Business in the Canadian Context ADMS 1010

Business in the Canadian Context ADMS 1010

Business in the Canadian Context

ADMS 1010 – Section A

Instructor

Alex Browning

Email: [email protected]

Web Site: http://www.geocities.com/adms1010g/bus_class.html


Educational Background

MBA – Richard Ivey School of Business

BAS – York University

B. Ed. (Adult Education) Brock University

CMA – Certified Management Accountant

FCMA – Fellow of the Society of Management Accountants

CIM – Certified Investment Manager Inv. Dealers Ass.

CTP – Certified Treasury Professional

Canadian Securities Course – Inv. Dealers


Business Background

Sr. V.P. Finance & Administration & CFO – LCBO

Board Member CMA Ontario

Past Chair of CMA-Ontario Board of Governors

Advisory Panel on Public Sector Issues– FEI


Agenda• Course Administration- 7:00-7:25

• Introduction - 7:25-7:40

• Political and Economic Ideologies - 7:40-8:00

• Major Political and Social Ideologies – 8:00-8:20

• Break – 8:20-8:35

• Video - 8:35-9:10

• Ideological Framework of Canada 9:10-9:30

• Q & A 9:30-10:00


Class Outcomes

By the end of this class you will:

• Understand the requirements of the course

• Understand the history of the major economic and political ideologies

• Be able to discuss the major Political and Economic Ideologies and their application to Canada

Mid-Term Administration

Availability – The Mid-Term is now available on line

Web Site: http://www.geocities.com/adms1010g/bus_class.html

If you have any problems accessing email me at

[email protected]

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.

• Academic Integrity

http://www.yorku.ca/secretariat/legislation/senate/acadhone.htm

• Academic Integrity Tutorial

http://www.yorku.ca/tutorial/academic_integrity/

Business in the Canadian Context ADMS 1010Course Administration – Mid-Term

10 Double-Spaced Pages• Good Essay Writing Skills expected

• 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 or Footnotes

• 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

Academic Integrity

http://www.yorku.ca/secretariat/legislation/senate/acadhone.htm

Academic Integrity

Academic Integrity Tutorial: http://www.yorku.ca/tutorial/academic_integrity/

Class Administration

Grading Structure

• Mid-Term Assignment 40%

• Final Exam 60% - Will be similar to Mid-term. Will focus on current events and you will have to apply the theory to these issues.

Class Administration

Scheduling Information

• Mon. October 12th – No class

Business in the Canadian Context ADMS 1010Course Requirements

If you wish to be put on a waiting list, visit the Receptionist for the School of Administrative Studies, Room 282 Atkinson

•Any student registered or wanting to register must have already completed ADMS 1000 or received Advanced Standing

•If you do not have this prerequisite, you will not be granted a satisfactory grade in this course.

•Course Outline states that all students are personally

responsible to ensure they have all prerequisites

Business in the Canadian Context ADMS 1010Course Administration

Course Outcomes

To understand and be able to discuss

How business and government interact

Why governments seek to affect business

How some businesses rely on government

Why governments are in business

The government and legal frameworks affecting business

How government decisions are made

How and why governments intervene in business

How globalization affects business and government


Will consider:

Frameworks within which government and business act or are constrained

Relationship of the public sector or bureaucracy to various elements of society

Forces on government and business


Frameworks within which government and business act or are constrained:

Ideological

Constitutional

Legal

Economic

Global


Forces on government and business:

To Intervene

To be Efficient

To De-regulate

To Protect

To Globalize


Relationship of the public sector or bureaucracy to various elements of society:

Government

Interest Groups

Private Sector

General Public


Texts required:

1. Wesson, Tom, Canada and the New World Economic Order 3rd Ed. 2007, North York, Captus Press

2. Jurkowski, D., Eaton, G., Between Public and Private: Readings and Cases on Canada’s Mixed Economy. Captus Press

Students are responsible for all readings listed on York Course Website


Required Case Readings: Between Public and Private

• Summary of Constitutional Events P. 113-120• Triple E Senate P. 176-188• Medical Centre P. 325-360• Book Publishing Industry P. 361-378• Canada’s Industrial Strategy P. 379-396• Cultivating Cash P. 397-428• Privatization 407 P. 437-442• Solid Waste Management P. 453-470• Commercialization LCBO P. 443-452• Soft Wood Lumber P. 482-514

Introduction

The course and the class discussion is all about applying the theories to today’s real life situations.

Both the Mid-Term and the Final will ask you to apply the learning the cases discuss in class and to issues out of the daily news.

It is strongly suggested that you attend class and that you read the papers daily to see how the major events support the theories presented in this course.

Words to the Wise

Introduction

Section 1: Introduction to Business in the Canadian Context

Section 1: Introduction to Business in the Canadian Context

Business

Canada

World

How do we perceive our Economy?

News Items Housing Starts Trade Figures Employment Rate GDP Balance of Trade

What issues do we experience in Canada?

