Class 2: Implications of Federalism
on Business
Business in the Canadian Context ADMS 1010
Instructor
Alex Browning
Email: browning@yorku.ca
Web Site: http://www.geocities.com/adms1010g/bus_class.html
Class 2: Implications of Federalism
on Business
Agenda
• Class Admin & Mid-Term
7:00-7:15
• Summary from Class 1
7:15-7:45
• Video –
7:45-8:30
• Break
8:30-8:45
• Introduction to the System of Federalism
8:45-9:00
• Requirements of Federalism
9:00-9:15
• Arrangement of Federal-Provincial Relations
9:15-9:30
• Government and Regional Diversities and Disparities
9:15-9:30
• Q&A
9:30-10:00
Class 2: Implications of Federalism
on Business
Outcomes
By the end of the night you will:
• Understand the importance of ideologies in today’s world
• Understand the system of Federalism and how it works in
Canada
• Understand the competing forces that shape business and
government interactions in Canada
Mid-Term Theme
THE GLOBAL ECONOMIC CRISIS
Available from my Web-site
Web Site: http://www.geocities.com/adms1010g/bus_class.html
Class Administration: Mid-Term
Grading Structure
•
Mid-Term Assignment 40%
•
SUBMISSION OF ASSIGNMENTS is due at
the beginning of class Monday, October
26, 2009. Late submissions will suffer a 5
percentage point penalty and must be
submitted at the beginning of class
Monday, November 2, 2009 as per
Section. No assignments will be accepted
beyond the Seventh Week of the Term.
Business in the Canadian Context ADMS 1010
Course Administration – Mid-Term
10 Double-Spaced Pages
•
•
•
Good Essay Writing Skills expected – Use of thesis statement
•
Spelling and Grammar Count – Proof Read Your Work
•
If in doubt contact and attend the workshops at the Writing Centre.
The Writing Centre is on the first floor of Atkinson -- telephone:
416 736-5289.
Referencing must be done: APA format preferred
•
http://owl.english.purdue.edu/handouts/research/r_apa.html
•
http://www.wooster.edu/psychology/apa-crib.html
•
http://www.apastyle.org/faqs.html
Quotation marks must be used for all direct quotes
Key to getting a good grade
•
If asked take a position and defend it
•
Each must have a thesis statement with supporting evidence linked
back to the thesis
•
Support points with extensive references for both Question 1 & 2 –
Use quotations
•
Cite all references in body of essay or with footnotes
•
Number and Answer each question separately as an essay not bullet
points
•
You must have a reference sheet at end of each question- APA format
•
Don’t plagiarize – See policy
•
Spelling and Grammar is graded – so proofread your assignment
Mid-Term Requirements
•
•
Example, In text Citation
"To compete internationally industry must be cost-competitive as
well as innovative. Competitive pressures ensure that a firm's
comparative advantage can be quickly lost as competitors act to
lower costs, compete on price, and continue the innovative
process." (Barrows, 26)
•
Example, Foot Note
•
“Porter’s Diamond is based on the hypothesis that the
factors that are the most significant determinants can be
grouped in to the following categories1
Footnote
1.
Barrows, D. Canada’s Global Competitiveness, p. 19
Mid-Term Requirements
A Bibliography is required.
• Arrange authors alphabetically.
• Example
• Barrows, David. “Canada’s Global
Competitiveness” in Tom Wesson Canada And
The New World Economic Order, Third Edition,
Captus Press, 2007
•
Use the author of article not text in citation
Mid-Term Requirements
A Bibliography is required.
For websites, the full URL address is required and
the date on which you accessed the website, for
example,
http://www.cbc.ca/news/yourview/2008/09/should_
canada_expand_our_trade.html (September 20,
2009)
Mid-Term Requirements
• Read the Question
• Extensive Use of Course Material
• As a guideline given that the value
of the answer for both questions is
50 marks, your answer should be 5
pages long for each
Mid-Term Requirements
• In preparing this assignment, you will be
expected to present extensive and visible
direct referencing from the two course
Required Textbooks as stated in the questions
as well as outside research.
• Do not use Wikipedia as a reference source. It
is not a reliable source.
Mid-Term Requirements

If you do not use Dr. Wesson's THIRD EDITION of Canada And The
New World Economic Order, you risk receiving a failing grade in
answering each question.

