class 2: defining canada. business in the canadian context adms 1010 – section instructor alex...

Class 2: Defining Canada

Business in the Canadian Context

ADMS 1010 – Section

Instructor

Alex Browning

Email: [email protected]

Web Site: http://alexatyork.com/bus_class.html

Class 2: Implications of Federalism on Business

Agenda• Class Admin

• Summary from Class 1

• Video –

• Introduction to the System of Federalism

• Canada vs United States

• Break

• Evolving Nature of Canada’s Confederation

• Arrangement of Federal-Provincial Relations

• Government and Regional Diversities and Disparities

• Banking Industry

• Q & A

Class 2: Implications of Federalism on Business

Outcomes

By the end of the class you will:

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

• Understand the competing forces within confederation and how they shape business and government interactions in Canada

• Have a high level understanding of how the Canadian Banking system came into being

Summary of Class 1: Ideologies

How do we perceive our Economy?

News Items Housing Starts Trade Figures Employment Rate GDP Balance of Trade

9 May 2011Alison Kemper ADMS 1010

7

Porter’s Diamond

Adapted by the Martin Prosperity Institute from Michael Porter, The Competitive Advantage of Nations, Free

Press. 1990

Porter’s 5 Force

Existing Domestic Rivalry Threat of New Entrants Threat of Substitute Productsm& Services Power of Buyers Power of Suppliers

STAGES OF NATIONAL STAGES OF NATIONAL COMPETITIVE DEVELOPMENTCOMPETITIVE DEVELOPMENT

1.1. Factor-Driven StageFactor-Driven Stage

2.2. Investment-Driven StageInvestment-Driven Stage

3.3. Innovation-Driven StageInnovation-Driven Stage

4.4. Wealth Driven StageWealth Driven Stage

Copyright © Captus Press Inc., 2009 Copyright © Captus Press Inc., 2009

Diamond of Sustainable GrowthStern School of Business

Section 3: Major Political, Social and Economic Ideologies

What is an Ideology?

It refers to a set of shared values, beliefs and ideas, and perceptions through which persons interpret events of the past, present and future.

It also refers to an explicit doctrinal structure providing a particular diagnosis of the ills of society.

It will include an accompanying action program for implementing the prescribed solution.

Reasons for Change in Society

Interactions among competing groups with dominant or counter ideology result in changes in society.

– Poor versus Rich (French Revolution) – Rich versus Rich (American Revolution)– Poor versus Poor (Peru 1980’s)

Social Upheaval changes status quo– Great Depression – War

Technological Changes impact social order– Industrial Revolution– Information Revolution

Reasons for Change in Society

Feudal Era

Mercantile Era

Industrial Era

Technological Era

Information Era ?

Changing Social and Business Demographics

Types of Social Ideologies

1. Collectivist Ideologies

2. Individualist Ideologies

Collectivist

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

Socialist Democratic Socialist Conservative

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

Liberalism Modern/Reform Liberal Neo-Liberalism

Ayn Rand (1905-1982)

Economic Ideologies

Capitalism CommunismMixed Economy

Section 4: The Ideological Framework of Canada

The dominant Ideologies of Canada Today

Political Conservatism Reform Liberalism Social Democracy

Economic Capitalism within the

context of a mixed economy.

Commanding Heights

PBS ProductionBased upon the

book by:Daniel YerginJoseph

Stanislaw

Class 2: Defining Canada

Early Governments in Canada

Government of New France– 1608-1759

Feudal System– Augmented by Fur Trade

Aristocracy with Samuel de Champlain being the first colonial ruler 1608-1635

Oligarchy – Corporate governance Triumvirate Council of Governor,

Bishop and Intendant

Early Governments

British Government 1759-1867– Defeat of French - Battle of the

Plains of Abraham 1759– French permanently give up

Canada 1763 – Treaty of Paris which ended the Seven Years War in Europe

– Significant attempts were made to Anglicise the population.

Support English migration from US Limit Catholic Church

Early Governments

On the verge of US revolutionary war British attempt to win French support the British governor passed the Quebec Act 1774 giving the Church more power, allowing Catholics to hold office and for French to maintain their own civil law.