The adoption of a common North American currency.

Develop a common North American border.

Threats to Canadian culture and the social safety.

Canada's dependency on its natural resource sector.

What benefits do businesses experience most from Government?

Financial Support Protection – Internal and External Risk Management Lobbyist

What problems do businesses experience most from Government?

Harassment Intervention Red tape Regulation Bureaucracy Inefficiency Taxation

What are the questions concerning government’s role in business?

Does government over-step moral or ethical boundaries to accommodate business?

Are there sacred rights and freedoms of business that transcend ethical considerations?

Does government reserve the right to protect citizens and consumers against the natural activities of business?

Are governments too aligned with business interests?

What does business want from government?

1. Continuity

2. Stability

3. Competition

4. Free Trade

5. Efficient/Productive

6. Unobtrusive

7. Supportive

A stable and predictable environment in today's global world ensures business...

What is government’s role in the economy?

Regulator Law Maker Trade Negotiator

/Deal Maker Benefactor Protector/Guardian Deliverer of Service

200$200$60

What is Canada’s Global Position?

WTO NAFTA United Nations NATO G-8 OAS APEC Commonwealth La Francophonie

Section 2: Political and Economic Ideologies

What is an ideology? How do they

emerge?

What is an Ideology?

It refers to a set of shared values, beliefs and ideas, and perceptions through which persons interpret events of the past, present and future.

It also refers to an explicit doctrinal structure providing a particular diagnosis of the ills of society.

It will include an accompanying action program for implementing the prescribed solution.

What does an ideology tell us?

1. It presents a simplified cause and effect interpretation of a complex world.

2. It integrates a theory of human nature with life's basic economic, social and political values.

3. It appears normative and moral in tone and content and aspire to perfect behavior.

4. It draws its philosophical premises from constitutions, declarations, manifestos and writings. – Basis of the ideology – Right to bear arms

What is the function of an ideology?

1. It constitutes a broad belief system and advocate reforms in the basic fabric and structures of society.

2. It addresses fundamental questions about leadership, recruitment, succession and behavior.

3. It persuades and propagandizes people who learn not to be influenced by opposing views.

What is a Dominant Ideology?

Prescribes and supports existing social, political and economic arrangements.

Embodies the prevailing mindset in the social, economic and governing system.

It is dominant because...

When most people accept it.

Or

When the most powerful people or institution accept and practice it. (May not require consensus of the majority of population.)

Example: Capitalism in US or China’s one child policy

What is a Counter Ideology?

Advances reforms and radical changes in society.

Rallies forces of change in society.

Responds to perceived inequality.

Challenges the Status Quo

Seeks to discredit the Dominant Ideology

Example: Captialism vs Communism in China

In a society, what are the conditions for developing a counter ideology?

1. The leaders of society seek to change society. (Democratic)

2. There is an underground movement to bring about change in a society. (Revolutionary)

Reasons for Change in Society

Interactions among competing groups with dominant or counter ideology result in changes in society.

– Poor versus Rich (French Revolution) – Rich versus Rich (American Revolution)– Poor versus Poor (Peru 1980’s)

Social Upheaval changes status quo– Great Depression – War

Technological Changes impact social order– Industrial Revolution– Information Revolution


Feudal Era

Mercantile Era

Industrial Era

Technological Era

Information Era ?

Changing Social and Business Demographics


Feudal Era

Changing Societal and Business Demographics

• Business dominated by aristocracy and the church

• Government and Business aligned

• Mainly agrarian

• Trades dominated by guilds – independent craftsmen


Mercantile Era


• Business dominated by a merchant class government still dominated by aristocracy

• Government and Business not always aligned

• Still mainly agrarian by towns become larger

• Roman Catholic Church and new Middle Class conflict – Reformation


Industrial Era


• Business dominated by vested interests – Capitalism & Nationalism

• Displaced agricultural workers

• Tradesmen employees

• Governments begin to regulate


Technological Era


• Business dominated by multinational corporations

• Capitalism

• Commoditization

• Displaced Blue Collar workers

• Greater Demands for Free Trade


Information Era

Changing Business Demographics

• Business dominated by Global Companies

• Globalization

• Displaced White Collar workers

• Knowledge Workers

• Governments competing for business

• Greater Social Demands for Government Intervention

Section 3: Major Political, Social and Economic Ideologies

Business and Government Perspective of Relationships

From business's perspective, there is an exponential growth in the size and power of corporations.

From government's perspective, there is the growth of bureaucracy because of continuing

business activities.

The result is a symbiotic relationship between business and government

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

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

Edmund Burke 1729-1797

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)

Utilitarianism

Utilitarianism advocates those actions which bring about the most good for the most people

Supports the concept of general good

"the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others."[

John Stuart Mills 1806-73

Utilitarianism

Utilitarianism is the ethical doctrine that the moral worth of an action is solely determined by its contribution to overall utility. It is thus a form of consequentialism, meaning that the moral worth of an action is determined by its outcome—the ends justify the means.

