Class 1 Notes
Readings Chapter 1, 3, and 4
Relation between business and government is very important, allow it varies over time.
Exercise of Power in Business as impact on democracy – some see it as a threat but it
could also be beneficial.
Ethicacy of that relationship – how do we access the health of that relationship? If it
doesn‟t work well, desire economic roles such as growth and employment will not be
secure.An unhealthy Business government relationship makes it difficult to tackle global
issues. Poorly designed and executed government interventions have a bad impact on
Without such a framework – the law, rules, states functions will not deliver. Thus
government must intervene in the markets and have a relationship with businesses.
The quality of government intervention conditions their long term success. Sometimes
the government has to intervene to save markets from themselves and crisis‟that come
along from time to time. Government play a role in non-crisis times as well in terms of
legitimacy, desirability of intervention; they step in to restructure things even if a crisis is
not at hand.
Business is a key political attribute – they provide resources, touches most areas of public
policy – they help to shape policy agendas.
The cost of not intervening and doing nothing can be considerable. This is a perspective
that drives this view of a work-well relationship between government and businesses.
Doing nothing could result in a number of consequences, including large costs, pollution,
Labour cannot be seen as a commodity without dehumanizing someone; there needs to be
a framework of employment protection.
o The use of government taxations spending to redistribute income. Ex: Brazil
Business community began to be more broad and large and not just a single community
or one interest group among many.
This course will focus on dealing with the transition from a welfare state to a more
neoliberal or laissez-faire state.
Regulatory state –the predominant state form
Keynes - Capitalist economies to run at a higher level of employment. He sought to
provide an explanation for how economies can maintain fuller employment even during
times of economic down times through terms of management, stimulus packages, etc.
o His model was less helpful in helping inflation
Political Science – the state has played an essential for in this
The firm is conceived as intermediaries privilege by the state
The state sets the rules for the game
Firm – profit maximizing
Economics identifies cases of market failure that call for state intervention
Good politics doesn‟t always = good economics and vice versa
Distinct characteristics, agendas, and needs of small firms Long term perspective on these challenges: business history – understand consequences
Focuses on what it means to be a corporation in terms of rights and responsibilities
The nature between business and government can change over a short period of time
Speedily available information inputs, low legislation outputs
It was about redesigning markets and restructuring. It wasn‟t entirely about removing the
state involvement from the economy. The role of the state didn‟t diminish as sometimes
State is still present and laws are still required for the monarch to operate
The regulatory framework is still in place but implemented less strictly
Regulation of financial system is likely to be tighter
Trust in businesses has been damaged and will take a long time to recover
This requires lots of money to bail out banks and other firms but the government sees this
This dynamic may not continue. France has strong involvement approach to the economy
but when brought up other European state don‟t respond to it.
In class assignment:
Government Policy toward Business: Give 5 Examples
a. Is it Keynesian/Neo-Liberal
b. Note the consequences - Good/Bad
c. Intentional/Not intentional
- Policy to pull out ofAfghanistan – Neoliberal
- Policy for green energy – Neoliberal: promotes green energy and hybrids but does not
force it on any one.
- Policy for employment insurance – Keynesian: forces certain industries and professions
to offer insurance to employees
- Policy for minimum wage – Keynesian: compulsory for business to raise minimum wage.
Good because it helps the poor and low income families. Bad because it raises costs for
- Harmonized Sales Tax – HST. Cutbacks on taxes that business incur. Keynesian.
- Free TradeAgreements: Neoliberal. Good because it increases economic activity between
America and Canada but bad because it export employment
- Crown corporations: Keynesian because it‟s the government monopolizing an entire
sector so that it keeps private sectors from competitively using it. Good because the
government has control over the prices and will keep them reasonable, bad because the
government has the power.
1. Stimulated aggregate demand 2. Public Spending
(demand management) 3. Tax Reform
2. Role for government 4. Interest Rates
5. Floating exchange
1. Fiscal policy 6. Trade Liberal 7. Privatization 10. Less interruption/some
8. Deregulation structure
9. Property Rights
Guest Speaker:Allison Bramwell
Readings Chapter 7, 17, 5 (page 81-86) and 6 (page 133-138)
The Spatial Dimension of Globalization: City-Regions and the ‘Great Transformation’
Allison Bramwell – PhD. Munk School of Global Affairs, University of Toronto
She studies Economic restructuring that plays out in city dimensions
What‟s happening in different ways in different cities and dynamics that go on right
underneath your nose that we don‟t even notice
Impact of economic change on urban regions in westernized countries
The paradox of globalization: why cities matter more than ever
Globalization and City-Regions: the new global hierarch
Innovation policy in a post-industrial
Cities and Globalization
Instant global communication
Shift to knowledge-intensive industries and services
Belding and clashing of cultural identities
Massive urbanization: over 50% of the global population lives in cities
Example of global value chain/trade: Blackberries have over 400 pieces and not 1 of those is
made here in Kitchener/Waterloo.
