Federalism - Week 2: Week 2: The Implications of Federalism...

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Unformatted text preview: Week 2: Week 2: The Implications of Federalism on Business and Society Business in the Canadian Context Definition of Federalism Definition of Federalism Distribution of power in a federation between the central authority and the constituent units (as states or provinces) involving the allocation of significant lawmaking powers to those constituent units A system of government in which power is divided between a national (federal) government and various regional governments. Federalism in Practice Federalism in Practice This arrangement not only allows provincial governments to respond directly to the interests of their local populations, but also serves to check the power of the federal government. The federal government determines foreign policy, with exclusive power to make treaties, declare war, and control imports and exports; Provincial governments oversee the provision of education, health care, social services and the creation of municipalities. Federalism in Practice Federalism in Practice Neither level of government can subordinate or overrule the authority of the other. The power of the central authority (i.e. the federal government) extends throughout the country and is “higher” than the power of each regional authority In the event of inconsistency between federal law and a provincial law, it is the federal or national law that prevails. Examples of Federalism Examples of Federalism Canada is a federalist state, with three levels of government The United States is also a federalist state with three levels of government Federal government in both examples exerts strong central authority, yet leaves significant decisions and powers up to the regional constituencies. The Unitary State: The Unitary State: An Alternative to Federalism Power is located in one central authority. Local authorities are subordinate to the central power. The legislature may remove the power granted to it by the central government. Example: Municipalities are subordinate to the provinces in Canada. Their decisions can be overruled by the provincial legislature that they are under. Great Britain is an example of a Unitary state When Federalist Becomes Unitary When Federalist Becomes Unitary In times of great crisis, a unitary state can evolve from a federalist one During World War II, the federal government assumed powers that were previously in the hands of the provinces; this went back to normal after the war What determines a Federal state? 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. Problems of Federalism Problems of Federalism Conflicts in fiscal policy. Federalism operates to preserve the status quo Federalism can act as a barrier to change Dual Challenge of Federalism Dual Challenge of Federalism A federal state must attempt to build a national strategy. Develop a transfer payment policy that redistributes Canada’s wealth fairly. A federal state must attempt to appease regional interests. Example: Canada must help poorer areas of the country with tax dollars generated in Alberta, British Columbia, Saskatchewan and Newfoundland. Result: Alberta, British Columbia, Saskatchewan and Newfoundland send more money to Ottawa than they receive in services. Differences between US and Canada Differences between US and Canada Canada All powers not specifically reserved for the provinces are allotted to the Federal government. United States All powers not specifically reserved for the Federal government are allotted to the States. Development of Canadian Development of Canadian Federalism The ultimate aim was to found a transcontinental nation in the form of a constitutional monarchy under the British Crown. A strong central government was desired and if a legislative union was impossible because of the peculiarities of Quebec and its desire to retain these, then a strong and highly centralized federal union would be the answer. THE FOUNDATIONS OF CANADIAN FEDERALISM, http://www.parl.gc.ca/information/library Fathers of Confederation felt that the American government had given the individual states too much power and did not want to repeat these mistakes. Federalism is suited for independent regional entities that find it necessary to address issues that they could not deal with individually – defence is a good example. Quebec at that time saw the development of a federal Canadian state as a way to continue to guarantee the preservation of their unique culture. Increasingly it was worried that the Canadian colonies were the targets of American aggression. There were economic benefits for the individual colonies to come together as well. Development of Canadian Development of Canadian Federalism Selected Federal Powers The Public Debt The Regulation of Trade and Commerce Postal Service The Census and Statistics Militia, Military and Naval Service, and Defence Sea Coast and Inland Fisheries Currency, Coinage and Legal Tender Copyrights. Natives, and Lands reserved for the Natives Division of Powers in Canadian Division of Powers in Canadian Federalism Naturalization and Aliens Selected Provincial Powers Direct Taxation within the Province in order to the raising of a Revenue for Provincial Purposes The Establishment, Maintenance, and Management of Hospitals, Asylums and Charities Municipal Institutions in the Province Shop, Saloon, Tavern, Auctioneer, and other Licences in order to the raising of a Revenue for Provincial, Local, or Municipal Purposes The Solemnization of Marriage in the Province Generally all Matters of a merely local or private Nature in the Province The British North America Act 1867 What are the challenges to What are the challenges to Canadian Federalism? Duality of federalism: Country versus the Provinces/Territories. Nature of Regions: Provinces were independent prior to Confederation and have their own distinct identities. Provinces wish to assert their