What do the three levels of government in Canada do?

Answer 1

Legally, there are only two levels of government in Canada. Federal and Provincial.

Canada has a government in the Westminster tradition, meaning basically that Parliament is the supreme authority. This is complicated by the fact that there are two parliamentary jurisdictions - Federal and Provincial - with separate houses governing each. In theory, any House of Parliament can make any law it chooses. The Provincial government is not legally subordinate to the Federal government or vice-versa. In practice, the Provincial Parliaments generally hold sway in most matters within their geographical borders, while the Federal government has almost exclusive say in matters of state (since the provincial governments have no army and are not recognized by International bodies such as the UN).

Chief among the powers of the Federal Government, aside from control over military and international diplomatic matters, is control over the currency and the central bank. This gives the federal government the ability to determine prevailing interest rates and bank reserve requirements and the output of the Candian Mint and, thereby, the money supply, the exchange rate, and the availability of credit.

For this reason the provinces, individually or collectively, are virtually powerless to pursue economic policies which run counter to Federal government monetary policy. For example, in the 1980s the Ontario Government under David Petersen tried, and failed, to insulate Ontario (and the rest of the country to some extent) from the disastrous and usurous monetary policies of the Federal government under Brian Mulroney by expanding Provincial spending to stimulate employment. Petersen lost the next election to Bob Rae, who had an explicit platform of spending the entire country out of recession using Ontario`s inherent industrial and financial might. Rae failed for various reasons - chief among these was the fact that Petersen had already run up the Provincial deficit in a similar, but unannounced campaign. There was no money left to spend, and no credit readily available.

The lesson here is that only the Federal government can literally print money. It alone has unlimited power to stimulate the domestic economy through inflating the money supply. It alone can contract the money supply and suppress economic activity country-wide.

The Provinces and Territories are obliged to borrow on the open market, which demands that they pay market rates, which in turn requires that their spending generate real economic growth and subsequent tax revenues which meet or exceed the interest rate they are obiged to pay.

When the prevailing interest rate, set by the Federal government, exceeds the real returns to capital, as it did consistently under the Mulroney regime, this is not possible for more than a few months.

For their part, Municipal governments are creatures of the Province and have no powers except those explicitly granted by their respective provincial governments. In similar fashion, Territories are subordinate to the Federal Government as, by extension, are the municipalities contained within them.

There has been some movement to recognize the councils of the larger cities as a separate level of government, but this would require a constitutional amendment which has so far not been seriously entertained by anyone.

Municipalities are generally also registered Corporations, however, which gives them the same rights as other corporations to conduct business such as charging fees for services, making investments, and borrowing money on the open market.

as a footnote: there is also a municipal government