Business,
Government,
and Regulations
+ Canadian
Business
Ideologies
© 2005 by Nelson, a division of Thomson Canada Limited.
1
Government’s Role in
Influencing Business
1. Prescribes the rules for business
2. Purchases business’ products and services
3. Contracts power to get business to do things
it wants
4. Is a major promoter and subsidizer of
business
5. Is the owner of vast quantities of productive
equipment and wealth
© 2005 by Nelson, a division of Thomson Canada Limited.
2
Government’s Role in
Influencing Business
6. Is an architect of economic growth
7. Is a financier
8. Protects society against business
exploitation
9. Directly manages large areas of private
business
10. Acts as a social conscious and redistributes
resources to meet social objectives
© 2005 by Nelson, a division of Thomson Canada Limited.
3
Roles of Government and
Business
• What should be the respective roles of
business and government in our
socioeconomic system?
• Which tasks should be handled by
government and which by business?
• How much autonomy are we willing to allow
business?
© 2005 by Nelson, a division of Thomson Canada Limited.
4
Canadian Business Ideologies
Relative Involvement of Govt in Business
Business
Left
NDP
Liberals
Conservatives
Right
Government
Collectivism/Monopoly Mentality/Mixed Economy/Corporatism/Managerialism/Neo-conservatism
© 2005 by Nelson, a division of Thomson Canada Limited.
5
Roles of Government and
Business
Clash of Ethical Systems
Business Beliefs
Government Beliefs
• Maximizes concession to
self-interest
• Minimizes obligations
society imposes on the
individual (personal
freedom)
• Emphasizes inequalities of
individuals
• Subordinate individual goals
and self-interest to group goals
and group interests
• Maximized obligations
assumed by the individual and
discouraging self-interest
• Emphasize equality of
individuals
© 2005 by Nelson, a division of Thomson Canada Limited.
6
Influence of Government on
Business
Nonregulatory
Issues
• Industrial policy
• Privatization
Regulatory Issues
• Economic Regulation
• Social Regulation
© 2005 by Nelson, a division of Thomson Canada Limited.
7
Government’s Nonregulatory
Influence on Business
Industrial Policy:
Schools of Thought
1.
2.
3.
4.
5.
Accelerationists
Adjusters
Targeters
Central planners
Bankers
© 2005 by Nelson, a division of Thomson Canada Limited.
8
Government’s Nonregulatory
Influence on Business
Industrial Policy
Pros
Cons
• Decline of national
competitiveness
• Use by other nations
• Ad hoc system
• Reduces market efficiency
• Promotes political
decisions
• Foreign success variable
• National attempts
uncoordinated and
irrational
© 2005 by Nelson, a division of Thomson Canada Limited.
9
Government’s Nonregulatory
Influence on Business
Privatization
• Producing versus providing a service
• Privatization debate
– Use markets to discipline delivery of
goods and services
– Federalization of certain functions
• Airport security
© 2005 by Nelson, a division of Thomson Canada Limited.
10
Government’s Nonregulatory
Influence on Business
Other Nonregulatory Influences
•
•
•
•
Major employer
Large purchaser
Major influencer
Major competitor
•
•
•
•
© 2005 by Nelson, a division of Thomson Canada Limited.
Major lender
Taxation
Monetary policy
Moral suasion
11
Government’s Regulatory
Influence on Business
Reasons for Regulation
•
•
•
•
Controls natural monopolies
Controls negative externalities
Achieves social goals
Other reasons
– Controls excess profits
– Controls excessive competition
© 2005 by Nelson, a division of Thomson Canada Limited.
12
Government’s Regulatory Influence
on Business
Types of Regulation
• Economic regulation
– Transport Canada
– CRTC
• Social regulation
– Employment Equity
– Occupational Safety and Health
– Human Rights Commission
© 2005 by Nelson, a division of Thomson Canada Limited.
13
Government’s Regulatory
Influence on Business
Benefits of Regulation
•
•
•
•
Fair treatment of employees
Safer working conditions
Safer products
Cleaner air and water
© 2005 by Nelson, a division of Thomson Canada Limited.
14
Government’s Regulatory
Influence on Business
Costs of Regulation
• Direct costs
• Indirect costs
• Induced costs
– Effects
• Reduced innovation
• Reduced investment in plant and equipment
• Increased pressure on small business
© 2005 by Nelson, a division of Thomson Canada Limited.
15
Deregulation
• Purpose
Purpose & Dilemma
– Intended to increase competition with
expected increased efficiency, lower prices,
and innovation
• Dilemma
– Must enhance competition without sacrificing
applicable social regulations (e.g., health and
safety requirements).
© 2005 by Nelson, a division of Thomson Canada Limited.
16
Canadian Business Ideologies
Relative Involvement of Govt in Business
Business
Left
NDP
Liberals
Conservatives
Right
Government
Collectivism/Monopoly Mentality/Mixed Economy/Corporatism/Managerialism/Neo-conservatism
© 2005 by Nelson, a division of Thomson Canada Limited.
17
Collectivism
• Control of economic
activity by the state
• Socialist ideals
• Govt needed to correct
defects of market
• Health care, CPP, NEP,
subsidies
• ‘New Left’
© 2005 by Nelson, a division of Thomson Canada Limited.
18
Monopoly Mentality
• Allowable domination
of sector by public or
private ownership
• Canada’s markets are
too small & spread out
for US competitive
ideal to work well
• Hudson’s Bay Co.
• Canadian Wheat Board
© 2005 by Nelson, a division of Thomson Canada Limited.
19
Mixed Economy
• Compromise of
collectivism and
conservatism
• Business and
government cooperate
informally
• Best description of
how things actually
work
© 2005 by Nelson, a division of Thomson Canada Limited.
20
Corporatism
• Formalized
cooperation among
business, govt and
labour = Tripartitism
• Sweden, Japan, France
• ‘Quebec Inc.’
• Can lead to emergence
of sector elites who
decide what is ‘best’
© 2005 by Nelson, a division of Thomson Canada Limited.
21
Managerialism
• Competitive Enterprise
System
• The Chamber of
Commerce view
• Assume corporations
operate in the best
interests of society
• Trust it
© 2005 by Nelson, a division of Thomson Canada Limited.
22
Neoconservatism
• Get government out of
business (and people’s
lives in general)
• Privatize and let the
market discipline
• Voucher systems
• Social policy is against
subsidies, welfare,
transfer payments
© 2005 by Nelson, a division of Thomson Canada Limited.
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