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Lecture 2

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York University
Administrative Studies
ADMS 1010

Business in the Canadian Context ADMS1010 – Summer 2012 – Troy Young Lecture 2 – What is Canadian Business? – May 17 2012 Canada’s Economic History - Canada first caught the attention of European nations due to the abundance of fish off of our eastern coasts. - Many European nations, particularly Catholic ones, fished in our waters. - The French and the English were the first to establish settlements, mainly to preserve the fish they caught before transporting back home. - The fur trade soon begins to outdistance fishing as the major economic activity. Fur hats were all the fashion rage in Europe. - Fishing settlements tended to be seasonal, while those that grew up due to the fur trade were permanent (Montreal and Quebec City became important ports for the fur trade). - In what is now the US, agriculture played a bigger role. This labour intensive activity caused the population there to grow much faster than in Canada, as the majority of the fur trade was done in conjunction with Canada’s existing Aboriginal population. - The importance of the fur trade led to the development of the Hudson’s Bay Company, which was both an important trading company and property holder. HBC is North America’s oldest commercial venture, having been formed in 1670. - Timber would replace the fur trade in importance as fashion no longer dictated the need for fur pelts. - Great Britain was fighting a series of wars in Europe. As an island nation, it relied heavily on the Royal Navy for protection and expansion of its colonial assets. - England’s meagre forests were all used up. There were limited places left in Europe to get the timber that was needed to build its fleets. - Canada had timber in abundance. The short growing season also contributed to the growth of tall, sturdy trees. - Great Britain became the world’s first true superpower, due in large part to Canada’s forests. - The labour intensive timber trade helped to spur immigration to Canada. Immigration patterns spread out along waterways. - Canal development (like the Rideau Canal linking Ottawa with Kingston and the Welland Canal, bypassing Niagara Falls) became very important in opening up Canada’s interior. - Railways, including lines linking Canada to US cities, also began to grow, further pushing immigration further and opening up new resources. The National Policy - Sir John A. Macdonald sought to strengthen the new Dominion both at home and abroad - It was based on high tariffs to protect the manufacturing industry. US firms were dumping surplus goods into Canada at below costs. - Macdonald hoped that by creating a strong manufacturing base in Canada, the nation would become far more secure and less reliant on the United States. o Construction of railways to link the two coasts of Canada and aid in the movement of goods. o Encouragement of immigration to Western Canada. o Exercise of residual legislative powers to establish a strong central government to unite, expand, develop and settle a newly established nation. Tariffs - A tariff is a tax on imported or exported goods. o A revenue tariff is set with the intent of raising money for the government. o A protective tariff, usually applied to imported goods, is intended to artificially inflate prices of imports and "protect" domestic industries from foreign competition. - If a country's major industries lose to foreign competition, the loss of jobs and tax revenue can severely impair parts of that country's economy. - Protective tariffs have been used as a measure against this possibility. - The disadvantages of protective tariffs are that they increase the price of the goods subject to the tariff, disadvantaging consumers of that good or manufacturers who use that good to produce something else Negative Side Effects of Tariffs - It leads to the substitution of higher cost domestic products and lower cost imports. - Protectionist quotas can cause foreign producers to become more profitable, mitigating their desired effect. - This happens because quotas artificially restrict supply, so it is unable to meet demand. - As a result the foreign producer can command a premium price for its products. Influence of Tariffs - Reduces both imports and exports - Collapse of trade when tariff barriers increase - The decline of tariffs are often accompanied by growth of non-tariff barriers Canada’s Economy Todayth th - In the late 19 and early 20 centuries, manufacturing and agriculture became increasingly important. In the year’s leading up to World War 1, Canada had the world’s fastest growing economies. - In recent years, Canada has moved back to a resource based economy as oil and mining have taken on a larger role, while manufacturing, particularly in Ontario, has suffered a setback. - Canada still remains one of the world’s largest and strongest economies o Canada has weathered the current global economic crisis better than many other nations What are the Questions Concerning the Government’s Role in Business? - Does government intervene too much in the marketplace? - Does the government have an obligation to its citizens to regulate business and protect consumers from unfair practices? - What is the appropriate role of government? The Relationships between Business and Government - Striking a balance between protecting the rights of Canadians while providing a stable and competitive economy for Canadian Business. The Role of Governments - Power Broker - Benefactor - Regulator - Protector What Business Wants - Stable and predictable relations with government. - Protecting native business from outside forces - Providing clear rules to operate under - Create an efficient and productive economy - Regulation of influences and costs to business i.e. hydro, insurance, etc. What Business Fears - An excessive amount of red tape and bureaucracy - Unstable playing field where changes are made due to political expediency - The decisions will be made that will affect the economy without the input of business - New regulations which will impact how business operates The Relationship between Business and Government - Government Loves Business o Business provides jobs for the population o Governments derive tax revenue from the actions of business - Business Loves Government o Government provides a stable economic environment o Government offers inducements to business o Government helps business enter the global market - Government Hates Business o Business is often more concerned about profits than people o Business is always lobbying for tax cuts and other self-serving benefits o Business always wants something from government - Business Hates Government o Governments regulate and place barriers before business o Governments tax business activities o Government never leaves business alone What is an Interest Group? - Defined as “an organized body of individuals who share some goals and who try to influence public policy.
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