Guy Carleton British Governor of Quebec 1768-1778

Revolutionary War, 1775-1783

9 May 201129 Alison Kemper ADMS 1010

After U.S. Revolutionary War 50,000 Empire Loyalists who did not want independence from Britian fled persecution and came north to Quebec, New Brunswick which resulted in Britian creating the Province of Nova Scotia to handle the increase.

United Empire Loyalists

30

Those that came to Quebec did not like living under the French influence so the British government created the Constitution Act of 1791 and split Quebec along the Ottawa Valley and created Upper and Lower Canada.

Upper & Lower Canada

While the British ruled through a Lieutenant Governor, who spent most of their time in Europe, and an elected assemble, the effect rule was left to an executive group who were appointed for life. Family Compact – Upper CanadaChateau Clique - Lower Canada

They were members of the high clergy, wealthy businessmen and traders, the high-ranking military officers, and large landowners

Unrest Rest

Power resting with this select few cause unrest amongst the population

Lead to Rebellions in both Upperm1837 and Lower Canada in 1837 & 1838

Upper Canada – William Lyon Mackenzie

Lower Canada - Louis-Joseph Papineau, Wolfred Nelson, Robert Nelson

Durham Report 1838

After the two Rebellions Britian sends Lord Durham to investigate and to make recommendations

Create a responsible government Unite Upper and Lower Canada 1841 Act of

Union

Lead Up to Confederation

Civil War and Raiders from US caused concern

Political instability in the new province of Canada

John A. Macdonald and other delegates created the 72 resolutions that lead to the British America Act in 1867 establishing a confederation of provinces but with a strong central government to avoid US problems

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

Canadian Government Structure

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?

Emphasizes the legal and institutional aspects of the system.

It has been defined as the method of dividing powers so that the general or central regional governments are each within there sphere coordinate and independent.

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

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

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

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

1871

1873

1867

1867

1867

1867

1870

1905

1905

1949

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

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

Differences between US and Canada

In Canada All powers not specifically

reserved for the provinces are allotted to the Federal government.

House of Commons democratically representative

Senate Appointed Co-operative Federalism –

Marble Cake

In the United States All powers not specifically

reserved for the Federal government are allotted to the States.

House of Representatives (Congress) democratically representative

Senate Elected and Equal Dual Federalism – Layer

Cake

Bank of Canada

Created in 1934 as a private bank and in 1938 became a Federal Crown Corporation

The responsibilities of the Bank are: monetary policy; sole issuer of Canadian banknotes and currency, the promotion of a safe, sound financial system within Canada; and funds management and central banking services "for the federal government, the Bank and other clients.

Money, Business and Federalism

Canada’s Financial Institutions

The Canadian financial services sector is made up of banks, trust and loan companies, credit unions and caisses populaires, life and health insurance companies, property and casualty (P&C) insurance companies, securities dealers and exchanges, mutual fund companies and distributors, finance and leasing companies, as well as independent financial advisors, pension fund managers and independent insurance agents and brokers.

Banks represent the largest portion of the Canadian financial services sectorthe 6 largest Canadian banks still account for more than 90 per cent of total bank assets and for about 76 per cent of the total assets of the deposit-taking sector.


Sector Number of active firms Employment1

Banks 69 237,000

Credit unions/caisses populaires

1,298 53,000

Trust companies 29 n/a

Life and health insurance companies2 108 118,000

P&C insurance companies 230 100,000

Mutual fund companies3 270 70,0004

Securities dealers3 207 37,000Finance and leasing companies

250 n/a


Canada's banks and life and health insurers are significant participants in international markets. The six largest banks generated 33 per cent of their net income from foreign sources in 2003, while 58 per cent of the life and health insurance sector's premium income was derived from foreign sources


Under the constitution the federal and provincial governments share jurisdiction over the financial services sector.The Government of Canada has sole jurisdiction for banks while credit unions/caisses populaires, securities dealers and mutual funds are largely regulated by provincial governments.