autonomy. Vast geographic distances. Money and Federalism Money and Federalism Fiscal and administrative arrangements are a key component of federal­provincial 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 Activism Federal Activism Since World War II, Feds increasingly involved themselves in Provincial affairs. Used transfer payments to coerce the provinces into adopting new national programs. Conditional grants can distort provincial budgetary priorities. The federal government can increase their influence in areas of Provincial jurisdiction. What is Equalization? Federal Activism Federal Activism Equalization is the Government of Canada’s most important program for addressing fiscal disparities among provinces. Equalization payments enable less prosperous provincial governments to provide their residents with public services that are reasonably comparable to those in other provinces, at reasonably comparable levels of taxation. The purpose of the program was entrenched in the Canadian Constitution in 1982: Equalization payments are unconditional – receiving provinces are free to spend the funds according to their own priorities. "Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation." (Subsection 36(2) of the Constitution Act, 1982) http://www.fin.gc.ca/FEDPROV/eqpe.html Federal Activism Federal Activism Equalization reduces fiscal disparities among provinces. Equalization payments enable less prosperous provincial governments to provide their residents with public services that are reasonably comparable to those in other provinces, at reasonably comparable levels of taxation. Newfoundland, British Columbia, Saskatchewan and Alberta not to receive Equalization payments. Currently at $13.6 billion a year. Until the 2009­2010 fiscal year, Ontario was the only province to have never received equalization payments; will now receive $347 million. PEI received $2.1 billion in 2007­2008. Impact of Federalism on Business Impact of Federalism on Business in Canada Canada has great regional diversity Geographic Economic Cultural Historic Impact of Federalism on Business Impact of Federalism on Business in Canada 60% of Canada’s population live in Ontario and Quebec. This is the “heartland” of Canada. The majority of manufacturing occurs in this region. This concentration into a relatively small geographic area (from Windsor to Quebec City) contributes to the alienation of other provinces in Canada. Canada’s federal parliamentary institution and the representational breakdown aggravates these divisions Ontario has 106 of 308 seats in parliament; Quebec has 75. The West combined (BC, Alberta, Saskatchewan Manitoba): 92 The East combined (Nova Scotia, New Brunswick, PEI and Newfoundland and Labrador): 32 Impact of Federalism on Business Impact of Federalism on Business in Canada Equalization payments have mostly been criticized by leaders of the wealthy provinces. Premiers of oil rich Alberta and Ontario with its large manufacturing base have both criticized the drain on their citizens' finances. Some economists also believe that they have contributed to the Martimes' longstanding economic backwardness. Under the current system there is no encouragement for an area to develop new profitable industries. Example: Newfoundland and Nova Scotia off­shore oil deals (Atlantic Accords) Impact of Federalism on Business Impact of Federalism on Business in Canada Federal government can also give economic incentives to an area to encourage the development of new industries and job creation Loan guarantees Tax incentives Cash grants Marketing and promotion Bailouts Impact of Federalism on Business Impact of Federalism on Business in Canada Using these federal initiatives, the government can steer development from one area of the country to another. Bombardier Example: In March 2005, Quebec was the winner in a bid to host a new Bombardier Jet plant. The federal government committed $400 million to the bid to have the plant locate there. Ontario (Toronto) was the second place bid. Without the federal money, the Ontario bid would have been the most lucrative. Impact of Federalism on Business Impact of Federalism on Business in Canada Market forces alone no longer dictate a company’s response to emerging opportunities or its decision with regard to location. Industrial Incentive Programs tend to direct new business to areas where unemployment is high. Impact of Federalism on Business Impact of Federalism on Business in Canada Politics plays a very big part in the awarding of grants and capital for companies. Earlier Bombardier example: Pundits believe the reason the federal government guaranteed the $400 million to chose Quebec over Ontario was in part due to the effects of the sponsorship scandal in that province. Impact of Federalism on Business Impact of Federalism on Business in Canada 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. 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. Government intervention can create artificial marketplaces. The Case The Case Cultivating Cash: How to Grow a Farming Business in Canada Government Intervention Government Intervention Canadian farmers are subsidized roughly 9 cents for every dollar they earn. Other industrialized nations have higher subsidies: US 45 cents for every dollar; European Union farmers get 56 cents per dollar. European farmers get grants to grow organic foods. Discussion Questions Discussion Questions Why should the government protect the agriculture industry? Use cultural, historical and economic reasons to justify your answer. What are some of the issues facing Canadian farmers internationally? Use examples. How can the examples in the case of government intervention show arguments against government intervention? ...
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This note was uploaded on 04/27/2010 for the course ADMS 1010 taught by Professor Jurkowski during the Spring '09 term at York University.

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