Canada and the New World Economic Order

Canada's economic system is a market economy, encompassing the production,

sales and distribution of goods and services based upon

prices set in the marketplace. The marketplace establishes an economic

framework within which firms compete on the basis of a number

of factors: price, quality, delivery, after-sales service etc. Competitiveness is

a measure of the ability to succeed in this context. This article presents several

different approaches to mcasuring competitiveness, and analyzes many of the

factors influencing its enhancement.

TJlE CONCEPT OF COMPETITJWNESS

The World Competitiveness Report, prepared by the Geneva-based World Economic

Forum and the International Management Development Institutc in

Lausanne, defines competitiveness as "...the ability to design, produce and market

goods and services, the price and non-price characteristics of which form a

more attractive package than those of c~mpetitors."~

Global Competitiveness

Until relatively recently competitiveness could be viewed primarily from a

domestic perspective, since the majority of firms competed only in a domestic

marketplace. Manufactured goods tended to be large and bulky, making it difficult

t o conduct significant international trade. Of course, considerable international

commerce did takc placc, but it was primarily in commodities -

agricultural products and natural resources.

This is no longer the case. The nature of production and distribution in

the world economy has changed dramatically in the past 50 years or so. The

advent of technologies (such as microelectronics) and thc introduction of new

materials (such as plastics) resulted in the miniaturization of many goods, Icading

to the development of manufactured products that arc much more casily

DAVID BARROWS AND JOHN A. COTSOMITIS

transported. It is now possible - and indeed, common to ship significant

quantities of automobiles from Japan to North America, an undertaking that

would have been unthinkable even 30 years ago. With technological breakthroughs

in communications and transportation, therc has also been a significant

increase in the exchange of tradeable services in a wide variety of fields,

including construction, engineering, architecture, legal and accounting services

and tourism.

As a result of the significant increase in international trade of manufactured

goods and services, many economists and business strategists have concluded

that competitiveness must now be defined in a broader, international,

context. Competitors are no longer within the same community or nation state.

Firms must think of competition as truly global in terms of both gaining export

markets and defending against competitors in domestic markets.

Goals of Competitiveness

From a broader societal perspective, it is not useful to view global competitiveness

as an end in itself. Rather, an internationally competitive economy is a

means to an end - the requirement for enhanced social well-being. Wealth creation

is necessary in order to fund social services and produce a high and rising

standard of living. It also appears to be a necessity for society to ultimately

achieve its higher-order goals, including personal freedom, security and a better

quality of life. Therefore, competitiveness must be viewed in a broader societal

context that goes beyond materialism.

Competitiveness Through Productivity Enhancement

Some definitions of competitiveness are based upon driving down costs to

the lowest common denominator by hollowing out corporations, outsourcing

jobs, shifting operations to lower-cost locales and reducing the wages, benefits

and social entitlements of workers. A more appropriate definition of competitiveness,

however, involves increased productive capacity achieved by innovation,

superior technology, continuous skill-enhancing training and a concern with

social equity and environmental preservation. The latter approach can better

lead to the creation of a value-increasing society.

TIIF; KRUGMAN CRITIQUE

In a widely quoted article in Foreign Affairs, the prominent economist Paul

Krugman argued that competitiveness is, at best, an essentially meaningless concept

when applied to countries. At worst, it can lead to incorrect policy formulations

such as protcctionism. Krugman argued that unlike companies, countries

do not face any bottom line. They do not compcte with each other in any

meaningful economic sense. Moreover, international trade is not a zero-sum

game. All parties benefit from trade by specializing in those productive activities

where