Deck 9: Section 4: The Leadership Challenge

Question 1

In what way does government interact with business in order to fulfil its role as guardian of society?

Answer 1

-Collector of taxes from businesses: Government collects two types of taxes: revenue taxes and regulatory or restrictive taxes. These monies are collected to help fund government services and program, and include individual income taxes, corporate taxes, property taxes and sales taxes. Restrictive taxes consist of two types, including excise taxes and customs duties or tariffs. Excise taxes are applied to goods and services that the government wants to restrict the purchase of.
-Acting as business owners: Governments sometimes own a federal or provincial run corporation (sometimes referred to as a public enterprise) that is accountable to Parliament for its operation through a minister.
-Regulating the business sector: The authority of government imposes constraints to significantly modify economic behavior in the private sector. The motive may include protection of the consumer or the environment, or protection of fair competition among businesses.
-Safeguarding Canadian interests in the global context: One of the central objectives of government regulation is to protect the public interest. The government has the ability to control the operations of private enterprises through regulations.

Question 2

Discuss two arguments in favour of privatizing crown corporations relating to competition and efficiency.

Answer 2

1. Belief in the Power of Competition as a Control Mechanism
Privatization programs are typically guided by the view that the force of market competition is best suited to fostering efficiency and innovation in an industry. Specifically, the view is that privatization of a state-owned monopoly will open an industry to competition and, consequently, encourage innovation, growth, and efficiency. Moreover, where privatization opens an industry to foreign competition, this permits consumers to have access to goods or services developed in other parts of the world and will stimulate innovation among domestic firms operating in the industry.
2. Belief that Private Business Can Operate More Efficiently
Studies conducted in a variety of countries have found evidence that the private production of goods and services is typically more efficient than public production. Consequently, many observers feel that it is difficult for government-owned enterprises to reconcile the social goals of the enterprise with the economic-efficiency goals that must be of concern to any business. Removing the political element of an enterprise allows it to focus on efficiency and avoid potential conflicts of interest.

Question 3

Why is unfair competition from a foreign competitor a concern for domestic business?

Answer 3

There is a concern among some businesses that foreign competitors will offer their products at extremely low prices as a means of monopolizing their share of the target country's market. The ultimate consequence would be that domestic producers could potentially be driven out of business and be replaced by the foreign imports. A foreign competitor who manages to export the products at such low prices may be accused of dumping -which is pricing the product below cost or below the cost of the target country's product. In other words, a foreign supplier who sells the product at a loss or for less than the price of the seller's domestic market would be considered guilty of dumping.

Question 4

In what way are there limits on each of the fundamental principles of capitalism?

Question 5

Explain several ways government can act as guardian of business, in terms of financial assistance.

Question 6

In what ways are crown corporations necessary?

Question 7

Briefly describe the differences in responsibilities among the three levels of government in Canada