Economic Systems, Trade, Competition and Competitiveness

Introduction/Overview

Economic systems are the structures that govern who own, controls, and uses the inputs that go into production (Akande, 2022). The world is home to a variety of economic structures that fall under the categories of capitalism, socialism, communism, or mixed economies. According to Akande (2022), economic systems can be thought of as a range of state engagement in economic activities. He added that socialism and mixed economic systems fall in between capitalism and communism, which are on different extremities of the spectrum.

When the means of production are owned, managed, and used by people who are known as capitalists or entrepreneurs, an economic system is said to be capitalist. Communism, on the other hand, is a situation in which those elements are owned, managed, and utilized by the state or government. The state and private citizens both play different roles in socialist and mixed economies. Governments play a substantial role in economic activity in a socialist state, while private citizens and businesses follow the government's rules. Governmental and private organizations both play roles in mixed economic systems that are influenced by the circumstances and the economic units' aims.

Competition is one of the pillars of capitalism. Competition is characterized as constant conflict between participants. In markets, competition is the process through which production units compete with other suppliers or producers in the same or related industries by innovating, improving the quality of their products, and cutting costs. Businesses concentrate more emphasis on cost-cutting and quality improvements as a result of competition (Baggs, 2007). I'll be examining economic systems, trade, and competitiveness both worldwide and within the context of Canada in my study.

There are a lot of reasons why I chose this subject. First, both poor sub-Saharan African nations and powerful western nations have embraced the concepts of globalization, competition, and free trade. While adopting these liberal economic philosophies has greatly benefited wealthy western nations, the same cannot be said for African nations and other developing economies throughout the world. Second, non-liberal trade policies adopted by nations like China and Russia appear to have raised many people out of poverty and enhanced the quality of their lives. More people have slipped into poverty over the past 20 years despite trade liberalization in Africa and many developing nations, while a small group of people (capitalists) have become astronomically richer.

Summary of Research Findings

Shaffer (1992) examined the competitiveness test for Canadian banking. According to the author, the regulatory and institutional changes that have taken place in the banking sectors of the US and Canada during the 1980s have not had a negative effect on the level of competition in either market. He goes on to say that for economies to be considered competitive, they do not require thousands of banks. The authors' thesis appears to be in line with the 2004 banking consolidation in Nigeria, which reduced the number of banks from 89 to 24. (Victor, 2019). In fact, the number of banks declining has not adversely affected interbank rivalry or competitiveness.

Trade has a significant impact on human quality of life, economic development, job generation, and other factors. Martin (2015) examined academic works on the politics of international commerce in the Oxford handbook of the political economy of trade. There is general agreement that political factors influence how international trade is conducted. Furthermore, the fundamental elements of capitalism—globalization, competition, and the free market—have shown to benefit industrialized economies at the expense of undeveloped and developing ones. International trade is also said to have widened the gap between wealthy and developing nations in terms of economic prosperity. Despite these drawbacks, there are no philosophically preferable alternatives to free trade, competition, and globalization because all of them (protectionism, communism, socialism, etc.) have not produced any appreciable results.

Baggs & Bettigness (2007) found that competition has a strong direct pressure effect as well as a significant agency effect using a distinctive collection of Canadian data that surveys both businesses and their employees. They came to the conclusion that these effects increased the value that businesses placed on quality enhancements, cost-cutting, contractual incentives, and employee effort. Competition naturally encourages firms to innovate, look for ways to save costs, and offer customers a better experience. This healthy competition rewards companies that work hard and penalizes organizations who are unwilling to innovate. Because clients have few options in the market, incentives for efficiency are not as high stakes in monopolistic markets. This may help to understand why every alternative trading framework to globalization and competition has failed to deliver superior value to stakeholders.

Discussion and Analysis

???????????The left-right wing ideological split in political economy is based on the economic system, which also influences a country's wealth. Left-wingers believe that the government should be the driving force behind social change, in contrast to right-wing political economists and politicians who believe that social development should be driven by individuals. The context, experiences, orientation, and background of the researcher will inevitably influence their position on this issue. Such viewpoints have an impact on international trade, rivalry, and market competition. This part would go into more detail on research findings and how current firms might apply the research.

The USA, Canada, Europe, the UK, Australia, and New Zealand are among the Western nations leading the way in trade liberalization, free market principles, globalization, and capitalism. Since they are largely founded on the principle of demand and supply, these notions are comparable in many ways. It is noteworthy that early proponents of the free market philosophy, including Thomas Ricardo, Adam Smith, Karl Max, Thomas Malthus, and others, were all Westerners. Although, previously isolated and agrarian economies like China have benefited greatly from the free-market spectrum, which globalization seems to be the most recent addition to. The free market, capitalism, and globalization in China (and Russia) appear to have taken into account their particular conditions and have been created to benefit the majority of their populations.

Following independence, free market principles were imposed on many areas of Africa that had previously been colonized by neo-liberal nations in Europe. Neoliberalism has benefited western countries, but underdeveloped economies in Asia and Africa cannot say the same, according to this study. For instance, China and Russia, with their unique interpretations of neoliberalism, have a GDP per capita of above 12,000 as of 2022. Over the previous five years, this number has steadily increased. Neoliberalism has, however, been fully embraced in Ethiopia and Nigeria, where the GDP per capita is now 800 and 2,000 dollars, respectively, and has remained so over the past 5 years. Given these figures, the author contends that while neoliberalism may have benefited western economies, contextual variations (such as degree of education, poverty and late mover disadvantages)?prevents poorer countries from benefiting from neoliberalism. The idea that free trade is a universally advantageous trade practice also undermines the significance of colonial and neo-colonial advantages that allowed western powers to exploit and predate poorer countries.