Proponents include John Stuart Mills

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 neo-conservatives 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

Libertarianism

Libertarians are deeply distrustful of anything that limits their own personal initiative, movement, or talents.

Often related to Anarchists

The Only role of government is to protect individual rights

Ayn Rand 1905-82

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

Adam Smith (1723-1790)

Liberal The pursuit of profit will

serve the best interests of society

Market will self regulate. Government should not

intervene in the marketplace.

The ‘invisible hand’ of the marketplace. – Perfect Competition

Alfred Marshall (1842-1924)

Neo-Classical liberal. He begins by isolating the primary

relationships of supply, demand, and price in regard to a particular commodity

Developed the concept of demand curve and price elasticity

Studied why humans make the choices they do.

He postulated that the central idea of economics must be that of a living force and movement, and its main concern must be with human beings who are impelled, for better or worse, to change and progress.

Distilled concept of marginal utility.

Joseph Schumpeter (1883-1950)

Capitalism is unable to elicit peoples moral allegiance

Capitalism in order to operate efficiently must exist in a social environment that allows for freedom on action.

Major contributions were the theory of the entrepreneur as the dynamic factor in fostering the business cycle and the theory of economic development of capitalism

Supported private monopolies in knowledge-based sectors

John Maynard Keynes (1883-1946)

His ideas emerged out of the disaster of the great depression.

Government is obliged to bring full employment.

His contributions were well read in the US and Britain in the 1930’s and contributed to Roosevelt's ‘New Deal’.

Keynes was a major contributor to the concept of the mixed economy.

John Kenneth Galbraith (1908 - )

In The Affluent Society Galbraith argued that the expanding United States economy needed more public services such as highways and educational institutions.

The economy, according to Galbraith, had finally reached a point at which less time and energy had to be spent on consumer goods.

Corporations often sought power through market share over the profit imperative.

Frederick A. Hayek (1889-1992)

Economic Libertarian Private Market best suited for

managing large societies Felt that any government intervention

in the marketplace was the first step towards totalitarianism.

The marketplace provides the only rational means of allocating existing resources and finding ways to use new ones

Defended individual liberty and the free-market in an academic environment where collectivism had been more fashionable

Wrote The Road to Serfdom in the waning years of World War II.

Milton Freidman (1912-2006)

Neo-Liberal Economist Founded the so called Chicago

School of Economics. A great follower and student of F. Hayek.

Strong support of Laissez-Faire Argued for the elimination of social

security and other elements of the welfare state.

Friedman argued that the concentration of political power inherent in socialist countries was detrimental both to economic prosperity and individual liberty.

Commanding Heights

PBS ProductionBased upon the

book by:Daniel

YerginJoseph

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 de-regulation

Keynes spend in bad times save in good

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.

What is a Mixed Economy?

Government regulated competition Some State Ownership Government protects indigenous industries.

(In Canada, timber, fishing, mining, manufacturing.)

Government protects and develops social programs.

Historic Differences of Ideology Between Canada and the United States

Canadian Ideological thought is more of a conservatism ideology and collectivist than the US. Canadians feel government is responsible for its citizens’ well being. There has been a strong continuity of socialism in Canada not witnessed in US.

In the United States there is a stronger belief of non-interference by government and the primacy of individual liberties. Law will not allow Federal Gov. to get involved in State issues. US appears to be continuing to move ever more to the right and individualistic

Is Canada’s Economy Changing?

In the 1960’s and 1970’s Keynesian economics with increasing government intervention in the economy was popular.

Governments owned and operated airlines (Air Canada), oil companies (Petro-Canada), and Electricity companies (Ontario Hydro, Hydro Quebec).

Government was interventionist in its approach to the economy.

Canada continues to suffer a severe identity crisis

Is Canada’s Economy Changing?

In the 1980’s and 1990’s Neo-Conservative/Neo Liberalism ideas began to emerge in Canada and governments felt they no longer needed to protect domestic industries.

NAFTA, Canada-US Free Trade, Privatization, and the dismantling of the social welfare state became normalized.

J.M. Keynes Out Milton Freidman In J.M. Keynes Back In ????

Where is Canada going in the Future?

Further evolution towards free markets?

Or A return to the Canada

of the 1960’s and 70’s?

Ideology Question

$10 Minimum Wage

Socialist Argument

Conservative Argument

Liberal Argument

Next Week

Readings: Between Public and Private:

Federal Government's Industrial Strategy to Regional Economic Disparities: A Historical Overview pp. 379 - 396 The Constitutional Timeline of Canada, pp. 121 - 130

Canada And The New World Economic Order, pp. 60 – 82.

Case:

Between Public and Private:, Cultivating Cash, pp. 397 - 428.

Business in the Canadian Context ADMS 1010

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