Galbraith Frederic Hayek Milton Freidman

Section 4: The Ideological Framework of Canada

Settlers to Canada brought with them the ideologies of Old Europe

Conservatism Aristocracy The Church The status quo

Liberalism The rising commercial

class. Change agents Traders

The dominant Ideologies of Canada

Political Conservatism Liberalism Social Democracy

Economic Capitalism within the

context of a mixed economy.

Historic Differences of Ideology Between Canada and the United States

Canadian Ideological thought is more of collectivist than the US. Canadians feel government is responsible for its citizens’ well being. There has been a strong continuity of democratic socialism in Canada not witnessed in US.

In the United States founded on a stronger belief of non-interference by government and the primacy of individual liberties. (“Give me Liberty or give me death: Patrick Henry). Law will not allow Federal Gov. to get involved in State issues. More recently Neo-Conservatist in regard to military, support of big business and law and order spending.

Commanding Heights

PBS ProductionBased upon the

book by:Daniel

YerginJoseph

Stanislaw

Commanding Heights

Opening Observations– Look at sponsors– Clinton: Globalization makes us interdependent– Globalization results in Global Terrorism– It would appear that governments are the author of all

problems– The Economic Revolution will determine the future of

the planet – Is this True?

There is a Battle of Ideas

Commanding Heights

Episode 1 – Battle of Economic Theory Keynes: Markets go to excess Governments need to step in Hayak: Market would take care of itself – Views built on war

experience – Markets work Governments do not. WW1 – Keynes oppose war reparations : Predicts another

war Failure of Market Economy leads to Communism and

Fascism Socialism doom to failure because it has no pricing system to

send signals Lenin had a change of heart at end re-introduced market

economy

Commanding Heights

US Stock Market Booms RCA $1.50 to $600. Great Depression – Keynes predictions came

true Government failed to stop the downward spiral

Roosevelt believed the Markets had failed Governments can win if they act the are intrusive

if they don’t act they cause instability

Commanding Heights

1936 Keynes publishes the General Theory of Employment, Interest and Money

Keynes saw the economy as a whole, a machine that could be managed

Keynes viewed everyman’s right to work Depression seemed to spell the end of capitalism

and democracy – Socialism and Communism grow Compare cycle of startup go bust someone new

starts up go bust with Airline industry since de-regulation

Keynes spend in bad times save in good

Class 2: Part 1: Introduction to Federalism

Introduction to Federalism

Globe & Mail – Jan. 10/07

Part 1: Introduction to Federalism

State Structures•Unitary State

•Federalism

What is a Unitary State?

A unitary state is a state or country that is governed constitutionally as one single unit, with one constitutionally created legislature. Governmental power may well be transferred to lower levels, to regionally or locally elected assemblies, governors and mayors ("devolved government"), but in a unitary state the central government has the principal right to recall such delegated power.

Source: http://en.wikipedia.org/wiki

Unitary States

Examples of a Unitary State

• Great Britain

• France

• China

• Japan

What is Federalism?

Federalism is a system of government in which power is constitutionally divided between a central authority and constituent political units (like states or provinces). The two levels of government are interdependent, and share sovereignty. In federal systems, assemblies in those states composing the federation have a constitutional existence and a set of constitutional functions which cannot be unilaterally changed by the central government

Source: http://en.wikipedia.org/wiki/Federalism

Federalism

Sharing of Power

• Economic

• Constitutional

• Political

Principles of Federalism

● Governmental power is distributed between a central or national authority and regional state or provincial authorities

● Every individual is subject to the laws of each, both the central government and the regional government

● Neither levels can subordinate or over rule the other where powers specified

● Where powers not explicitly granted they are assumed to be part of either the central or the regional authority

Federalism

Examples of Federations

Canada

USA

Australia

India

What Determines a Federal State?

There is a legal guarantee of authority to each of the regional authorities

This justifies the coordination and cooperation with the central authority

Two levels of Government in Canada’s Federal State

Provincial (Ontario) Federal (Canada)

Example of Unitary State in Canada

• Relationship between Provinces and Municipalities

Equality in Federalism

In no federation does perfect equality exist between all in the federation.

Federal Government holds the power in all unspecified areas

PEI does not have the same role or power as Ontario. Why?

Federal Government can over-rule regions in states of emergency – War Measures Act – Anti-Inflation Board

War Measures Act of 1914

Art. 6 (5). The protection and guarantees extended to Canadians by the Canadian Bill of Rights, and other Charters of Rights in operation provincially in Canada, are waived aside while the Proclamation is in effect.

