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Old Order of the Post War The aim of this report is to look at historical reason of Canada being a welfare state and being changed to a more capitalistic society. The era of Keynesian Welfare State (KWS) and contemporary Neo Liberalism and the effects of Mike Harris government policy will be discussed. The old order is definitely dying; however the new order that gets established in Canada does not seem to be the era of economic prosperity and democracy at their full potential. After 1945, the size of government sharply increased as new government institution and new programs were added. The government grows and the government expenditure made up to around 40 % of Gross Domestic Product (GDP).
Any major decision made by the government would have a great influence on the market. (Begley, p. 147) On the other hand, business corporations lost their influence on government as they had during the era of National policy. On the level of trade, the primary international trade agency, General Agreement on Tariffs and Trade (GATT) was formed for tariff negotiations in 1947. (Weibner, p. 70) The aims of GATT were Raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, developing the full use of the resources of the world and expanding the production and exchange of goods, being desirous of contributing to these objectives by the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce. (Owen, p. 125) GATT formed the framework for seven rounds of global tariff reduction negotiations. During the golden age, Canada experienced low unemployment rate, low inflation rate and small deficit. However, with the increasing activities between nations, BWS started to face new problems. Firstly, the rise of the Eurocurrency market in the 1960 s placed increasing strain on the BWS. (Bretton Woods Agreement) President Nixon shocked the world financial market by announcing that the dollar was no longer freely convertible into gold, which signaled the end of fixed change rates. This action increased the pressure on BWS.
By 1973, the BWS had collapsed. Secondly, the collapse of Bretton Woods was compound in 1973 by the decision of the Organization of Petroleum Exporting Countries (OPEC) to quadruple the price of oil, affecting a huge transfer of funds from oil-importing countries to oil-exporting countries. Oil-exporting countries were left with a large surplus to invest on international money market. The banks lent increasingly to developing countries. In the process both the intensity and the extensity of global flows were transformed. (Owen, p. 162) Thirdly, the rate of growth is declined as Fordism reached its maximum marginal value of production. The rise of the price of oil also played a role in the declining marginal value.
In 1970 s, the economy experienced stagnation that there were both high inflation and high unemployment rate existed. There was an increasing deficit because of decreasing tax revenues and increasing expenses on welfare programs as the function of automatic stabilizer. Since Keynesian provided no explanation and solution to stagnation, monetarism helped to explain it. In 1975, the bank of Canada officially adopted monetary policy. On the level of production, Multinational Corporations (MNCs) have grown; there has been a significant trans nationalization of production expressed in the emergence of global production and distribution networks. The North American Free Trade Agreement (NAFTA) encouraged the development of three major markets: Canada, Mexico, US such that MNCs have been induced to locate production insides each of these blocs (Begley, p. 84).
Since Mexico had little regulations toward employments welfare, environmental protection and US has been the major investor of Canadian manufacture sector, Canada had to deregulate many laws in order to attract US and other foreign investments to continue investing in Canada. In 1989, the trade relationship between Canada and US has moved forward, culminating in the establishment of Canadian American Free Trade Agreement (FTA) Worldwide, many production sites were shifted to the Third World Countries, which had no unions or little power on unions and no regulations on working condition and environment protection. On the level of finance, during the 1970 s and 1980 s the national capital controls became less and less effective because of the growth of Euromarkets and the collapse of BWS. One of the aims of World Bank, which is founded in 1944, is to Promoting reforms to create a stable macroeconomic environment, conducive to investment and long-term planning (). World Bank provides nearly $ 30 billion in loans annually to its client countries; therefore we can see the political and economic influences it has on these countries.
On the level of trade, the formation of Business Council on National Issues in 1976 has a long-term effect on Canadian policy making. Since most of the members of BCNI are large corporations, they have the power to influence governmental policies though business action. It had helped to solve the Albert oil crisis and the establishment of NAFTA. When the politics are making decision that will affect business realm, they will concern the reaction of those investment companies, but they do not spend so much concern on unions. 90 per cent of Canada-U.
S. trade is concentrated in the hands of just 200 companies. A survey of the employment practices of companies belonging to BCNI shows that 37 members of this powerful group that lobbied so hard for the FTA and NAFTA have reduced their payroll by a total of 215, 414 employees between 1988 and 1994 (Weibner, p. 99). Social programs cut over the last seven years, big business has successfully campaigned for less government regulation and for the weakening of social programs in the name of leveling the playing field number (Weibner, p. 114). Canadians are not racing for the public goods. If they continue to allow corporation lobbies to influence the governmental decision making process, the existing public goods will disappear also.
During 1995 - 1996, Federal Government cut its health expenditures from 9024 millions to 1077 millions, education expenditure from 6254 millions to 3355 millions (drop nearly 45 per cent), transportation and communication expenditure from 5192 millions to 3306 millions. Only general-purpose transfers expenditures were increased from 10429 millions to 23834 millions dramatically (Richardson, p. 89). By 1998 / 99 the liberals have cut $ 7 billion in social transfers to the province (Richardson, p. 90). When the government cut the budgets on welfare and on the other hand cut the tax together, the victims will be the lower class family. Cutting the education funds makes students pay more tuition fees and increase the burden on their families. Cutting the health expenses leads to hospital refuse to accept new patients and hurt the people who need medical attention.
Since the government does not provide low rent housing, many families, not a single person, cannot afford to live in a decent home and need to live outdoor with the danger and harsh weather nearby. Only 34. 9 per cent of unemployment workers received UI benefit (Richardson, p. 77). Federal government also sets new rules that people who are receiving UI need to do volute works but they ignore the fact that some people need to take care of the children and cannot go to work. Privatizing public corporations such as hydro will eventually lead to increase the fees and thus in add burden to the poor. It is true that Canadian economy has benefited from these changes and brings economy away from the crisis of the deep depression. However, Canadians will lose the public good that had existed in society for nearly 50 years if the society approaches the format of capitalism.
Although adopting monetary policy hurts the benefits of the workers, it is clear that Canada cannot go back to the period of KWS. If Canada can find a balance between Keynesianism and Neo-Liberalism, people will have both the benefits of the welfare and economic efficiency. Words Count: 1, 304. Bibliography: Begley, J. Canadian Economic Policies.
Ottawa: Scientific Press, 1999. Owen, K. The Evolution of Contemporary Economic Order. New York: Harper Collins, 2000.
Richardson, D. Welfare System in Canada. Ottawa: Scientific Press, 1999. Weibner, A. Contemporary Democracies Need for Change. Michigan: Zondervan Publishers, 2002.
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