When the economies of some Asian countries declined sharply in 1998, an economic sickness dubbed the Asian Flu, the bug spread around the world affecting many countries and hit the Canadian economy too. Soon, the entire world was hit with a serious recession. A year or two later, other reasons led to another global crisis. This is one of the negative effects of a globalized world of business. It is the economic equivalent of easier and faster plane travel allowing germs to be spread more easily from country to country. Then things started to pickup a bit, but in 2000 and 2001 there were several serious reverses. First the hi-tech and dot.com bubble burst and their shares collapsed on the stock markets. The final blow was the terrorist attacks in the U.S. on September 11, 2001 which triggered a chain of negative developments in various sectors of the U.S. and Canadian economies.

As a result, the economy in Canada has been on a roller coaster ride the last few years. In 2001 and early 2002 unemployment started to climb as companies continued to lay off employees due to falling demand. Another effect was the weakening value of the Canadian dollar relative to the U.S. dollar. By 2001/02 our dollar was fluctuating in the record low area of 62-63 cents. Both of these developments, as the chapter noted, resulted in an unprecedented number of interest rate reductions by the Bank of Canada in the attempt to boost the economy. The rate reached levels not seen since the 1960s.

What was strange is that, unlike previous recessions, the new, knowledge-based economy was in trouble while the old economy was doing well. Because there was no inflation and interest rates were so low consumers were buying cars and homes, the real estate market was booming, and the 2001 Christmas season saw malls packed with customers.

The experts' disagreements about the exact state of the economy and the varying conditions across Canada make it difficult for businesses and governments to make plans for the future.

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Turmoil in the Economy (The Coming Storm)

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1			As noted in the textbook, the dominant trend in recent times, in the business world, has been favouring unrestricted, free market operations. The current global economic problems have led to a demand for a greater role for government to limit some of the international free market activities that led to or worsened difficulties in many countries. Discuss the pros and cons of this issue.
2			Imagine you are a CEO of a medium size company in January 2002, located in Alberta and you are aware of the different opinions of business and economic experts about the economy and where it’s heading. On January 12 you see a headline in the Globe and Mail, “Job losses likely to deepen” followed by a subheading, “Calls mounting for federal action to further stimulate flagging economy.” Would you support such a call? Or would you feel that it’s up to each company to solve their own problems? Would you feel differently if your company was in B.C? Explain your position.