The issuing of the War Measures Act has the effect of not only waiving aside the usual guarantees for civil liberties in Canada but also, automatically, to alter the distribution of powers between the two levels of government since several of the provisions of the Act infringe upon the "property and civil rights" power of the provinces.

Invoked in 1939 and 1970

Source: http://www2.marianopolis.edu/quebechistory/readings/warmeas.htm

Problems of Federalism

Conflicts in fiscal policy. Federalism can protect the status quo or move to

change them. Federalism can act as a barrier to change Conflicts in ideology

Dual Challenge of Federalism

A federal state must attempt to build a national strategy.

– Example: Canadian government must be seen to develop a national immigration policy.

A federal state must think globally

A federal state must attempt to appease regional interests.

– Example: Canada must try to appease Quebec to keep it in Canada. Result: Quebec has unique immigration policy.

Federal State must support local issues – Example: Softwood Lumber

Why is Federalism hard to define in Canada?

• Canada has both a French and English culture.• We are not by definition nationalist but

Multicultural • The provinces and the Federal government are

often in dispute over their authority in specific areas.

• Examples ?

Why is Federalism hard to define in Canada?

• Different sub-cultures in English Canada often ignored

• Constitution Act of 1982 not fully tested • Quebec never signed the Constitution

What are the challenges to Canadian Federalism?

• Duality of federalism. The country versus the regions.

• Vast geographic distances.• Changing economic and social circumstances• Nature of Regions. Many areas of Canada were

independent prior to Confederation and have their own distinct identities.

Evolving Confederation

• British Columbia• Alberta• Saskatchewan• Manitoba• Ontario• Quebec• New Brunswick• Nova Scotia• PEI• Newfoundland

Evolving Confederation

• British Columbia• Alberta• Saskatchewan• Manitoba• Ontario• Quebec• New Brunswick• Nova Scotia• PEI• Newfoundland

1871

1873

1867

1867

1867

1867

1870

1905

1905

1949

How does the Constitution Define the Federal Government?

• The preamble to the British North America Act remarks:

• Federally united in one Dominion under the crown of the United Kingdom of Great Britain and Ireland, with a constitution similar in principle to that of the United Kingdom. (i.e. a parliamentary democracy).

Part 2: The requirements of Federalism?

A political union of two or more units that are allocated powers within their respective jurisdictions.

The Constitution is the contract that specified the role of each member of the union

Ultimately makes the Supreme Court the arbitrator of any disagreement on powers

Constitution Act 1982

The written expression of Canadian Federalism

Language is Broad and too often vague

Passage of time results in changes not anticipated by writers of constitution

Sets out roles

Federal Legislative Powers

“It shall be lawful for the Queen, by the advice and consent of the Senate and House of Commons to make Laws for the Peace, Order and good Government of Canada.”

Canada Health Act, International Trade, Defense, Transport Canada, Fisheries.

Constitution Act 1982 Sec. 91

Provincial Legislative Powers

Section 92 and 93 on Canada’s Constitution distributes exclusive legislative powers to the provinces over regional interests.

Example: Cities and Towns, Education, the provision of Health Care, Welfare and Transportation, Direct Taxation, protection of property, exploration and development and government and management of non-renewable resources

Judicial Powers

A method of authoritative interpretation of the constitutional division of the legislative power

The testing of the constitutional validity of laws both at the Federal and Provincial Levels

A Federal System is a Balance

Federal Government provides peace and security for the entire nation

Provincial Governments retain sufficient powers to regulate local matters

Federal Provincial

The Supreme CourtWhen the System is out of balance

Since 1949 the Supreme Court of Canada is willing to use the “peace, order and good government” clauses as a residuary power to include interpretation of “national importance or national dimension or national concern”

Differences between US and Canada

In Canada All powers not

specifically reserved for the provinces are allotted to the Federal government.

Co-operative Federalism – Marble Cake

In the United States All powers not

specifically reserved for the Federal government are allotted to the States.

Dual Federalism – Layer Cake

Why ?

What threatens Canadian Federalism? Distinct society federalism

– This emerged out of frustration with the central government, (Quebec) and shook the foundation of Canada.

Provinces moved to assert their autonomy. Immigration, Language and Healthcare.

Summary of Requirements of Federalism

Establishes a Federated State Creates a central government without destroying

regional authorities Easier to govern a geographically dispersed country Easier to expand territories to create new provinces

Money and Federalism

3. The fiscal and institutional arrangements of federal-provincial relations

Canada's confederation on July 1, 1867 brought four eastern provinces together to form a new country. As part of the deal, Nova Scotia and New Brunswick were promised a railway to link them with the two Central Canadian provinces – Quebec and Ontario. Manitoba joined confederation in 1870. British Columbia, on the west coast, was enticed to join the new confederation in 1871, but only with the promise that a transcontinental railway be built within 10 years to physically link east and west. Canadian Pacific Railway was formed in 1881.