So, what is meant by visible and extensive use? Using only one or
two articles and at that, scantly, will give you a grade of less than
15/30 in total for answering both parts of the question. No
references to any of the assigned articles from Dr. Wesson's Third
Edition will definitely give you a failing grade of 5 - 10/30 in total for
both parts of the questions.

I am looking for quality in the use of the assigned articles in Dr.
Wesson's Third Edition.

Referencing for other course material essential for a strong mark
Mid-Term Requirements
•
Applying economic indicators of measuring
international competitiveness, how does Canada
gain to increase its global competitiveness in a
free trade agreement with Europe? (50 marks)
•
The assigned articles will provide assistance in
answering this question. Ensure that your answer
operationalizes what is meant by Canada gaining
competitiveness in expanding trade with Europe.
Fully discuss competitiveness
•
Mid-Term Requirement: Question 2
• What changes to Canada’s industrial strategy
will need to be made in order for Canada to
globally compete with European countries to
gain global competitiveness? (50 marks)
• The assigned articles will provide assistance
in answering this question. Again ensure you
fully discuss global competitiveness and
how it relates to Canada and Europe. Be sure
to discuss the industrial strategies as they
relate to Canada.
Summary of Class 1: Ideologies
How do we perceive our
Economy?

Job loss Figures usually
measured through changes to
payroll date or Unemployment
Rate The measure of jobs
loindividuals currently looking
for work.
Current reading:The economy lost
7,400 jobs in June and the
unemployment rate rose two basis
points to 8.6% -- the highest rate
since February 1998. The number
of jobs in the economy has shrunk
by 370,000 since employment
peaked in October 2008.
How do we perceive our
Economy?


Conference Board's consumer
confidence index — The private
sector think tank produces a group
of its own indicators, including the
well-followed consumer confidence
number. The index is a survey of
5,000 households with the pollsters
asking people how they see their
near-term financial future and
whether they will be out of work
anytime soon.
Current reading: May's reading of
54.9 blasted past analysts'
expectations and sent stocks
higher as investors started seeing
a consumer spending recovery in
the cards.
How do we perceive our
Economy?




Exports/Imports — Again, perhaps a bit
obvious in that strong growth means
businesses are selling more widgets to
foreigners. But, the level of exports can be
a better indicator of future expansion of
facilities than employment growth.
Current Report
Canada’s merchandise trade account
to slumped to a record deficit of $1.4billion in May as energy and
automotive exports decreased and the
Canadian dollar shot higher, Statistics
Canada figures showed.
The value of exports fell 6.9% to $28.4billion in the month, while the volume
was down by 4.1%, reflecting both
weak demand and a 2.9% decrease in
prices.
How do we perceive our
Economy?


Case-Shiller Index — The housing
price index, named after two of the
economists who developed the
measurement, is a way to look at
housing prices in different regions of
the U.S. The Case-Shiller indicator
correlates with higher commodity
prices and also, in a rising market,
shows growing household net worth.
Current reading: The C-S housing
marker was down 19 per cent for the
first three months of 2009, the
biggest drop in the index's history.
More troubling, March's prices were
down 18.7 per cent, a sign that the
decline is not flattening.
How do we perceive our
Economy?

Housing Starts: Measure of
investor and consumer confidence
and a leading economic indicator

Canada's housing sector
continued on the comeback trail in
August as home starts for the
month jumped more than 12 per
cent, according to new figures
released Wednesday.

Thus, even with August's increase,
housing starts were still down
more than 25 per cent compared to
the same month in 2008.
How do we perceive our
Economy?

Baltic Dry Index — is a leading
indicator phone survey of the price of
shipping a commodity a certain
distance. The index provides "an
assessment of the price of moving
the major raw materials by sea..

