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The Minister of Finance, Paul Martin, announced that Canada had a record a surplus of $2.9 billion, their promises of tax relief have been executed and the unemployment rates has fallen to 7.5 per cent, its lowest level in more than nine years (Finance Canada). The costs of this good news are the budget cut of the federal government on social welfare programs in recently years. Hospital rejected to accept new patients. Toronto High Schools was shut down. Homeless people sleep outdoors. Is the monetary policy that Mike Harris exercising harms the people? The aim of this article 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
In 1878, McDonald national policy was introduced. McDonald introduced a set of import tariffs to protect the domestic market. This policy became the diving force of Canadian economy until 1930's with the problems of the great depression, world economic crisis and government deficit. In 1936, John Maynard Keynes published his book "The General Theory of Employment, Interest and Money". He argued that a depression was a short run phenomenon because of a lack of demand. If the government could inject money to the private sector, the private sector would be better off and spending money and the government could collect tax. It has been called as demand-management policy.
The crises were solved by the breakout of the Second World War (WWII) in 1937.
After WWII, many governments (including Canada, UK and US) pursued Keynesian demand-management policy.
On the level of production, in 1940's, Henry Ford decided to bring a new method of production, assembly line production, with a 5 dollars day policy. His idea was to create a new type of workers who could afford to own cars and to avoid alienation of workers. Ford also brought along many workers' benefits such as consultants to make the workers concentrating on their jobs. This concept, Fordism, became a system that there was a matching of mass production with mass consumption. Fordism also led to the recognition of collective bargaining power. Unions were established to bargain for their rate of wages and everyone automatically became a union member. The power of unions was continually growing up while word output grew at an unprecedented rate of 3.9 per cent annually during the golden age (1950-1973) (Held 164).
On the level of finance, the Bretton Woods agreement was also signed during KWS period in 1944. The core of Bretton Wood System (BWS) was the agreement of International Monetary Fund (IMF). " The purpose of IMF is to promote international monetary cooperation, exchange stability... to provide temporary financial assistance to countries under adequate safeguards to help ease balance of payments adjustment" (IMF). With the BWS, capital outflows were strictly controlled. For nearly three decades, governments were relatively free from the constant treat of capital withdrawal as today. Away from the treat enabled them to "be far more responsive to demands from the electorate - demands that usually involved policies aimed at achieving full employment and developing social programs." (Howlett 540). In Canada, government introduced new social and welfare programs, for example, unemployment insurance, family allowance, Canada assistant plan and health care program. Post-secondary education was funded. By the demand management policy, the fund to welfare programs would be automatically adjusted with the number of unemployment. These were the origin of our existed social welfare program. Capital controls also created stable currency values that helped to promote World Trade.
After1945, 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 to the market. On the other hand, business corporations lost their influence to government as they had during the era of National policy.
Quotes talked about in this paper
Terminology referenced in this essay
inflation rate, Finance, unemployment rates, UI, capitalism, Gross Domestic Product,
Names talked about in this research material
Howlett, Mike Harris, Bretton Woods, John Maynard Keynes, Henry Ford, Paul Martin, Dillion, McQuaig, Milton Friedman, Knight, Pratt, David, Nixon,
Organizations talked about in this research paper
federal government, International Monetary Fund, NAFTA, US government, Toronto High Schools, Organization of Petroleum Exporting Countries, Multinational Corporations, FTA,
Locations talked about in this research material
Canada, subsidy, Mexico, Ontario,
Health Conditions referenced in this essay
a short run phenomenon,
Companies mentioned in this term paper
the BWS, McDonald, World Bank, bank of Canada,
Keywords referenced in this term paper
policy, welfare programs, social welfare programs, monetary policy, Canada, federal government, unemployment rate, trade, Free Trade Agreement, Mike Harris, government policy, public good, national policy, market, welfare state, deficits, government expenditure, World Bank, government deficit, North American Free Trade Agreement, corporations, Bretton Woods agreement, Canadian economy, government policies, Keynesian, demand management policy, government regulation, marginal value, capital controls, golden age, tariff, GATT, private sector, economic efficiency, unions, International Monetary Fund, interest rate, Third World Countries, unemployment insurance, policy making, international money market, the government, fiscal policy, inflation rate, investment, John Maynard Keynes, Gross Domestic Product, Second World War, trade deficit, health expenditure,