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Alison Weir

Porter 5 forces: 1. Existing Domestic Rivalry 2. Threat of new Entrants 3. Threat of substitute products and services 4. Power of Buyer 5. Power of Supplier Porter Diamond: Ideologies Collectivist Ideologies: Society is the dominant institution  The left: holds that economic society is best arrange through the direct involvement of the workers form the bottom up  The right: holds that the owners of the means of production arrange economic society from the top down th  Found varying degrees of expression in the 20 century in movements as socialism, conservatism and facilism Socialism  Ideology based on the ownership of the means of production and distribution by the workers  Holds that capitalism is fundamentally undemocratic  Marxist theory refers to a transitional stage Democratic Socialism  Does not see capitalism as an evil that needs to be overthrown through revolutionary means  Tends to accept elements of capitalism, however, desires that government play an interventionist role in the management of the economy and markets Individual Ideologies: The individual is dominant  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 as he or she does not infringe on the same liberty of another  Liberalism and neo-liberal Liberalism  Value of society is measured in terms of the satisfaction of the individual  Personal freedom leads social progress  Governments do not give rights; their job is to protect them Neo-liberalism  Deregulation to allow market forces to act as self-regulating mechanism  Privatization of public enterprise  Role of government should be confined to creating and defending markets, supporting businesses, protecting private property and defending the realm Neo-liberalism Neo Conservatism Only see the need for defense budgets for Favour huge defence budgets and foreign defending individual rights and property interventions See no role for government intervention in See some role for government intervention in businesses businesses Opposed to government spending Opposed to government spending Events that influenced early Canada European famine and immigration: Gordon hired a fleet of ships and forcibly transported crofters to Canada, where they were dumped on Canadian authorities. American Revolution: 50 000 Empire Loyalists fled persecution and came north to Quebec, New Brunswick, which resulted in Britain creating the Province of Nova Scotia to handle the increase War of 1812: The War of 1812 also started the process that ultimately led to Canadian Confederation in 1867. Although later events such as the Rebellions and the Fenian raids of the 1860s were more directly pivotal, Canadian historian Pierre Berton has written that if the War of 1812 had never happened Canada would be part of the United States today, as more and more American settlers would have arrived, and Canadian nationalism would never have developed Repeal of British Corn Laws: removing the preferential duties on wheat, timber, etc., and (2) producing the discontent with imperial relations which culminated in the famous Annexation Manifesto of 1849. Reciprocity agreement of 1854: The Canadian American Reciprocity Treaty, also known as the Elgin- Marcy Treaty, was a trade treaty between the colonies of British North America and the United States. It covered raw materials and was in effect from 1854-1866. It represented a move toward free trade and was opposed by protectionist elements in the United States, who joined with Americans angry at apparent British support for the Confederate States of America during the American Civil War, ended it in 1866. Civil War: The civil war had an economic and political effect on Canada. Economic effect: The war in the United States created a huge market for Canada's agricultural and manufactured goods, most of which went to the northern side. The collapse in Southern States' exports to the world also led to increases in the prices of many of Canada's exports. Political effects: The tensions between the United States and Britain, which had been ignited by the war, led to concern for the security and independence of the colonies, helping to consolidate momentum for the confederation of the colonies in 1867. National Policy of 1878: It called for high tariffs on imported manufactured items to protect the manufacturing industry. World War I: Economy prospered and manufacturing industries grew during the war Once the war was over Canada was known as an independent country, not just part of Britain’s empire. Women roles changes – worked in factories Canada went into a depression after the war Great Depression: Unemployment was a large factor. Due to over production, factories panicked and laid off huge amounts of workers. 1 in 5 Canadians became dependent upon government relief for survival Bankruptcies also affected the great depression in Canada. The biggest form of bankruptcy was the stock market. Durham Report- After the two Rebellions, Britain sends Lord to investigate and to make recommendations. He recommended that Upper and Lower Canada be united into one province. He also recommended a responsible government. Federalism What is federalism?  