Current reading: By Peter Boockvar September 18th, 2009, The Baltic
Dry Index has fallen today to the
lowest level since mid May, down for
a 6th straight day at 2,356. It still
remains 255% off the Dec lows but is
now down 45% off the late May ‘09
high and is 80% below the record
high in May ‘08.
Summary from Class 1
•Societal Changes drive changes to Economies
•Feudal
•Industrial
•Technological
• Informational
•The Economy affects all aspect of activity within Society
 Government
 Business
 Individuals
Summary from Class 1
• Government has many roles, Guardian, regulator/law maker,
benefactor, trade negotiator or protector
• Business and Government are highly inter-related
•Business benefits
•Business Hindered
• As business power grows – governments grow to oversee business
• Dominant Ideologies vs. counter ideologies
• Economy Ideology can define government and business interaction –
Fasism, Capitalism Socialism
Major Political, Social and
Economic Ideologies
Types of Social Ideologies
1. Collectivist Ideologies
2. Individualist Ideologies
Types of Ideologies
Collectivist ideologies: Rather than leaving
the individual to pursue his or her own ends,
the state ensures that the individual serves
the interests of society when taken as a
whole.
Collectivists focus on community and society,
and seek to give priority to group goals over
individual goals
Collectivist Ideologies

The Left: Holds that economic society is best
arranged through the direct involvement of the
workers from the bottom up.

The Right: Holds that the owners of the means of
production arrange economic society from the top
down.
Collectivist Ideologies

Collectivism has found varying
degrees of expression in the 20th
century in such movements as
socialism, communism, conservatism
and fascism. The least collectivist of
these is social democracy,
Communism



Calls for violent overthrow of
capitalist system because
capitalist class will not share
power
Workers will have direct
input into economic
management
Everyone will contribute
based on ability and receive
based upon need
Democratic Socialism


Does not see capitalism as an evil that
needs to be overthrown through
revolutionary means.
Instead, tends to accept elements of
capitalism, however, desires that
government play an interventionist role in the
management of the economy and markets.
Classical Conservatism





Edmund
Burke 1729-1797


Stemmed from reaction to French
Revolution
Man is rational but passionate. Passion
needs to be restrained.
Only the state has the power to restrain
man’s passion. Other traditional
institutions must exist to do this. Church,
Family
The state exists not to protect the
individual, but, the past, present and
future.
It is dangerous for government to
interfere in economies
Change should be gradual
Belief in Class
Neo-Conservatism









More individualistic than conservatism
Challenge the very principle of the welfare state
Do not believe government has a responsibility to
maintain a standard of living
Programs such as education, welfare and health which
cost the most should be reduced
Business should be less regulated, markets should be
free. Including privatization of State owned enterprises
(SOE).
Less taxation and less government spending
Minimal but strong centralized government
Believe in preserving traditional values and institutions
Believe Government should be tough on crime.
Individualist Ideologies

The individualist theory
of government 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
he or she does not
infringe on the same
liberty of another.
Ayn Rand (1905-1982)
Individualist Ideologies



Utilitarianism
Liberalism
Libertarianism
Ayn Rand (1905-1982)
Liberalism

Value of a society is measured
in terms of the satisfaction of
the individual.

Personal freedom leads social
progress.

Laissez-faire and individualism

Governments do not give
people rights their job is to
protect them

Proponents include Thomas
Hobbs

Leviathan
Liberalism

Classical liberals emphasize
free private enterprise,
individual property rights,
laissez-faire economic policy,
and freedom of contract, and
oppose the welfare state.
Classical liberals support
equality before the law, and
hold that economic inequality,
arising from competition in the
free market, does not justify
wealth redistribution by
governments.
Adam Smith 1723-90
Economic Liberalism






Laissez-Faire Capitalism.
No government intervention in economy
Adam Smith, The Wealth of Nations
If man is left to pursue his own interests, he will contribute
to the common good.
“Government is best which governs least”
Markets are self regulating and will control man’s
excesses. (The Invisible Hand).
Neo-Liberalism





It has as its basic concern the development of the free-market.
Globalization and Neo Liberalism are often interchanged
The rule of the market — freedom for capital, goods and
services, where the market is self-regulating allowing the
“trickle down” notion of wealth distribution. It also includes the
de-unionizing of labor forces and removals of any impediments
to capital mobility, such as regulations. The freedom is from the
state, or government.
Reducing public expenditure for social services, such as health
and education, by the government
No protection of class or social order or institutions
Neo-Liberalism




