What is the economic ideology being expressed by Jim Flaherty, the Federal Minister of Finance?
Jim Flaherty, the Federal Minister of Finance is trying to advance various economic ideologies that will help Canada to move forward as far as the economic growth rate is concerned. He is in a way trying to advance Adam Smith’s ideology on the importance of self-interests in an economy. This means that there should be an invisible hand. The minister is of the idea that an increase in business investments will allow his government to end its stimulus program (Badertscher, 2010, p. 13). In this case, he believes that any increase in business activities will stimulate the economy to perform well. He seems to be warming up to the ideology of the trickle-down effect. This is because a country can not move forward without investments. Investments will restore business confidence in the country and create demand (Wesson, 2007, p. 13).
Mr. Flaherty wants to increase exports because this has been the country’s weakness. This is a good economic ideology because countries should be more export-oriented than import oriented (Wesson, 2007, p. 17). Since the US accounts for 63% of the country’s exports, it will be good to enhance exports for long term sustainability (Howlett and Curry, 2010, p. 15). In this case, the finance minister wants to increase the country’s exports. For the county to move forward, he feels that it should be able to reduce deficits and debts. This will therefore insulate Canada from further economic shocks (Badertscher, 2010, p. 18). Besides, the finance minister wants other provinces to reduce their budget deficits because this might hurt the economy.
How does Canada’s Federal system affect economic policy in the recovery?
Canada’s federal system affects economic recovery in a broadway. In this case, economic recovery will depend on various policies that the system will come up with (Jurkowski and Eaton, 2003, p. 17). For instance, the federal system has maintained a low policy rate and this is very good for the economy. Interest rates are supposed to be kept low to encourage lending that will increase investments (Wesson, 2007, p. 23). For sustainable economic recovery, the federal system should come up with good policies to support various economic sectors (Wesson, 2007, p. 25). This, therefore, explains why the country’s economic recovery depends on its federal system.
The most important economic priority for Jim Flaherty is to increase business investments and reduce budget deficits and debts. Business investments are important to him because the economy will be able to stimulate demand in various sectors (Badertscher, 2010, p. 28). Any investments will create jobs in the economy and allow people to spend. Whenever an economy experiences an increase in market confidence, businesses will create wealth and stimulate demand (Wesson, 2007, p. 31). As much as the finance minister wants to increase business investments, he also wants to reduce the country’s budget deficits through good exports (Wesson, 2007, p. 34).
Dwight Duncan, the Minister of Finance for Ontario wants to reduce budget deficits and this is an important economic priority for him. It is projected that Ontario will have a budget deficit of $18.7-billion and this is a major concern for the Finance minister. This is because Ontario accounts for 40% of Canada’s economy (Howlett and Curry, 2010, p. 28). Reducing the budget deficit is important for Dwight Duncan because he also needs to stimulate the economy. A large budget deficit will limit his spending and this is not good for the economy because various sectors need to be supported through good allocations (Wesson, 2007, p. 42).
Flaherty’s policies will increase Canada’s competitiveness broadly. It should be known that a boost in business confidence will attract investors in the country and this will make it more competitive (Wallace, 2002, p. 17). On the other hand, businesses will be able to compete well because there will be demand in the economy (Wesson, 2007, p. 28). An increase in exports will also help to build the country’s businesses. Duncan’s policies will increase Ontario’s competitiveness through good business performance. As much as Duncan might have good policies, their success depends on a good federal system (Wesson, 2007, p. 36). This means that they have to work hand in hand with Mr. Flaherty.
Different economic policies at the Provincial and Federal levels will give the country stable economic growth because it will encourage competition (Sturgeon, 2009, p. 17). In this case, everybody will strive to ensure that they have the right policies in place (Wesson, 2007, p. 29). Different policies will also ensure that all the sectors of the economy are well supported. This is because of diversity in various sectors of the economy (Wesson, 2007, p. 37). It should be known that different economic policies at the Provincial and Federal levels might also have various disadvantages. In this case, there will be no national coherence. This is because everybody will always come up with policies that suit his/her interests (Howlett and Curry, 2010, p. 34). There can also be harmonization problems because these policies have various far-reaching impacts and effects (Wesson, 2007, p. 39).
Evaluate the policies in light of their impact on this business in Ontario
The banking business is very stable in Ontario and it should be assisted to pick up well (Wesson, 2007, p. 17). An example of an Ontario-based bank is CVB Financial Corp that grappled with losses because of bad loans. Therefore, these policies will have various impacts on such businesses (Sturgeon, 2009, p. 24). The Finance ministers have come up with a policy to reduce interest rates. Such a bank will only grow its books if there are high-interest rates on loans but the finance ministers want such rates to be reduced to encourage lending. The implementation of various adequate policies like tight rules on lending and operations of the sector can also reduce the growth of the banking business in Ontario as time goes by (Wesson, 2007, p. 27).
Most of these economic policies will support the success of such businesses to recover from the recession. Policies aimed at increasing the availability of credit will attract investors’ in the country (Wesson, 2007, p. 18). In this case, fiscal policies will help to revive the growth of credit. To encourage investments, the government has been giving banks enough credit for them to lend (Badertscher, 2010, p. 28). This is a good policy that will increase the bank’s business because people will have confidence in the economy (Wesson, 2007, p. 43). Such policies will also allow banks to repair their balance sheets for long-term sustainability and this is good for the economy.
Reference list
Badertscher, P. (2010). Flaherty ‘Comfortable’ Business Will Replace Stimulus. Web.
Howlett, K., & Curry, B. (2010). Canadian finance ministers to target debts and deficits in New Year. Web.
Jurkowski, D., & Eaton, G. (2003). Between Public and Private: Readings and Cases on Canada’s Mixed Economy. North York: Captus Press Inc.
Sturgeon, J. (2009). Jobless rate to peak at 10%. Ontario: Firefly Books.
Wallace, I. (2002). A Geography of the Canadian Economy. Don Mills: Oxford University Press.
Wesson, T. (2007). Canada and the New World Economic Order. North York: Captus Press Inc.