Defined as the method of dividing powers so that the general or central regional government are each within their sphere coordinate and independent Principals 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 overrule the other where powers specified  Where powers not explicitly granted they are assumed to be part of either the central or the regional authority Example of federalism: Canada, US, Australia, India Equality in Federalism:  Perfect equality does not exist  Federal government holds power in unspecified areas Problems of Federalism  Conflicts in fiscal policy  Can protect the status quo or move to change them  Act as a barrier to change  Conflicts in ideology Challenges to Canadian Federalism  Duality of federalism- country versus regions  Vast geographical distances  Changing economic and social circumstances  Nature of regions- many areas of Canada were independent prior to confederation and have their own distinct identities Regional Differences  Influenced by immigration patterns  Economics-access to capital, occupational mobility, market size  Cultural differences- spatial mobility i.e. First nations  Resource differences- size of internal market and access for products Ontario versus PEI  Historic differences John A. MacDonald’s National Policy:  Designed to encourage manufacturing growth in Central Canada  Imposed high tariffs on manufacturing goods  Established open market for foreign investment (attracted both foreign and domestic investors to Canada’s protected markets)  Designed to encourage east-west trade rather than north-south trade with U.S  Development of harbours and fast steamship lines to England and Asia  Encourage the growth of a wealthy business class in Canada  Strong immigration policy to promote the population of Western Canada  Encouraged the development of the Canadian Pacific Railway's transcontinental line. Implications of the National Policy:  Foreign firm importing goods into Canada  disadvantaged by tariffs  free to invest in Canada and establish subsidiaries  inefficient  Foreign firms are able to open resource frontiers before Canadian firms—vertical integration  Made Canadian industries very attractive investments  Concentration of ownership and market power Reciprocity Agreement of 1911  A last attempt at reciprocity was negotiated in 1911 by the Liberal government of Sir Wilfred Laurier  Reciprocity agreement would be implemented by concurrent legislation, provided for free trade in natural products and the reduction of duties on a variety of other products  Agreement was accepted by US Congress but repudiated by Canadians who ousted the Liberals in the general election of Sept. 21, 1911 Protectionism What is protectionism?  Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local businesses and jobs from foreign competition  Government policies that shield domestic production and producers form foreign competition Tariffs, Quotas and Subsidies Tarrif- a refers to a tax imposed by the importing country when a good crosses an international boundary  Effect of a protective tariff- producers dependent on protection cannot normally export since their costs are often above world prices. Therefore they depend most entirely on domestic markets.  Wasteful  Leads to substitution of higher cost domestic products and lower cost imports  Increases economic rents- ―excess returns‖ above ―normal levels‖ that take place in competitive markets Quotas- a limit on the quantity of a good that can be produced abroad and sold domestically Subsidy- assistance paid to a business or economic sector or producers. Most subsidies are set in place by the government for producers or are distributed as subventions in an industry to prevent the decline of that industry Trade Restrictions as Protectionism Non-tariff barrier refers to any action other than a tariff that restricts international trade. They can be seen as worse than tariff barriers. 1. Quotas 2. Licensing 3. Regulations Arguments for protection  Canada being small needs to protect it small companies from much large international players  Canada for its own defense needs to maintain these manufacturing jobs so that we do not become reliant on foreigners for essential technology  We need to protect our tax revenue so these companies do not buy up our firms to move the tax payment to parts of the world with lower tax rates  We need to protect these companies to protect employment here in Canada.  We need to protect our markets from companies who will move production to countries with no environmental or labour laws and in-effect dump cheap products into Canada  We need to protect the Canadian way of life and our culture from being eroded by global companies that would buy up our firms and then fill Canada with foreign content.  Other countries subsidize and protect their industries we should do the same.  The government should protect its investment where it has spent money to support industries.  It should not allow Canadian taxpayers to subsidize foreign firms Arguments against protectionism:  Canada signed free trade agreements (which are laws) and the provinces are required to comply since trade is a Federal responsibility under the constitution.  Canada can be sued or punished for breaking its trade agreements which could hurt other parts of the economy.  Canada is a small country by population and needs to trade to maintain its standard of living. If we do not let others trade into Canada they may retaliate.  If Canada keeps relying on protectionism we will never be more competitive or innovative. Crown Corporations  Any enterprise that is substantially owned by the government  An institution brought into existence by government to serve a public function  Function in many ways like a private company Why do governments create crown corporations?  Industry itself may lend itself to a natural monopoly ex. Power, water  Industry might experience wide price fluctuations  Cultural issues  Nation building tool in the promotion of transportation, communication and resource development  Defense against expansionism  Means to promote regional development  Go where the private sector refuses to go Crown coporations under attack  Costly  Bloated  Unresponsive  Compete unfairly against the marketplace  Outlived their useful lives Risks of Crown Corporations Crown corporations undertake a wide range of corporate activities that engender financial risk, including raising financing, managing investments and using derivatives. Nationalization Nationalization: process of taking a private industry or private assets into public ownership by a national government or state Critics of Nationalization  Claimed government measures distorted market values and resulted in inappropriate compensation  Great concerns about the extent to which crown corporations might be acquired by foreign interests CNR Case The expansion of agriculture in the prairies and immigration to Canada led to the development. Wilfred Laurier attempted to accomplish the following by building 2 railroads:  Continue John A. Macdonald’s nation building  Boundaries  Provinces  Agriculture and infrastructure  French-English connections Robert Borden inherited the following when he was elected Prime Minister:  Three intercontinental railways  Fewer than 7.5 million people  Financially weak  Unable to meet debt obligations  Banks at risk The outcome  Dominion (Canadian) National Railways  Non-partisan board  Permanent Company  Not subject to the parliament Canadian Pacific opposes the deal  Not fair competition  They offer to operate the railway  Claim (along with the Liberals) that this was bad public policy motivated by friends in trouble On November 5, 1919 the Grand Trunk Acquisition Act is passed and the Railway is nationalized Problems with the CN  Abnormally high costs- in 7 of 10 years between 1985-1995, the CNR’s revenue from freight operations failed to cover its operating costs and in order to compensate, the railway raised fees it charges other carriers to use its lines, driving down traffic and increasing shipping costs, but the federal government acted as a patron and covered most of the difference, therefore CNR was able to avoid taking the steps necessary to become profitable rd  Excess trackage- between 1885 and 1995, the CNR trimmed only 15%, which left only 1/3 of its track carrying only 1% of its freight volume. Less than half its runs made money.  Labrdr problems- CNR employed many more people than necessary to run its operations. It cut 1/3 of its workforce between 1992 and 1995. About 11 000 jobs were cut, yet they were still overstaffed. Labour costs represented 43% of CNR revenue in 1992, had fallen to 38% by 1994, yet was still above US average of 36% Privatization of CN  Deregulation of railroads in the United States caused a massive restructuring of the industry  CNR’s ability to keep pace with rapidly shifting circumstances was compromised by its Crown Corporation status  In September 1995, all shares in the CNR were sold to the public and it became a private company. The Rationale for Privatization  Improving efficiency- sharpen corporate incentives to cut costs and set prices in line with costs  Reducing the public sectors borrowing requirements- crown corporations will no longer be the responsibility of governments, therefore it may result in lower deficits  Reducing government involvement in enterprise decision making- crown corporations are vulnerable to short term political thinking  Easing public sector pay determination- can increase power of unions  Gaining political advantage- government opted for the political advantage of privatization  Improve service-create competition and market forces that would increase innovation and services Trade Reasons for Trade  Resources are not completely distributed across the globe  Climate and terrain of a state  Skills of its labour force  Advantages of specialization Mercantilism- countries would try to get as much wealth into their country as they could. They would do this by exporting lots and lots of goods but importing little to no goods. That way they'd be receiving lots of gold and silver for their goods but not spending any gold and silver on buying goods from other countries. Dependency Theory  Subsidize and protect domestic industry and manufactured goods- countries can produce their own products rather than simply export raw materials  Import limitations  Forbidding foreign investment  Nationalization Absolute Advantage  To specialize in production leads to increased output  Trade internationally specializing in producing only those goods in which a country has absolute advantage  Consumers will be better off buying foreign made products priced more cheaply than domestic ones, which suggests specialization through free trade Comparative Advantage  Based on the premise that nations will specialize in those areas that are best suited to their productive capabilities and will then exchange with other nations  Based upon nation’s productivity  Countries gain from trading certain good even though its trading partners can produce those good more cheaply  Goods and services which a country should produce and trade with other countries is the goods and services that it produces relatively more efficiently than other countries. Products that it can acquire a higher price externally than it can at home Acquired Advantage  Also proposes specialization through the acquisition of acquired advantage, mostly founded of manufacturing Life Cycle of the International Product Auto Pact  The Auto Pact was signed in 1965 to prevent a trade war over the findings of the Royal Commission. 
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