Deregulation, to allow market forces to act as a self-regulating
mechanism
Privatization of public enterprise (things from water to even the
internet)
Changing perceptions of public and community good to
individualism and individual responsibility.
The role of government should be confined to creating and
defending markets, supporting business, protecting private
property and defending the realm
Neo-Liberalism vs Neo-Conservatism



Many neo-liberals have been defined as neoconservatives and vice versa. The main difference
between the two groups has mainly to do with defence
and foreign policy.
Neo-conservatives favor huge defence budgets and
foreign interventions. Neo-conservatism seeks to
maintain the status quo, traditional values
Neo-liberals are opposed to government spending since
it leads to large deficits and debt and see no role for
governments interfering with business. Governments role
is to ensure global free markets support business
Economic Ideologies
Capitalism
 Communism

The Concepts of Capitalism


Refers to an economic
system where the
means of production, or
capital, is owned
primarily by individuals.
Economic decisions are
made by market forces.
The Concept of Capitalism
Focus is on an open system of:
 Pricing
 Profits and Losses
 Private Property Ownership
 Capital Movement
Differing Models of Capitalism
1. Pure Capitalism
 Defined by lack of government regulation
 Laissez-faire approach by government
2. Mixed Economy
 Mostly privately owned, however, some degree of
government intervention
 Most modern developed economies have this element
Theorists of Capitalism




Adam Smith
Alfred Marshall
Joseph Schumpeter
John Maynard Keynes



John Kenneth Galbraith
Frederic Hayek
Milton Freidman
Section 4: The Ideological Framework of
Canada
Settlers to Canada brought with them
the ideologies of Old Europe
Conservatism
 Aristocracy
 The Church
 The status quo
Liberalism
 The rising commercial
class.
 Change agents
 Traders
The dominant Ideologies of
Canada
Political
 Conservatism
 Liberalism
 Social Democracy
Economic
 Capitalism within the
context of a mixed
economy.
Historic Differences of Ideology
Between Canada and the United States


Canadian Ideological thought is more of collectivist
than the US. Canadians feel government is
responsible for its citizens’ well being. There has
been a strong continuity of democratic socialism in
Canada not witnessed in US.
In the United States founded on a stronger belief of
non-interference by government and the primacy of
individual liberties. (“Give me Liberty or give me
death: Patrick Henry). Law will not allow Federal
Gov. to get involved in State issues. More recently
Neo-Conservatist in regard to military, support of big
business and law and order spending.
Commanding Heights
PBS Production
 Based upon the
book by:
Daniel
Yergin
Joseph
Stanislaw

Commanding Heights

Opening Observations
–
–
–
–
–

Look at sponsors
Clinton: Globalization makes us interdependent
Globalization results in Global Terrorism
It would appear that governments are the author of all
problems
The Economic Revolution will determine the future of
the planet – Is this True?
There is a Battle of Ideas
Commanding Heights







Episode 1 – Battle of Economic Theory
Keynes: Markets go to excess Governments need to step in
Hayak: Market would take care of itself – Views built on war
experience – Markets work Governments do not.
WW1 – Keynes oppose war reparations : Predicts another war
Failure of Market Economy leads to Communism and
Fascism
Socialism doom to failure because it has no pricing system to
send signals
Lenin had a change of heart at end re-introduced market
economy
Commanding Heights


US Stock Market Booms RCA $1.50 to $600.
Great Depression – Keynes predictions came
true



Government failed to stop the downward spiral
Roosevelt believed the Markets had failed
Governments can win if they act the are intrusive
if they don’t act they cause instability
Commanding Heights






1936 Keynes publishes the General Theory of
Employment, Interest and Money
Keynes saw the economy as a whole, a machine
that could be managed
Keynes viewed everyman’s right to work
Depression seemed to spell the end of capitalism
and democracy – Socialism and Communism grow
Compare cycle of startup go bust someone new
starts up go bust with Airline industry since deregulation
Keynes spend in bad times save in good
Class 2: Part 1: Introduction to
Federalism
Introduction to Federalism
Globe & Mail – Jan. 10/07
Part 1: Introduction to Federalism
State Structures
•Unitary State
•Federalism
What is a Unitary State?

