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Government Involvement in the Economy - Coggle Diagram
Government Involvement in the Economy
PART 1
Environmental Protection
Some companies and businesses care more about profit than environmental sustainability, and if left to their own devices, they would pollute freely in the name of maximizing profit. Government agencies ensure that companies meet environmental protection standards.
Environmental and Climate Change Canada informs Canadians about protecting and conserving our natural heritage, and ensuring a clean, safe and sustainable environment for present and future generations. The department regulates industry through acts such as the Canadian Environmental Protection Act, 1999 (CEPA 1999).
An example of environmental regulation on businesses are forestry companies. Forestry companies usually harvest trees from public or 'crown' land. After they clear the trees off of the land, they must pay to have the land re-planted with trees to ensure the sustainability of our forests.
Ensuring the Safety of the Consumer
Health Canada sets safety regulations for companies that produce goods for human consumption. They require companies to display the nutritional value of food on its packaging. They require for cigarette companies to clearly warn people of the health risks.
The Canadian Standards Association (CSA) is responsible for ensuring that products meet industry standards for safety. This is an example of a Crown Corporation. To be able to display the sticker, a product must undergo extensive stress tests and material science tests.
If a product passes all safety tests, it is usually trusted in the market, however, the government agencies responsible for consumer safety cannot oversee all production. Sometimes, unsafe products slip through and enter the market. If they do, the government can force the company to issue a recall on that product. A recall allows the consumer to have their purchased good repaired for free or are given a refund.
Promoting a Stable Market
What is an example of a monopoly?
De Beers Consolidated Mines once controlled the majority of the market for diamonds. They gained control by pricing out their competitors. Once they gained control, they were able to control the price of diamonds. They could create "artificial scarcity" to increase the demand and heighten the prices.
Why are monopolies a bad thing?
They cut out competition.
If the company has a monopoly, they are able to set the price to at what they want.
There is less incentive to create a product of better quality.
What is a monopoly?
A monopoly is when a company or group has complete control over the supply of a product or service.
PART 2
Prevent Price Fixing
Price Fixing occurs when several similar companies collectively agree to inflate the prices of their products to increase profits.
An example of price fixing occurring would be if Shell, Esso, and Petro-Canada agreed to increase the prices of their fuel to increase profits.
The
Competition Act
enforces the prevention of price fixing and ensures the best prices for consumers.
Crown Corporations
Crown corporations are wholly owned federal or provincial organizations that are structured like private or independent businesses.
Some notable examples of Crown Corporations are:
CBC, Canada Post, VIA Rail, Bank of Canada
Crown Corporations are usually created to fulfill a need that would not make any profit for a private company.
An example of this is electric and water infrastructure in towns and cities.
Some crown corporations exist to promote Canadian culture and identity.
An example would be CBC. It is completely government funded and creates 100% Canadian content.
Drawbacks of Government Involvement in the Economy
Governments hold a lot of power and have access to information outside of the public sphere. It is against the law for government officials to use private information to gain profit. This is called insider-trading.
A group of senators from the United States sold a significant part of their stock portfolio after a private briefing about the damage that COVID-19 would do to the stock market. This is an example of insider-trading.
Governments sometimes have a reputation for being inefficient and wasteful. Government employees typically are paid well and grow to become lazy in their work.
Private companies run on profit so finding efficiencies makes you more competitive and profitable.
Labour Laws
In Canada and every province, there are laws that protect worker and employer rights.
Governments enforce occupational health and safety standards.
They conduct workplace inspections.
They investigate workplace accidents and injury.
Why are they important?
Labour Laws protect the rights of workers and ensure their safety.