The death of distance – theorists predicted that cities would become less and less relevant and
important. What‟s interesting is that it‟s just the opposite.As processes become more global,
cities become more relevant and important (social and political dynamics that shape these
processes as well but no time to touch on that today).
Why Cities Matter
Central importance of “knowledge and learning in the creation of economic value and
competitive success” (Gertler 2001).
o Process innovation:Anew process innovation; making the same thing but in a
more effective way.
o Product innovation: Inventing new things
o Dramatic shift in the nature of work: shift from manual labour and low skilled
jobs that make things to service jobs that make ideas. Knowledge workers –
So... Human Capital one of the most important driver of economic growth and people
live in cities!
Asatellite picture from space – shows the huge economic activity and human capital (that
drives the economic activity) in cities City-Regions in the Knowledge-Based Economy
Global Cities:At the top of the hierarchy
De-industrialization cities: champions in decline
At the top of the international hierarchy of cities (Paris, London, New York, Tokyo)
Highly diversified economies that have more than one specialization: finance, high tech,
High concentration of highly educated and „talented‟people
o Richard Florida: he argues that it is cities that have these huge concentrations of
talented people and that‟s what drives economic force
High concentration of capital (you need high human capital in order to spend big money
in these cities and afford to live there. Cities are hives for giant economic activity)
o If you have lots of stocks of capital then you have lots of capital to start new
o Capital – you can invest it!
Large lots of land and buildings can fall in to disrepair very fast
Manufacturing powerhouses most harshly affected by globalization (U.S. Rust Belt and
parts of Europe)
Specialized in traditional manufacturing industries, steel, auto, consumer goods
o Mass productions of consumer goods at high enough prices to make a profit but
low enough a price for consumers to afford
Example of consumer goods that everyone started to get in the early
1960‟s: cars, televisions, appliances (fridge, washing machine, toaster)
Massive firms in the 1960‟s: GE (General Electric), Ford, GM, Chrysler,
Steel plants (took up hundreds and hundreds of acres), huge demographic
shift to the suburbs.
Major employment in low-skill but stable, high wage production jobs
Massive loss of firms and jobs over past 35 years
Serious urban decay – point of no return for some
Cities and National Champions: Government-Business Relations and Local Economic
Community well-being closely tied to the local economy – people need jobs!
„smokestack‟chasing to attract „champions‟
„growth machines‟and local identities
o When one city gains intellectuals another looses them
High Tech Cities
Silicon Valley – where Google, Facebook,Apple and many other successful software
firms are located o Science based and creative industries
One of more knowledge-intensive or creative specializations or „cluster‟
o Usually anchored by a major university – Silicon Valley (Stanford), Boston (MIT)
o And an anchor firm
o High concentrations of human and financial capital relative to size
o Examples of a high-tech knowledge-intensive industries : biotech,
pharmaceuticals, software, medical devices, alternative energy
o Example of a high-tech creative-intensive industries : video games
What sets them apart? Why are they different from de-industrialized cities?
o They all have high concentrations of human capital relative to their size
o You need investors for a high-tech city
o Universities: they are anchored by universities
o Anchor firms
o Local institutions
What Makes Cities Grow? Specialization, Human Capital and Institutions (Storper 2011)
Cluster focus on how firms embedded in regional economies
But don‟t know why cities develop particular specializations
Focus instead on building resilience and ability to adapt to technological change
o Why is this significant? The national champions that were located in Detroit
(Steel), Pittsburgh (GE:Appliances), etc., the firms there were adaptable but the
infrastructure and the local economy were not able to adapt.
Interaction effect between specialization, human capital and institutions
“Human capital is what software is made of.”