A unitary state is a state or country that is governed
constitutionally as one single unit, with one
constitutionally created legislature. Governmental
power may well be transferred to lower levels, to
regionally or locally elected assemblies, governors
and mayors ("devolved government"), but in a
unitary state the central government has the
principal right to recall such delegated power.
Source: http://en.wikipedia.org/wiki
Unitary States
Examples of a Unitary State
• Great
Britain
• France
• China
• Japan
What is Federalism?

Federalism is a system of government in which power is
constitutionally divided between a central authority and
constituent political units (like states or provinces). The
two levels of government are interdependent, and share
sovereignty. In federal systems, assemblies in those
states composing the federation have a constitutional
existence and a set of constitutional functions which
cannot be unilaterally changed by the central government
Source: http://en.wikipedia.org/wiki/Federalism
Federalism
Sharing of Power
• Economic
• Constitutional
• Political
Principles 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 over rule the
other where powers specified
● Where powers not explicitly granted they are
assumed to be part of either the central or the
regional authority
Federalism

Examples of Federations
 Canada
 USA
 Australia
 India
What Determines a Federal State?


There is a legal guarantee of authority to each of
the regional authorities
This justifies the coordination and cooperation
with the central authority
Two levels of Government in
Canada’s Federal State

Provincial (Ontario)

Federal (Canada)
Example of Unitary State in Canada
• Relationship
between Provinces and Municipalities
Equality in Federalism




In no federation does perfect equality exist
between all in the federation.
Federal Government holds the power in all
unspecified areas
PEI does not have the same role or power as
Ontario. Why?
Federal Government can over-rule regions in
states of emergency – War Measures Act – AntiInflation Board
War Measures Act of 1914



Art. 6 (5). The protection and guarantees extended to
Canadians by the Canadian Bill of Rights, and other
Charters of Rights in operation provincially in Canada, are
waived aside while the Proclamation is in effect.
The issuing of the War Measures Act has the effect of not
only waiving aside the usual guarantees for civil liberties in
Canada but also, automatically, to alter the distribution of
powers between the two levels of government since
several of the provisions of the Act infringe upon the
"property and civil rights" power of the provinces.
Invoked in 1939 and 1970
Source: http://www2.marianopolis.edu/quebechistory/readings/warmeas.htm
Problems of Federalism




Conflicts in fiscal policy.
Federalism can protect the status quo or move to
change them.
Federalism can act as a barrier to change
Conflicts in ideology
Dual Challenge of Federalism

A federal state must attempt
to build a national strategy.
–


Example: Canadian
government must be seen
to develop a national
immigration policy.
A federal state must
attempt to appease
regional interests.
–
A federal state must think
globally

Example: Canada must
try to appease Quebec to
keep it in Canada. Result:
Quebec has unique
immigration policy.
Federal State must
support local issues
– Example: Softwood Lumber
Why is Federalism hard to define in
Canada?
Canada has both a French and English culture.
We are not by definition nationalist but
Multicultural
The provinces and the Federal government are
often in dispute over their authority in specific
areas.
•
•
•
•
Examples ?
Why is Federalism hard to define in
Canada?
•
•
•
Different sub-cultures in English Canada often
ignored
Constitution Act of 1982 not fully tested
Quebec never signed the Constitution
What are the challenges to Canadian
Federalism?
•
•
•
•
Duality of federalism. The country versus the
regions.
Vast geographic distances.
Changing economic and social circumstances
Nature of Regions. Many areas of Canada were
independent prior to Confederation and have their
own distinct identities.
Evolving Confederation
•
•
•
•
•
•
•
•
•
•
British Columbia
Alberta
Saskatchewan
Manitoba
Ontario
Quebec
New Brunswick
Nova Scotia
PEI
Newfoundland
Evolving Confederation
•
•
•
•
•
•
•
•
•
•
British Columbia
Alberta
Saskatchewan
Manitoba
Ontario
Quebec
New Brunswick
Nova Scotia
PEI
Newfoundland
1871
1905
1905
1870
1867
1867
1867
1867
1873
1949
How does the Constitution Define
the Federal Government?
•
The preamble to the British North America Act
remarks:
•
Federally united in one Dominion under the crown of the
United Kingdom of Great Britain and Ireland, with a
constitution similar in principle to that of the United
Kingdom. (i.e. a parliamentary democracy).
Part 2: The requirements of
Federalism?



