1. ESSENTAILS OF A MIXED ECONOMY

2. Capitalism (Laissez Faire)
Laissez faire (Adam Smith) was used to describe the belief that the government should keep their hands off the economy.
Supported by liberals who believed “there were bound to be poor people in society”.
Typical laissez faire factory…
Means of production owned by capitalists
Owners want to maximize production
Low wages
Expensive product
If there is an excess of labor people are fired
Workers are seen as a piece of machinery

3. Ideas to Battle the Evils of the Industrial Revolution
Democratic Socialism
Turned against Laissez Faire policies and urged government reform to help the long suffering workers.
Typical factory run by the beliefs of a democratic socialist…
Means of production still owned by capitalists
Minimum wage laws would be passed to create higher wages
Reduction in working hours
Safety conditions in factories
Labor unions allowed to operate in the interest of the workers, etc.
They believe that while everyone may not be born with equal abilities, all are equal as human beings and should therefore be guaranteed the basic necessities of life.

4. Ideas to Battle the Evils of the Industrial Revolution
Communism
Communists believe that the inequality capitalism should be overthrown by workers (proletariat) in a violent revolution.
Ultimately capitalists are out to exploit the “proletariat” to make a profit.
Factory run by the beliefs of a Communist…
Workers would overthrow the bourgeoisie (owner)
Temporary dictatorship is set up to create stability
Once the stability exists the government “withers away” and society becomes a workers paradise.
State owns the factory
No profits simply make what you need
Workers are all paid equally. (From each according to their ability, to each according to their need – Karl Marx)
Karl Marx : The Communist Manifesto

5. SWEDEN Both private & public enterprise
Wealth to be distributed evenly
Goal is that every person has a high standard of living

6. PRIVATE OWNERSHIP Almost 100% of agriculture
Private enterprise employs 90% of all industrial workers
Produce 95% of manufactured goods
Many multinationals (IKEA, Saab, Electrolux, Volvo)
Exporter of technology

7. GOVERNMENT CONTROLS Controls some essential services
Natural resources, transportation, energy, railway, water, power, etc.)
Atomic energy state monopoly
Some control because of social policy to prevent company bankruptcies and to maintain high employment.
Use fiscal and monetary policies (loans, interest rates, subsidies, taxes.)

8. GOVERNMENT PLANNING
Purpose of regulations is the desire for the free enterprise to run smoothly
Use five year plans (not official govt. policy)
Forecast and project for economic growth
Communicate to private firms
guidance
Methods of indirect planning (Indicative Planning)
The use of government targets to coordinate private and public economic decision making.
Methods of direct planning
Full employment/freedom from poverty
Social welfare programs

9. THE ROLE OF UNIONS IN THE SWEDISH ECONOMY
Cooperation of Swedish leaders in business, labour and government.
80% of workforce is unionized
Role of unions is to abolish the negativity of capitalism.
Co-determination Act of 1977
Gave unions a role in industrial decision making. (i.e. wage earner funds)
All decisions are negotiated

10. THE CRADLE TO GRAVE WELFARE STATE (Womb to Tomb)
Jobs, housing, adequate income, medical care
Free pre-natal care, family allowance, maternity/paternity allowance
Free nursery, low cost daycare, funded higher education
5 week vacations, old age pensions
Goal is that every person has a high standard of living

11. Economic Equality in Sweden
Health:
90% if workers are sick
Free health care
Dental care free for under 19 (40% over 19)
Travel to and from doctor covered
Patients pay only 4% of all medical fees.

12. Education:
Free to secondary (lunches included)
Grants & loans to post secondary
Pensions:
Receive pension 65+ (65% of highest income years.)
Housing:
Housing subsidies for families with children.
Construction regulated by government to ensure safety.

13. Unions:
Operates U.I.
Government paid scholarships
Training
Relocation (travel expenses)
Unemployment Rates
Sweden (2004) 3-4 %
Canada (2004) 7.5 %

14. BUT…. Canada 5% GST Sweden 25% VAT
Sweden’s tax rate is considerably higher than any other country in the world.
Canada 5% GST
Sweden 25% VAT

15. THE ECONOMIC CRISIS IN SWEDEN
1970 deficit was increasing, high inflation, high unemployment
1982 the Social Democratic Party is elected
Depression
Persuaded Swedes to save
Produced more goods, decreased consumption of consumer goods.
Invest surplus money in countries economy.
Reduce govt. $, lower interest rates
Used capitalist policies to maximize production and socialist policies to redistribute wealth.
RESULT= economic growth

16. Probably the closest Canada has come to a pure market system was during the 1920s.
During that decade governments followed Adam Smith's advice, and left the privately owned economy alone.
Because government did little, taxes were low.
Then came the "crash of '29" followed by the Great Depression. Most Canadians experienced major economic hardships throughout the 1930s.

17. Business owners and workers began to feel that the government should do something to prevent such a national collapse again and to provide help to helpless individuals.
Since then, the Canadian government's role in the economy has grown steadily so that in the 1990s, Canada has become very much a mixed economy.

18. MIXED ECONOMIES (CANADA)

19. Look at some of the programs run by governments in Canada today:
• stabilization of the economy to prevent booms and busts
(Monetary Policy)
control of bank interest rates
Control $ supply
(Fiscal Policy)
increase or decrease taxes
increase or decrease government spending
BANK OF CANADA

20. Government Laws & Regulations
Agriculture
Govt. marketing boards
Influence prices
Crop controls
Quotas to limit production
Food inspection
Negotiate sales of wheat to foreign nations
Regulation of the market
quality controls
some price controls
• prevention of monopolies to preserve competition
Deregulation
A reduction of govt. restrictions on business enterprises. (neo-conservatives)

21. Provision of public services (universality)
Redistribution of wealth to provide security
old age pension
unemployment insurance
child tax credit
welfare
Provision of financial support to businesses
subsidies to failing businesses
Provision of public services (universality)
schools
Police
fire control
Hospitals
parks
Transfer Programs
Progressive tax systems

22. Government Owned Business
Crown Corporations (nationalized industry)
CBC Radio and TV
Royal Canadian Mint
Canada Post Corporation
Reasons…
Control an area of the economy which is vital to general welfare of nation.
To provide goods/services private entrepreneurs are unable to provide.
Earn income for the government.
To rescue companies from bankruptcy.
Help stabilize economy.

23. Privatization
Keynesian Methods (deficit financing) created a $580 billion dollar deficit by 1996.
Canadian govt. began cutting social programs.
Selling of state owned companies to private industry. (Thatcherism/Reaganomics)
Create more efficiency in govt.
Cut bureaucracy in govt.
Mulroney
Privatized 39 crown corps.
Prov. Govt. Alberta
Liquor
Licensing
Telephone

24. Direct Taxes: those paid by citizens. (GST/Income tax)
Indirect Taxes: hidden in the price of goods. (excise tax)

25. There are many direct and indirect controls over our economic system.
The good news is that these many government programs and regulations have provided us with increased stability, security, and equality.
The bad news is that we have lost some individual freedoms and that the cost to taxpayers is high.

27. What role(s) should the government play in the Canadian economy?