Class Notes (811,457)
Canada (494,752)
AFM 131 (188)
David H A (87)
Lecture 2

AFM 131 Lecture 2: Role of Government in Business Notes

8 Pages
Unlock Document

University of Waterloo
Accounting & Financial Management
AFM 131
David H A

Senthuran Senthilnathan AFM 131 Role of Government in Business National Policy: • High tariffs on imports in order to protect Canadian manufacturing • Encourage east to west trade • Railway to connect the country • Mixed economy (both businesses and government influence the economy) Crown Corporations: • Companies owned by the federal or provincial government • Provide services not offered by businesses • Bail out a major industry • Provide special services not otherwise available, as in the case of Bank of Canada • Typically, crown corporation owns province’s electric power company • Ex. Canada Post, OLG, LCBO Financial Role of Two Special Provincial Crown Corporations: • Alberta Heritage Savings Trust Fund o established as a result of Alberta economy prospering due to oil boom o government set aside part of its oil royalty revenue to start the fund o fund’s assets worth $17.2 billion o must operate on a sound financial basis but, it makes investment decisions that will benefit Alberta • The Caisse de dépôt et placement du Québec (Quebec Deposit and Investment Fund) o giant fund that was established to handle the monies collected by the Quebec Pension Plan o $214 billion in total net assets under management, one of the largest pools of funds in North America o set up parallel to the Canada Pension Plan o must operate on a sound financial basis Privatization • Selling publicly-owned corporations • Ex. Air Canada, Hydro One • Deregulation – Withdrawal of laws and regulations that hinder competition. • Government agencies and like for-profit organizations, are looking at ways to lower costs and improve efficiencies. Senthuran Senthilnathan AFM 131 Law and Regulations: • Each level of government has their own unique set of responsibilities. Some could be shared. • Created by politicians who have been elected • Political parties in power can greatly affect the business environment • Power to make laws is based on the British North America Act, 1867. The BNA Act was passed by the British Parliament in 1867. It is the law that created the Canadian Confederation and it sets the legal ground rules for Canada. In 1982, the BNA Act become part of the new Constitution and was renamed the Constitution Act, 1867. The Competition Bureau: Chocolate Conspiracy: • Canada’s largest candy bar makers were involved in a class-action lawsuit based upon the claim consumers paid inflated prices for products. • Companies paid $23.2 million to settle the lawsuit • This is an example of how the Competition Bureau protects consumers from artificially high prices for goods and services. • Critics claim that the Competition Bureau is anti-consumer because it is just as likely to force companies to raise their price as lower it. Marketing Boards: • Organizations that control the supply or pricing of certain agricultural products in Canada • Canadian governments sometimes grant substantial loans with favourable conditions to enable these countries to pay for their imports of our wheat and other agricultural products • Canadian Dairy Commission controls the output and pricing of milk and other dairy products • The Canadian system of marketing boards has been under attack by various organizations because it does not permit normal competitive conditions to operate in this field. • It is argued that this distorts the whole industry and raises prices for Canadian consumers. • The EU-Canada Comprehensive Economic and Trade Agreement (CETA) will allow 92% of EU agriculture to be imported duty free. Federal Responsibilities: • Impact citizens across Canada. Responsibilities that may affect business operations include: o Trade Regulations (Interprovincial and international) o Banking and monetary system o Incorporations of federal companies o National defence o Hospital insurance and medicare – grants were given to provinces and territories on condition that their plans reach certain standards of service. Canada Health Transfer (CHT) is the largest major fund transfer to provinces and territories. o Public debt and property Senthuran Senthilnathan AFM 131 o Immigration o Unemployment o Criminal law o Fisheries • Competition Act – aims to ensure that merger of large corporations will not restrict competition and that fair competition exists among businesses • Competition Bureau – o Independent law enforcement agency that ensures a competitive and innovative marketplace o Price fixing (conspiring with other businesses to raise the public) • Consumer Protection Laws (i.e. Food and Drugs Act) o Maple Leaf Foods • Government has role of setting both standards and enforcement. Enforcement (government have the power the shut down companies that do no meet standards) Provincial Responsibilities: • Regulation of provincial trade and commerce • Natural resources within their boundaries • Incorporation of provincial companies • Direct taxation for provincial purposes • Licensing for revenue purposes • Administration of justice • Health and social services • Municipal affairs • Property law • Labour law • Education – retention for provision of elementary and secondary school education and the accommodation of religious and linguistic preferences has resulted in various school systems. • More merging of public and private philosophies in public-private partnerships. • Governments are clear supporters of privatizing public services Free-Trade Between Provinces and Territories • Interprovincial trade barriers are damaging to Canada’s economy and Canadian’s standards of living. • Agreement of Internal Trade (AIT) is the intergovernmental trade agreement signed by Canadian First Ministers. Reduce and eliminate barriers to the free movement of persons, goods, services and other investments within Canada. • AIT does not avoid all barriers but it is a step in the right direction. Senthuran Senthilnathan AFM 131 Municipal Responsibilities: • Roughly 4,000 municipal governments across Canada • Utilities and infrastructure (Ex. Roads, sidewalks, garbage collection) • Role in consumer protection – regulating food establishments, zoning laws, parking regulations, etc. Keynes’ Model: • Need for government oversight • Future is uncertain • Need for a quick spark • We can’t just wait for the market Hayek’s Model • Let the economy do the job • Don’t bail out the losers • Don’t need a series of bubbles (result of government intervention) • With alternative, no end to the cost Which one will we choose? • We have
More Less

Related notes for AFM 131

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.