A political union of two or more units that are
allocated powers within their respective
jurisdictions.
The Constitution is the contract that specified
the role of each member of the union
Ultimately makes the Supreme Court the
arbitrator of any disagreement on powers
Constitution Act 1982




The written expression
of Canadian Federalism
Language is Broad and
too often vague
Passage of time results
in changes not
anticipated by writers of
constitution
Sets out roles
Federal Legislative Powers
Constitution Act 1982 Sec. 91


“It shall be lawful for the Queen,
by the advice and consent of the
Senate and House of Commons
to make Laws for the Peace,
Order and good Government of
Canada.”
Canada Health Act, International
Trade, Defense, Transport
Canada, Fisheries.
Provincial Legislative Powers


Section 92 and 93 on Canada’s
Constitution distributes exclusive
legislative powers to the provinces
over regional interests.
Example: Cities and Towns,
Education, the provision of Health
Care, Welfare and Transportation,
Direct Taxation, protection of
property, exploration and
development and government and
management of non-renewable
resources
Judicial Powers


A method of authoritative
interpretation of the
constitutional division of the
legislative power
The testing of the
constitutional validity of laws
both at the Federal and
Provincial Levels
A Federal System is a Balance
Federal
Federal Government provides
peace and security for the
entire nation
Provincial
Provincial Governments retain
sufficient powers to regulate
local matters
The Supreme Court
When the System is out of balance
Since 1949 the Supreme Court of Canada is willing to use the “peace,
order and good government” clauses as a residuary power to include
interpretation of “national importance or national dimension or
national concern”
Differences between US and Canada



In Canada
All powers not
specifically reserved for
the provinces are
allotted to the Federal
government.
Co-operative
Federalism – Marble
Cake




In the United States
All powers not
specifically reserved for
the Federal government
are allotted to the
States.
Dual Federalism –
Layer Cake
Why ?
What threatens Canadian
Federalism?



Distinct society federalism
– This emerged out of frustration with the central
government, (Quebec) and shook the foundation
of Canada.
Provinces moved to assert their autonomy.
Immigration, Language and Healthcare.
Summary of Requirements of Federalism




Establishes a Federated State
Creates a central government without destroying
regional authorities
Easier to govern a geographically dispersed country
Easier to expand territories to create new provinces
Money and Federalism
3. The fiscal and institutional arrangements
of federal-provincial relations
The Great Canadian Dream
Canada's confederation on July 1, 1867 brought four
eastern provinces together to form a new country. As part of
the deal, Nova Scotia and New Brunswick were promised a
railway to link them with the two Central Canadian
provinces – Quebec and Ontario.
Manitoba joined confederation in 1870. British Columbia, on
the west coast, was enticed to join the new confederation in
1871, but only with the promise that a transcontinental
railway be built within 10 years to physically link east and
west. Canadian Pacific Railway was formed in 1881.
Show Me the Money!



Fiscal and administrative
arrangements are a key
component of federal
provincial relations.
How much and who gets
what is the defining
question of the Dominion
of Canada.
Politics plays a key role,
but there are other
elements.
Federal Involvement in Regional
Support




Canada’s founding fathers believed that the Civil
War in the United States was caused by overly
independent States.
The government of Canada has emergency federal
powers. During the two world wars the Federal
government assumed almost dictatorial powers.
Provinces only granted limited taxation authority –
Direct taxation only
Provincial autonomy reduced by distorting regional
priorities
Factors Contributing to Increased
Federal Activism
What effect did The Great Depression have on
Canadian federalism?

Federalism was influenced by the economic theories
of John Maynard Keynes. Just as it had under FDR and
the New Deal in the US

Federal authority was seen under Keynes’ economic
model to be the provider of economic stability through
the use of the Central Bank to regulate money supply
and through economic stimulation.