Research Learnings

In the following ways, this study adds to the body of research on trade and neoliberalism:

???????i.???????????Neoliberalism has been and continues to be advantageous to wealthy western nations, but it is failing to produce the same results in poorer Asian and African nations.

?????ii.???????????Colonialism and neocolonialism, which allowed wealthy western nations to plunder and invade less developed Asian and African nations, contributed to their wealth. Therefore, neoliberalism cannot be fully credited for such prosperity.

???iii.???????????For instance, Canada claims to be a free market, yet it forbids foreign investment in industries it views as strategically important, like telecommunications, culture and tourism, and defense. In addition, I note that while Ontario, British Columbia, and Alberta are very liberalized, the same cannot be said for provinces like Manitoba, where the government controls more than 75% of the main economic activities, including insurance, energy, public transportation, tourism, city administration, urban planning, and significant portions of construction.

???iv.???????????If impoverished countries are to benefit from globalization and trade, neoliberal trade policies need to be adjusted as is the case in China and Russia.

?????v.???????????In order to develop a coherent argument about the limitations of neoliberalism in their respective countries, poor countries urgently need to collaborate with patriotic researchers and international diplomats. They should also step up their efforts with multilateral organizations in order to establish more equitable international trade practices.

Relevance of this research to businesses today

In many aspects, the research is applicable to businesses today. A truly equal society is aided by fair and equitable international trade, which also boosts productivity and output globally, raises standard of living, and lowers geopolitical tension.

First, an egalitarian society is one in which all people are treated equally. The needs and interests of developing economies do not appear to have been taken into consideration by current global trade practices. In fact, trade practices over the past 20 years have been parasitic and predatory to the detriment of developing countries. The implementation of trade equality would improve corporate profits by giving everybody nearly equal economic opportunity and reaffirming everyone's entitlement to a reasonable standard of living. In addition, fair trade would promote effective international capital flows and raise the GDP and GDP per capita of developing countries. Overall increases in productivity and output would follow from this.

Third, higher global output and productivity would improve the standard of living for people living in emerging nations, which account for roughly 85% of the world's population (World Data, 2023). A more inclusive economic policy would have a good impact on the eradication of poverty, the fight against international terrorism, the immigration crisis, and the reduction of mistrust between nations. Finally, fair trade would lessen geopolitical unrest, cold wars, and trade disputes between nations, like the ones we've seen between China and the US, Russia and the West, and others. For there to be sustained and inclusive prosperity, there must be world peace. A fair global trade policy would be advantageous for businesses in many respects because they operate in geopolitics. In closing, equitable global trade would result in Improved growth (in revenue and profitability), worldwide development, a trained and movable staff, and free flow of finance.

Conclusion

Trade, competition, competitiveness, and economic systems are all interconnected in various ways. Using examples from both established and emerging economies, this essay examined these subjects and how they are related. It has been noted that while industrialized countries have seen the predicted benefits of current constructs, the same cannot be said for developing economies. In light of this situation, the author argues in favor of inclusive, egalitarian, fair, and equitable trade policies that advance the interests of both rich and poor countries and enhance the wellbeing of their citizens.

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References

BAGGS, J., & DE BETTIGNIES, J.-E. (2007). PRODUCT MARKET COMPETITION AND AGENCY COSTS. Journal of Industrial Economics, 55(2), 289–323. https://doi.org/10.1111/j.1467-6451.2007.00312.x

“JJ McCullough.” The Canada Guide, 2018, thecanadaguide.com/basics/the-economy/.

Inim, V. (2019). BANKING REFORMS AND THE STABILITY OF THE NIGERIAN BANKING SYSTEM. International Journal of Management Studies and Social Science Research, 1(ISSN: 2582-0265). https://www.ijmsssr.org/paper/IJMSSSR0049.pdf

“List of the 152 Developing Countries.” Worlddata.info, www.worlddata.info/developing-countries.php#:~:text=Developing%20Countries%20%20%20%20Country%20%20.

Martin, L. L. (2015). The Oxford Handbook of the Political Economy of International Trade. In Google Books. Oxford University Press. https://books.google.ca/books?hl=en&lr=&id=ItfFBgAAQBAJ&oi=fnd&pg=PA213&dq=Competition+in+the+Canadian+market&ots=pJo_t2NFJB&sig=wqVsLYr8OELBuhJoVt9etEylDsw&redir_esc=y#v=onepage&q=Competition%20in%20the%20Canadian%20market&f=false

Shaffer, S. (1993). A Test of Competition in Canadian Banking. Journal of Money, Credit and Banking, 25(1), 49. https://doi.org/10.2307/2077819

Online, A. A. (2022, July 6). Does capitalism push citizens into poverty? Tribune Online; Nigerian Tribune. https://tribuneonlineng.com/does-capitalism-push-citizens-into-poverty/#:~:text=Opinions%20By%20Augustine.S.Akande%20On%20Jul%207%2C%202022%20THERE