The Great Canadian Dream

Show Me the Money!

Fiscal and administrative arrangements are a key component of federal provincial relations.

How much and who gets what is the defining question of the Dominion of Canada.

Politics plays a key role, but there are other elements.

Federal Involvement in Regional Support

Canada’s founding fathers believed that the Civil War in the United States was caused by overly independent States.

The government of Canada has emergency federal powers. During the two world wars the Federal government assumed almost dictatorial powers.

Provinces only granted limited taxation authority –Direct taxation only

Provincial autonomy reduced by distorting regional priorities

Factors Contributing to Increased Federal Activism

What effect did The Great Depression have on Canadian federalism?

Federalism was influenced by the economic theories of John Maynard Keynes. Just as it had under FDR and the New Deal in the US

Federal authority was seen under Keynes’ economic model to be the provider of economic stability through the use of the Central Bank to regulate money supply and through economic stimulation.

Increased Federal Activism

All levels of government worked on developing a large number of makeshift intergovernmental arrangements to meet the urgent needs of families

Produced chaos within tax systems at all levels as everyone looked for new sources of revenue

Tax on tax Rowell Sirois Commission (1937) created to solve

this crisis War Gave Federal Government total control – War

Measures Act

Keynesian Philosophy Increased Federal Activism - Post WWII

Department of Finance Officials believed that the federal government must ensure economic stability through management of the money supply by the Bank of Canada through tax cuts and additional government spending in a period of economic downturn

Keynesian Philosophy Contributed to Centralized Federalism – Post WW II

To forestall a post-war recession, the Federal Government embarked on a program of post-war reconstruction and social spending.

Paternalistic Liberal Government

Keynesian Philosophy Contributed to Centralized Federalism – Post WW II

Through the 1950’s and 1960’s the federal government assumed a national leadership role in economic management and led the development of the welfare state

There was growth of interdependence with the rise of national organizations whose primary pressure targets were Cabinet and the bureaucracy in Ottawa

Cooperative Federalism

• Federal and Provincial Governments agree to work together in areas that are clearly the domain of one or the other

• Four Main Features

• Reliance on Federal-Provincial conferences

• Federal Government agreed to consult with provinces before committing to programs

• Policies designed as fiscal programs to create economic stability and growth – Cost sharing

• Formal structures to support intergovernmental relations

• Lead to a more integrated Federalism

Cooperative Federalism

The Federal Government provided financial assistance, either in a lump sum or fixed ratio of the cost of a program, on the condition that the provincial governments provide certain services

Federal Government used these grants to involve itself in virtually all areas of provincial jurisdiction

Used transfer payments to entice the provinces into adopting new national programs.

Benefit of Conditional/Shared Cost Grants

Served to inhibit conflict Shared knowledge and provided basis for resolving

disputes Administrative consultation among officials tended to

involve low levels of conflict It was a movement toward greater partnership

Problems with Conditional/Shared Cost Grants

Conditional grants can distort provincial budgetary priorities.

The federal government can increase their influence in areas of Provincial jurisdiction.

The Provinces could refuse grants, however, the realities of politics makes this unlikely.

Interest groups will pressure provinces into accepting grants.

– Example: Medicare 2002. All provinces signed on to the Federal funding offer even though many were opposed due to budgetary constraints

Problem with Conditional/Shared Cost Programs

Provinces still felt the Federal Government was interfering with Provincial powers

Provinces resented the Federal Government taking a paternalistic attitude, that they knew what was best for each province

Programs did not affect provinces equally

Double Image Federalism

Quebec Reaction Opposed all federal initiatives that appeared to

compromise provincial independence Sought to remain aloof Seldom had alternative, constructive proposals to

counter the federal plan Premier Duplessis refused to join several joint programs

A movement by Quebec to modernize, to assert its autonomy and to preserve its cultural and linguistic identity

Diverging Meaning of Cooperative Federalism

For the Provincial Governments it has meant joint decision-making on matters of mutual concern

For Federal Government it has meant a commitment to listen to provincial views after a national policy had been developed.

Executive Federalism

Provinces began to take more activist roles in economic and social policy and demand great control over revenue and spending

Lead to a more Executive Federalism

First Minister Conferences

Conferences

Federal Provincial Conferences - The federal government set the agenda and therefore hold the advantage. Topics include the constitution, transfers, health, education, CPP, etc.