Increased Federal Activism





All levels of government worked on developing a
large number of makeshift intergovernmental
arrangements to meet the urgent needs of families
Produced chaos within tax systems at all levels as
everyone looked for new sources of revenue
Tax on tax
Rowell Sirois Commission (1937) created to solve
this crisis
War Gave Federal Government total control – War
Measures Act
Keynesian Philosophy Increased
Federal Activism - Post WWII
Department of Finance
Officials believed that the
federal government must
ensure economic stability
through management of the
money supply by the Bank of
Canada through tax cuts and
additional government
spending in a period of
economic downturn

Keynesian Philosophy Contributed to
Centralized Federalism – Post WW II


To forestall a post-war
recession, the Federal
Government embarked
on a program of postwar reconstruction and
social spending.
Paternalistic Liberal
Government
Keynesian Philosophy Contributed to
Centralized Federalism – Post WW II


Through the 1950’s and 1960’s the federal
government assumed a national leadership role in
economic management and led the development of
the welfare state
There was growth of interdependence with the rise
of national organizations whose primary pressure
targets were Cabinet and the bureaucracy in
Ottawa
Cooperative Federalism
• Federal and Provincial Governments agree to work together in
areas that are clearly the domain of one or the other
• Four Main Features
• Reliance on Federal-Provincial conferences
• Federal Government agreed to consult with provinces before
committing to programs
• Policies designed as fiscal programs to create economic stability and
growth – Cost sharing
• Formal structures to support intergovernmental relations
• Lead to a more integrated Federalism
Cooperative Federalism

The Federal Government provided
financial assistance, either in a
lump sum or fixed ratio of the cost
of a program, on the condition that
the provincial governments
provide certain services

Federal Government used these
grants to involve itself in virtually
all areas of provincial jurisdiction

Used transfer payments to entice
the provinces into adopting new
national programs.
Benefit of Conditional/Shared Cost Grants




Served to inhibit conflict
Shared knowledge and provided basis for resolving
disputes
Administrative consultation among officials tended to
involve low levels of conflict
It was a movement toward greater partnership
Problems with Conditional/Shared Cost
Grants




Conditional grants can distort provincial budgetary
priorities.
The federal government can increase their influence
in areas of Provincial jurisdiction.
The Provinces could refuse grants, however, the
realities of politics makes this unlikely.
Interest groups will pressure provinces into
accepting grants.
–
Example: Medicare 2002. All provinces signed on to the
Federal funding offer even though many were opposed due
to budgetary constraints
Problem with Conditional/Shared Cost
Programs



Provinces still felt the Federal Government was
interfering with Provincial powers
Provinces resented the Federal Government taking a
paternalistic attitude, that they knew what was best
for each province
Programs did not affect provinces equally
Double Image Federalism

Quebec Reaction




Opposed all federal initiatives that appeared to
compromise provincial independence
Sought to remain aloof
Seldom had alternative, constructive proposals to
counter the federal plan
Premier Duplessis refused to join several joint programs
A movement by Quebec to modernize, to assert its
autonomy and to preserve its cultural and linguistic
identity
Diverging Meaning of Cooperative
Federalism

For the Provincial Governments it has meant joint
decision-making on matters of mutual concern

For Federal Government it has meant a commitment
to listen to provincial views after a national policy
had been developed.
Executive Federalism

Provinces began to take more activist roles in
economic and social policy and demand great
control over revenue and spending

Lead to a more Executive Federalism

First Minister Conferences
Conferences




Federal Provincial Conferences - The federal
government set the agenda and therefore hold the
advantage. Topics include the constitution, transfers,
health, education, CPP, etc.
First Minister’s Meetings – Held between the
Premiers and the Prime Minister. Recently the
Premiers have dominated the agenda.
Held behind closed doors. Joint Statement.
Secrecy is important. (Why?)
Part 4: Regional Diversities and
Disparities
What is Canada?

Canada is a federation of very diverse regions.
–
–
–
–
–

Economic
Cultural
Historic
East, West, Quebec, Ontario.
Size
Not all provinces equal
Federal Representation
Province
Newfoundland & Lab.
PEI
Nova Scotia
New Brunswick
Quebec
Ontario
Manitoba
Saskatchewan
Alberta
British Columbia
Territories
Total
# of Seats % of Total
7
4
11
10
75
106
14
14
28
36
3
308
2.3%
1.3%
3.6%
3.3%
24.4%
34.4%
4.5%
4.5%
9.1%
11.7%
0.9%
Population Forecast July 2006 post census estimates
% of Pop
1.6%
.4%
2.9%
2.3%
23.5%
38.9%
3.6%
3.1%
10.1%
13.2%
.3%
Province of Quebec






Is a distinct region
Has a distinct history
Has a separate and unique
educational system
Has a distinct code of Civil Law
It has a political pattern of
separatist behavior.
The effect is to make regional
cleavages a distinctive element of
Canadian federalism
Regional Differences





Influenced by
immigration patterns.
Economics
Cultural differences
Resource differences
Historic differences
Regional Differences





Size of internal market and access for products.
Ontario vs. PEI
Natural Resources – Inherently volatile
Occupational mobility, fishing and mining
Spatial immobility “I like it here!”
Claim to capital, i.e. Bank Loans
Feds try to Manage Regional
Differences three ways.
1.
2.
3.
Industrial Incentive
Programs
Infrastructure Assistance
Programs
Social adjustment and
rural development
programs.
Industrial Incentive Programs



Make viable industries attractive in slow growth
regions.
Tax credits, seed money, consulting services.
Oil and Gas in Newfoundland.
Infrastructure Assistance Programs


Assist in providing capital for sewers, water, road
improvement, hospitals and universities.
Example: Toronto to Montreal high-speed rail
proposal.
Social adjustment and rural
development programs.
Try to develop
industries in areas
where there is little or
no productive
employment.
Example: The soap stone
carving industry in
Nunavut. Ontario Wine
Industry

Types of Economic Incentives






Loan guarantees
Tax incentives
Cash grants
Marketing and promotion
Bailouts
Subsidies
Why do these Programs exist?






Keynesian Economics
Primary goal is job creation.
Sustains families
Dignity
Politics
Economy
Case: Cultivating Cash




Government subsidy programs is an aspect of
federalism.
Canadian farmers are are essential aspect of the
Canadian economy.
Canadian farmers are being forced from the land at
an alarming rate.
Three types of Canadian Farmers
–
–
–
–
Lifestyle farmer – Historical Farm
Agricorp – Farming Corporations > $5M
Small Business Farmer $100K - $5M
Part-time Farmer – Hobby
Case: Cultivating Cash

Issues
–
–
–
–
–

Financing
Business Risk
Land Management
Prices
Government programs poorly targeted
Globalization
–
WTO talks to reduce subsidies
Case: Cultivating Cash

Interest Groups
–
–
–
–
Ontario Federation of Agriculture
Western Canadian Wheat Growers Ass.
National Farmers Union
Canadian Fed. For Independent Business –
Agricultural Sector
Case: Cultivating Cash

Subsidy Programs
–
–
–
–
Farm Credit Canada – Small to Med. Farms
Net Income Stabilization Account – Profitable
Farms
Agricorp – Crown Corporation
Revenue Caps on grain transportation
Case: Cultivating Cash
Canadian Wheat Board
–
–
–
–
–
Marketing Monopoly for wheat
and barley
Governance by government
and producers
Controls 20% of international
market
Provides price stability to
farmers
Provides transportation from
Farmers to railways
Flaws of Regional Development



Industrial incentive programs favor capital-intensive
programs in areas where one of the major problems
is excess labor. (Mega-projects).
Do the companies really need the grants, or would
they have done it anyway?
Grants to one company could hurt other existing
companies who have not received grants.
Flaws of Regional Development

Open to abuse and
mismanagement
Flaws of Regional Development
Industrial incentive programs
may accrue to multinational
companies in foreign
countries.
 Could lead to ‘bidding wars’
between neighboring
provinces or countries to
secure the relocation of large
companies.
Example: Ontario auto
negotiations 2003.

Flaws of Regional Development
Drug firms get $150M for jobs, research
January 09, 2008
Ontario must invest taxpayer
dollars in the research and
development efforts of big drug
companies if it hopes to keep
good-paying jobs in the
province,.. "There's a race for
global jobs, and our intention is
to make sure that we win that
race," Wilkinson said after
announcing the fund at a
Toronto research centre.
Next Week
Constitutional and Legal Framework of Canada
Case: Tripe “E” Senate