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© 2005 by Nelson, a division of Thomson Canada Limited. 1
Business, Business, GovernmentGovernment, and , and Regulations Regulations + Canadian + Canadian Business Business IdeologiesIdeologies
© 2005 by Nelson, a division of Thomson Canada Limited. 2
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
© 2005 by Nelson, a division of Thomson Canada Limited. 3
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
© 2005 by Nelson, a division of Thomson Canada Limited. 4
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?
© 2005 by Nelson, a division of Thomson Canada Limited. 5
Canadian Business Ideologies
Government
Business
Liberals ConservativesNDP
Collectivism/Monopoly Mentality/Mixed Economy/Corporatism/Managerialism/Neo-conservatism
Left Right
Relative Involvement of Govt in Business
© 2005 by Nelson, a division of Thomson Canada Limited. 6
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
© 2005 by Nelson, a division of Thomson Canada Limited. 7
Influence of Government on Business
Nonregulatory Issues
• Industrial policy• Privatization
Regulatory Issues
• Economic Regulation
• Social Regulation
© 2005 by Nelson, a division of Thomson Canada Limited. 8
Government’s Nonregulatory Influence on Business
Industrial Policy: Schools of Thought
1. Accelerationists2. Adjusters3. Targeters4. Central planners5. Bankers
© 2005 by Nelson, a division of Thomson Canada Limited. 9
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
© 2005 by Nelson, a division of Thomson Canada Limited. 10
Government’s Nonregulatory Influence on Business
Privatization• Producing versus providing a
service• Privatization debate
– Use markets to discipline delivery of goods and services– Federalization of certain functions
•Airport security
© 2005 by Nelson, a division of Thomson Canada Limited. 11
Government’s Nonregulatory Influence on Business
• Major employer• Large purchaser• Major influencer• Major competitor
• Major lender• Taxation• Monetary
policy• Moral suasion
Other Nonregulatory Influences
© 2005 by Nelson, a division of Thomson Canada Limited. 12
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
© 2005 by Nelson, a division of Thomson Canada Limited. 13
Government’s Regulatory Influence on Business
• Economic regulation– Transport Canada– CRTC
• Social regulation– Employment Equity– Occupational Safety and Health – Human Rights Commission
Types of Regulation
© 2005 by Nelson, a division of Thomson Canada Limited. 14
Government’s Regulatory Influence on Business
• Fair treatment of employees• Safer working conditions• Safer products• Cleaner air and water
Benefits of Regulation
© 2005 by Nelson, a division of Thomson Canada Limited. 15
Government’s Regulatory Influence on Business
Costs of Regulation• Direct costs• Indirect costs• Induced costs
– Effects•Reduced innovation •Reduced investment in plant and
equipment •Increased pressure on small business
© 2005 by Nelson, a division of Thomson Canada Limited. 16
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
© 2005 by Nelson, a division of Thomson Canada Limited. 17
Canadian Business Ideologies
Government
Business
Liberals ConservativesNDP
Collectivism/Monopoly Mentality/Mixed Economy/Corporatism/Managerialism/Neo-conservatism
Left Right
Relative Involvement of Govt in Business
© 2005 by Nelson, a division of Thomson Canada Limited. 18
Collectivism
• Control of economic activity by the state
• Socialist ideals• Govt needed to
correct defects of market
• Health care, CPP, NEP, subsidies
• ‘New Left’
© 2005 by Nelson, a division of Thomson Canada Limited. 19
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
© 2005 by Nelson, a division of Thomson Canada Limited. 20
Mixed Economy
• Compromise of collectivism and conservatism
• Business and government cooperate informally
• Best description of how things actually work
© 2005 by Nelson, a division of Thomson Canada Limited. 21
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’
© 2005 by Nelson, a division of Thomson Canada Limited. 22
Managerialism
• Competitive Enterprise System
• The Chamber of Commerce view
• Assume corporations operate in the best interests of society
• Trust it
© 2005 by Nelson, a division of Thomson Canada Limited. 23
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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