First Minister’s Meetings – Held between the Premiers and the Prime Minister. Recently the Premiers have dominated the agenda.

Held behind closed doors. Joint Statement. Secrecy is important. (Why?)

Part 4: Regional Diversities and Disparities

What is Canada?

Canada is a federation of very diverse regions.– Economic– Cultural– Historic– East, West, Quebec, Ontario.– Size

Not all provinces equal

Federal Representation

Province # of Seats % of Total % of Pop

Newfoundland & Lab. 7 2.3% 1.6%PEI 4 1.3% .4%Nova Scotia 11 3.6% 2.9%New Brunswick 10 3.3% 2.3%Quebec 75 24.4% 23.5%Ontario 106 34.4% 38.9%Manitoba 14 4.5% 3.6%Saskatchewan 14 4.5% 3.1%Alberta 28 9.1% 10.1%British Columbia 36 11.7% 13.2%Territories 3 0.9% .3% Total 308Population Forecast July 2006 post census estimates

Province of Quebec

Is a distinct region Has a distinct history Has a separate and unique

educational system Has a distinct code of Civil Law It has a political pattern of

separatist behavior. The effect is to make regional

cleavages a distinctive element of Canadian federalism

Regional Differences

Influenced by immigration patterns.

Economics Cultural differences Resource differences Historic differences

Regional Differences

Size of internal market and access for products. Ontario vs. PEI

Natural Resources – Inherently volatile Occupational mobility, fishing and mining Spatial immobility “I like it here!” Claim to capital, i.e. Bank Loans

Feds try to Manage Regional Differences three ways.

1. Industrial Incentive Programs

2. Infrastructure Assistance Programs

3. Social adjustment and rural development programs.

Industrial Incentive Programs

Make viable industries attractive in slow growth regions.

Tax credits, seed money, consulting services. Oil and Gas in Newfoundland.

Infrastructure Assistance Programs

Assist in providing capital for sewers, water, road improvement, hospitals and universities.

Example: Toronto to Montreal high-speed rail proposal.

Social adjustment and rural development programs.

Try to develop industries in areas where there is little or no productive employment.

Example: The soap stone carving industry in Nunavut. Ontario Wine Industry

Types of Economic Incentives

Loan guarantees Tax incentives Cash grants Marketing and promotion Bailouts Subsidies

Why do these Programs exist?

Keynesian Economics Primary goal is job creation. Sustains families Dignity Politics Economy

Case: Cultivating Cash

Government subsidy programs is an aspect of federalism.

Canadian farmers are are essential aspect of the Canadian economy.

Canadian farmers are being forced from the land at an alarming rate.

Three types of Canadian Farmers– Lifestyle farmer – Historical Farm– Agricorp – Farming Corporations > $5M– Small Business Farmer $100K - $5M– Part-time Farmer – Hobby


Issues– Financing – Business Risk – Land Management– Prices– Government programs poorly targeted

Globalization – WTO talks to reduce subsidies


Interest Groups– Ontario Federation of Agriculture– Western Canadian Wheat Growers Ass. – National Farmers Union – Canadian Fed. For Independent Business –

Agricultural Sector


Subsidy Programs– Farm Credit Canada – Small to Med. Farms– Net Income Stabilization Account – Profitable

Farms– Agricorp – Crown Corporation– Revenue Caps on grain transportation


Canadian Wheat Board– Marketing Monopoly for wheat

and barley– Governance by government

and producers– Controls 20% of international

market– Provides price stability to

farmers– Provides transportation from

Farmers to railways

Flaws of Regional Development

Industrial incentive programs favor capital-intensive programs in areas where one of the major problems is excess labor. (Mega-projects).

Do the companies really need the grants, or would they have done it anyway?

Grants to one company could hurt other existing companies who have not received grants.


Open to abuse and mismanagement


Industrial incentive programs may accrue to multinational companies in foreign countries.

Could lead to ‘bidding wars’ between neighboring provinces or countries to secure the relocation of large companies.

Example: Ontario auto negotiations 2003.


Drug firms get $150M for jobs, research

January 09, 2008

Ontario must invest taxpayer dollars in the research and development efforts of big drug companies if it hopes to keep good-paying jobs in the province,.. "There's a race for global jobs, and our intention is to make sure that we win that race," Wilkinson said after announcing the fund at a Toronto research centre.

Next Week

Constitutional and Legal Framework of Canada

Case: Tripe “E” Senate

Documents

Class 2: Implications of Federalism on Business. Business in the Canadian Context ADMS 1010 Instructor Alex Browning Email: [email protected] Web Site: