Chapter 7: The political Context
CANADIAN BUSINESS ENTERPRISE: FUNDAMENTAL FEAUTURES
-government=critical role in Canadian economy
-Canadian economic system=mixed system
-Business Enterprise system determines:
1. What goods/services are produced/distributed to society?
2. How goods/services are produced/distributed to society
-Capitalism is an economic system, and it is based on the following fundamental features:
1. Rights of the individual: individual who takes precedence in society; individuals have every right to
pursue their own self-interest. But in Canada the practice that the individual is the most important
element in society is not representative. There are limits, Gov. Regulations.
2. Rights of private property: individuals have the right to own land, labour and capital.
3. Competition: Advocates competition, ensures businesses provide at a fair cost
4. The role of government: minimal government interference. ‘Laissez faire let people do as they
-Communism: government is responsible for the allocation of society’s resources.
GOVERNMENT AS GUARDIAN OF SOCIETY:
The Tax Collector Role:
2 forms: Revenue taxes and regulatory taxes.
Revenue tax: collects money to help fund government services and programs. Includes: individual taxes,
corporate income tax, property tax, sales tax.
Individual Income tax: levied on the incomes or net profits individuals, partnerships, sole trader. Largest
source of revenue for government.
Corporate Income tax: Second largest source for federal government. They are taxed on their net profit
at a rate (federal and provincial). Sales tax: paid through retail stores. GST-The Goods and Service Tax. Value added tax, paid at every step
of the manufacturing process, levied on manufactured goods.
Property tax: largest fund for municipal government. Used to fund municipal government operating
costs and government.
Restrictive/Regulatory taxes: aimed at controlling products/services. Excise taxes and tariffs.
Excise taxes: levied on products that the government desires to restrict, sometimes deemed to be
The Business Owner Role: Crown Corporations
Crown Corporation: a public enterprise or organization that is accountable to the parliament through a
minister. Can be provincial or federal.LCBO-provincial.Established for following reasons:
To implement public policy, includes protecting national interests.
Protect vital to the economy industries
Provide special services that cannot be provided by private businesses
To nationalize ‘natural monopolies’-electricity generation and distribution
The Regulator Role:
Government economic regulation: the imposition of constraints that are backed by government
authority, they are intended to change economic behavior in the private sector. Regulation on consumer
protection, environmental protection, nature of competition.
Ideal for consumers is perfect competition. Perfect competition: when there are an optimal number of
competitors in a given industry, to ensure fair pricing and distribution of goods and services at highest
level of quality. Presents optimal combination of desired g and s by consumers.
Imperfect competition: fewer than optimal number of competitors, since less number of competitors
there is less pressure on businesses to offer low price and high quality. Inefficient business will result.
The public interest:
Government objective is to protect public interest. Created a competition policy, to control nature of
competition. – intends to stimulate open competition, eliminate restrictive business practices,
encouraging maximum production, distribution and employment. GOVERNMWNT AS GUARDIAN OF THE