Waterloo: From Tires to ICT
o De-industrializing economy – loss of manufacturing shifted to...
o Diverse local economy – advanced manufacturing, services, high tech
o Strong software cluster – anchored by indigenous firms (RIM, Open Text)
o Developing capacity in digital media
o UW students in Science, Technology, Engineering, Math
o Pioneering co-op program – local and global recruiting
o Entrepreneurship – MBET, bootcamp, IP policy
o University of Waterloo, Conestoga College, Wilfred Laurier, Balsillie School, etc.
o UW Research and Technology Park – accelerator
o Communitech, Canada‟s Technology Triangle (CTT), Prosperity Council
o Canadian Digital Media Network
Innovation Policy in Post-Industrial Age: What Governments do...
Specialization? Encouraging commercialization
o Public research organization
o Funding research in universities and colleges o R&D tax credits
Human capital? Training smart people
o Post-secondary education – need more STEM grads
o Attracting and integrating foreign trained professionals
o Linking with industry
Institutions? Knowledge sharing
o Industry associations
o Support for entrepreneurs – RIC Centres
Traditional Models of Government-Business Relations
Pluralists and neo-pluralists (Dahl, Lindblom)
o Business one of many interests but has privileged access to government
Elitists and Neo-Marxists (C.W. Mills or Panitch)
o Capitalist class or business elites control government
Do these long established conceptual framework capture key dynamics in the 21st
Century knowledge-based economy?
Successful Places invest in their specializations, human capital, and institutions because this is
what helps their global economy to adapt to change.
Evidence of Three shifts:
1. From lobbying to partnering: Shared challenges
2. From government to governance: neither government or business can do it alone
3. From national or provincial scale to city-regions: collaboration among local actors
Potential of partnerships and governance in city-regions – why some places will move ahead in
the 21 century while others fall behind
Why Cities Matter
o Because human capital is critical to knowledge-intensive economic activities and
people live in cities
The new global hierarchy of cities
o Global cities
o De-industrializing cities
o Ordinary cities
o High tech cities
The changing role of government in the knowledge based economy: supporting
o Lobbying to partnering
o Government to partnership
***Any of this information from the guest speaker could be on the exam but it will only be
on there if it is related to this course
Class notes – deciphering the textbook, Chapters 1-6 NormativeAnalysis of Government and PositiveAnalysis of Government
- What we think governments ought to do
- Government policy seeks to promote the public interest
- It`s difficult to really say what the public interest is
o When we get to specific policies and how to implement these things we see that
the public interest is not always clear cut. Varies from people values, time,
- Four categories of NormativeAnalysis used by business analysts to create a
rationalization for government intervention.
o Economic Efficiency (Page 32). Whether it`s functioning appropriately, whether
there is market failure or growth. De-industrialization
o Macro-economic stabilization – ensuring the cycle is operating
o Fairness – what is fair to allow within society
o Others social objectives– cultural distinctiveness, military
- How do these relate to business-government relations: Links between individual
sovereignty and political enterprise.
- Economic freedom – individuals should be free to enter into voluntary agreement with
- Fairness in government and business relations – the textbook introduce equity, ethics,
morality, sanctity of life, freedom from discrimination
- None of the examples that they point to are really complete – they all have flaws and we
are often faced with moral relativism (there‟s no standard by which we can use to
determine whether something really is fair or not). How do we determine whether
something is absolutely fair or not? Major philosophical approaches:
o Utilitarian Approach (John Stewart Mill and Jeremy Bentham), page 57. We need
to try to establish an environment where total happiness is maximized. When you
have something is it fair to redistribute that to other people to increase the total
happiness of all in society (you have lots, others have little and would enjoy it
more; do you give it to them?).
o Social contract approach (John Rawles) the concept of the original position. The
well being of the worst of citizen needs to be taken into consideration when
considering fairness. Social contract approach: The only way people can enter
into the best kind of social contract with other is to operate from the point of view
that you don‟t have any advantages over others. Focus on redistribution and
o Procedural fairness (Hiet and Milsic). Focus on procedural fairness (not
distributed fairness). Society‟s obligation is simply to provide fair procedures.
People should have voluntary choices and institutions should avoid paternalism.
- The ability to evaluate procedures on a group basis
- Group fairness can conflict with individual equality for opportunity
o Men and women: competition for employment and enrolment in education
- We like to redistribute the well off to benefit those with less
o In Canada we do this in a number of ways – read the text. Ex: we tax the higher
income brackets more - Biases in the text: Milton Freeman – make assumptions of fairness which makes some of
the arguments not as compelling. Lots of room for disagreement in this part of the text.
Positive Analysis of Government
- What we think government actually arrive at certain policies
- The reasons why policies take the forms it does
- *** Factors taken into consideration when analysing policies: example from the text:
voting, special interest groups/business lobbies, public sector managers and politicians
themselves, also globalization, the legal system and ideology (added by the prof).
- Direct democracy
o implications for society
- Indirect democracy
- Idea that representatives have access to technical expertise
- What are the different reasons that society has a discontent with what they want and what
they actually get? Point to institutions
o Expert judgement
o Representatives/politicians themselves – they are subject to interest lobbying
whereas individuals aren‟t
Representative themselves are different then the overall population
(education, background, values, etc.)
The professor wrote the following on the board in regards to the relationship between
government and businesses and making policies:
- Interests (it‟s more than just interest that go into making a policy)
The text assumes that all politicians operate in the self interest category (prof. doesn`t necessarily
agree with this).
Prime Ministerial governance – over the years the PM assumes a more important position
in government and in Canada
Regional interests influence the informed thinking of representatives
The electoral system itself (not in the textbook): can have an influence on policy that is
selected by government. In Canada we have: First Past the Post (the Candidate that gets
the most votes wins) the number of seats is determined by the amount of votes the party
Class 3 Notes
Readings Chapter 8 and 12 but this lecture will touch on chapter 7 and 17
o Interests - Interest is not the only factor that goes in to making these policies.
Institutions - Example of health care system Be aware of the assumptions and that Brander is coming from a specific standpoint. He sees
society as individuals and points to factors that allow people to fit into that academic approach.
He talks about politicians, etc. and respond to policy operatives appropriate. People tend to
rationally calculate themselves.
Brander talks about the significance of the transition from Fordism industrial structure to post
Fordism industrial structure. There are new drivers in the economy that are pushing economic
growth. Increase in services (knowledge intensive services in particular) and we‟re not always
clear on what‟s causing this shift (political agenda, free trade agreements, etc.). People look to
some of the three I‟s to explain the shift.
Post industrial industry emphasises advanced technologies to increase the amounts of
good available with less labour. Less direct production (agriculture, mining, etc.) and
more service occupations.
1920‟s –Agriculture: much of the work force was in agriculture, mining, etc.
1950‟s – when the Fordism paradigm really took off. Relative industrial boom: cars are
being produced, appliances and electrical gadgets
1905‟s – Post Paradigm: a shift out of the Ford era into the digital and service based
economy. Information, communication, technologies, software, etc.
Brander talks about this transition and on page 150 of the text there‟s a table on it.As the
years move from the 1920‟s to the 1980‟s and so on the percentage of agriculture
decreases and shifts to an increase in services.
o There is debate within economics and the importance of industrial structure. Some
say industrial structure doesn‟t really matter, however...
Industrial structure does matter and there are very important reasons why
we would want to have a presence in more than one type of
industrial/economic activity. Why? Services develop as a compliment to
manufacturing, not as a substitute for it. Those who give up an economic
presence in the manufacturing aspect will have a weakness and will be
giving up important future avenues.
What does this transition actually mean for future goods production? Both services and
manufacturing are necessary for a healthy economy.
o Some observations:Astrong manufacturing sector is not a requisite for a strong
economy. The service industry presents a solution to Canada‟s government and
o Low order to high order (services being the higher end of economic success).
o Services have come to play a key role but manufacturing is also important to
o Direct linkages between business and service sector industries
Society needs good education services in order to produce knowledge based workers
It‟s important to preserve some manufacturing
The service sector itself is divided into categories
a. Dynamic services (two types)
i. Distribution industries such as transportation, utilities, etc. ii. Productive industries: finance, insurance, real-estate, business services,
1. Dynamic because they are high value and critical ingredients in the
b. Traditional services
i. Retail trade, hotels, restaurants, museums, recreation parks
c. Non-market services
i. Things that the government itself operates (the military, health and
education in Canada, transportation system
1. New Capitalism must reflect nation‟s concerns
a. What does this article tell us about industrial structure and the way it‟s moved on
over the past 20-30 years?
There‟s a decrease in manufacturing
Germany has a better industrial strucutre: in terms of commercialism and
capitalism. The U.S. imports more than they export whereas Germany
exports more than they import. In Germany manufacturing still dominates
which is why they are doing so well with exports.
Solutions to how the U.S. could be better but that it would be very difficult
because you can‟t go back to the same level of manufacturing they once
had because it‟s so global now.
b. Is this the same thing Brander is saying? How does it differ?
Mostly agrees – services aren`t good but can still be value creators in the
market. Brander didn`t spend a lot of time on finance but did make the
point that services should compliment manufacturing.
Chapter 17 – economic policies; preserving price stability as a primary
concern for governments.
2. U.S. Middle class becomes big business‟s afterthought
a. What does this article tell us about industrial structure and the way it‟s moved on
over the past 20-30 years?
The traditionalAmerican growth model involves high domestic consumer
demand. This article raises the question as to whether they need to worry
about that or not. Is international demand enough for them or will they run
into problems here?
The U.S. businesses are dealing with a middle class. Even though 9
million people are unemployed the stock markets and Dow Jones keep
rising. In the past 20-30 years, there is less focus on consumerism in the
U.S. and more focus on the rising middle class outside the U.S.
b. Is this the same thing Brander is saying? How does it differ?
Brander says the services will be fine. This article points to the company‟s
domestic consumption that they traditionally need, is there anything that
governments can do to bring things back together?
3. AKeynes Insight into free markets
a. Consider the implications of the article.
Didn‟t do what Keynes said: he said the government should spend during
a recession to boost demand and help return the economy to full employment and then refrain from spending when the economy is doing
well. Instead, they thought the economy could be self-regulating and they
wouldn‟t have to spend more during the recession that it would just
recover on its own.
Governments need to take action in recessions and stop spending a lot
when the economy is doing well.
Should be careful not to over stimulate the economy
The stimulus presents only short term benefits with detrimental long term
Period of slow response, waiting for the government to self-regulate
Things changed when Keynes published his book and
There‟s a view that points to Keynesism and the war, giving the
production more what in responding to the problems. The war focused the
attention on policies to justify massive amounts of government spending.
b. Efficiency verses fairness
Where do you draw the line here?
The point of unemployment changes with industrialization
How do these articles differ?
Identify the balances of different kinds of economic activity
primary, secondary, and tertiary industries
How Canada‟s infrastructure has evolved over time, different jobs
Services are a compliment to rather than a substitute for manufacturing
The three newspaper articles
Class 4 Notes
Readings: chapter 15, 16
Good summary of Macro economics business environments and the business cycle
Identify the kinds of relationships outlined in the chapter and understand how they work
Government Monetary and Fiscal policies
o Monetary - Money supply and liquidity
o Fiscal - The governments home spending and income levels
Keynesians and neo-liberal perspectives on these models
Added by the prof – the information in the text is very conventional but it does make
assumption about human nature in classical economic theory (all humans are perfectly
racial being capable of the highest reason decision making). Failures in the labour market
are seen as failures for individuals to make proper or accurate decisions. Thus the text
says, the onetary and Fiscal policies can have great effects if correctly applied.
o Text also talks about equilibrium – there is no real equilibrium, and the
application of this to the real world are not necessarily very applicable Use to be that important resources were in abundant supply, now we have resource limits.
This will have a dampening effect on economic policies and growth.
Chapter 8 - Trade policy theory
50% of Canada‟s policy is related to international trade
Canada is one of the few countries in the world where policies on international trade is
constantly being debated
It‟s important to consider the theory of international trade; the main concepts and
vocabulary, the main institutions associated with trade policy (chapter 9 talks more about
This chapter defines the basic economics of trade
o Traditional theory of comparative advantage
o Industrial organization and international trade
Types of trade policies that governments work with business to develop:
o Tariffs – import restricting, works by raising the costs to consumers within a
o Currency valuations– the value of a country‟s currency, low currency could mean
o Government procurement policies – how governments make purchases from
places, they may only choose to buy from domestic producers
o Administrative barriers – more difficult for people to get licences to import
o Interprovincial trade barriers
o Sanctions – penalties
o Import quotas
Why do governments do these trade barriers or policies to trade?
o They believe it benefits the economy
Protects local jobs and businesses
Improving the trade balance
Keeps capital within the region
1879-1930’s – National Policy
o Also known as JohnA. MacDonald‟s national policy era
o Canada wanted to protect it‟s infant industries and promote economic
development, in industry and manufacturing in particular
o Canada built up massive tariffs walls to protect the small industries that existed in
Canada. At that time PEI, NB, NS, were to be industrial partners of Canada.
However things changed; we did increase the industrial level in Canada but it was
done by acting as an incentive forAmerican corporatio