Both levels of government regulate insurance and trust and loan companies. Market conduct is regulated at the provincial level and companies that are federally incorporated are regulated by the Federal government.

Ontario no longer provides for the incorporation of new trust and loan companies in its jurisdiction.


The Government of Canada provides prudential oversight of banks through the Office of the Superintendent of Financial Institutions (OSFI).

Federally incorporated Trust and Insurance Companies are regulated the Trust and Loan Companies Act On October 1, 2009, for Credit Unions and Caisse-Populaires regulations responsibilities were transferred from Financial Services Commission of Ontario (FSCO) to Deposit Insurance Corporation of Ontario (DICO)

The legislation governing Canada's federally regulated financial institutions is subject to review every five years.

Consumer Protection

the Canada Deposit Insurance Corporation (CDIC), a federal Crown corporation, insures deposits in banks and trust and loan companies against loss in the event of member failure up to $100,000[3] per depositor in each member institution

The Deposit Insurance Corporation of Ontario (DICO) is an Ontario Provincial Agency established under the Credit Unions and Caisses Populaires Act, 1994. All eligible deposits are insured up to $100,000 per depositor in each organization and fully insures all eligible deposits in registered accounts (i.e. RRSP’s).

Part 2 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.

Fiscal and Institutional Arrangements

From 1867-1929 Provinces gained more an more power from the Federal government

Many provinces gained control over crown lands Gain control over mineral rights Growth of importance of Provincial roles in

Education, Health and Welfare

Factors Contributing to Increased Federal Activism

The Great Depression and the need for Federal Government help? Federalism was influenced by the economic theories of John Maynard Keynes. 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 anStart of WWII and the 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

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

Executive Federalism

Quebec often opted out of Federal Programs though wanted the money to do their own. (Double Image 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

OVERVIEW OF THE SECTORAL OVERVIEW OF THE SECTORAL STRUCTURE OF CANADA’S ECONOMYSTRUCTURE OF CANADA’S ECONOMY

Evolution of Canada’s economyEvolution of Canada’s economy– From agrarian to manufacturing and then to service-From agrarian to manufacturing and then to service-

based based

Development of Canada’s corporate sectorDevelopment of Canada’s corporate sector– High degree of concentration of wealth and corporate High degree of concentration of wealth and corporate

powerpower– High degree of foreign ownership High degree of foreign ownership



Sectoral Structure of Canada’s Economy from 1901-1961

SHIFTS IN EMPLOYMENTSHIFTS IN EMPLOYMENT

Employment is Employment is shifting away from the from the agricultural sector.agricultural sector.– Shift is attributed to an increase in the Shift is attributed to an increase in the

productivity of agricultural labourproductivity of agricultural labourDue to increasing sophistication and Due to increasing sophistication and

mechanization of agricultural productionmechanization of agricultural production

Great increases in the goods production in the goods production and service industriesand service industries



Sectoral Structure of Canada’s Economy from 1960-2005

EFFECT OF SHIFTEFFECT OF SHIFTTO SERVICE SECTORTO SERVICE SECTOR

Canadians will require different and greater level of job skills to be successful

Government must adapt new industrial, tax and regional policies to reflect shifts

Strategy is difficult because not all provinces equal

Need to manage these differences


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

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.

Flaws of Regional Development

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’s Green Energy Deal Samsung

Need for a Stable Banking System

Case: The Bank Act of 1871

Commanding Heights

PBS ProductionBased upon the

book by:Daniel YerginJoseph

Stanislaw

Next Week

Canada expands—Agriculture and Manufacturing Readings

– Civics Canada Online Textbook Agriculture in Canada Manufacturing in Canada Statscan Information on Manufacturing

Case: Relentless Change, Massey Harris Company, pp. 60-76

First Group Assignment -- On Massey Case

class 2: defining canada. business in the canadian context adms 1010 – section instructor alex...

Documents

beingsummary of class

implications of federalism

ills of society

interests of society

canadian banking system

rich french revolution

economic ideologies

rich american revolutionpoor