Public Policy on Business Competition Essay
American businesses have been at a disadvantage from their foreign competitors due to the flawed economic system and the capitalist economy of the country. The foreign companies have been continuously improving their efficiency and effectiveness in relation to their American counterparts which means that they have now become more competitive and can even surpass that of the American products. The very strict government regulations and tariffs designed to protect the American economy is now the cause of the lesser jobs available for American workers. Outsourcing had definitely reduced the number of jobs and somehow the capitalist society that America has has relied on outsourcing as a way of cutting costs. Capitalism has its own evils as compared to socialism.
Socialism is the opposite of capitalism, in socialism the government has to see to it that wealth is allocated to all members of society. Although, socialism has provided for all of its members it also brought the economy of the country to its downfall. The principle of comparative advantage is the key to ensuring that nations coexist and become interdependent on one another. Comparative advantage means that each country produces a specialized product which is becomes the economic strength of the country. It may have it’s own disadvantages but each country will have their own comparative advantage and disadvantage.
Public Policy on Business Competition
For more than four decades now, American businesses have been losing ground to foreign competitors. While 24.8 percent of all vehicles sold all over the world were made in the United States in 1986, by 1992 the U.S. share had declined to 20.7 percent. Now, this number goes further down to a little over 16 percent (OICA). A number of factors have contributed to the loss of the United States’ manufacturing competitiveness.
First, foreign competitors have invested in more efficient equipment and processes and have instituted other programs that have raised worker productivity relative to the United States. Second, governments of some foreign manufacturing industries have provided planning, financial subsidies, favorable tax rates, and other industrial policies designed to nurture and support their industrial base. But perhaps the greatest reason why the United States is slipping in terms of global competitiveness is because of public policies based on coddling.
Arbitrary trade barriers, unrealistic quotas, and overly-restrictive tariffs are the norm when it comes to the government’s current stand on business competition. American workers and businesses are in a constant state of consciousness wherein a sense of entitlement pervades. They constantly lobby because they feel that the government is supposed to protect them from the deluge of competition from overseas. The thing is, Americans will continue to lose their jobs to the Indians and the Chinese.
Companies aim to cut costs wherever and whenever they can. Given a choice, they will outsource to whomever can give them the best value. Instead of whining and lobbying, Americans should look for ways to adjust. They should do away with wanting to do menial tasks and start looking towards jobs that require more expertise and mental acuity. Not wanting to improve and instead asking for protection from the tides of change will not advance society at all and instead degrades it. In fact, it is the basis of a concept that was proved ineffective and impracticable.
Socialism is based on the flawed notion that members of society should be equals and the government must see to it that everyone is being cared for. One of the major complaints levied by socialists has been that capitalism permits surplus value to flow to capitalists, making capitalism a very unequal, class-ridden society. By contrast, a socialist society would share the return to capital among the workers, thereby promoting much greater equality than a market economy. This “strength” as socialists put it, proved to be socialism’s downfall.
Indeed, the experience of socialist countries exemplifies how attempts to equalize incomes by expropriating property from the rich can end up hurting everyone. By prohibiting private ownership of businesses, socialist governments did reduce the inequalities that arose from large property incomes. But the reduced incentives to work, accumulate capital, and improve – just because the government will provide for every man – crippled this system and impoverished entire countries.
The principle of comparative advantage holds that each country will specialize in the production and export of those goods or services that it can produce at relatively low cost because it is more efficient in producing them than other countries. Conversely, each country will import those goods which it produces at relatively high cost or those that it is incapable of producing at all.
This simple principle provides the unshakable basis for international trade (Samuelson & Nordhaus 663). The most efficient and productive pattern of specialization is that nations should concentrate on activities in which they are relatively or comparatively more efficient than others. And even though countries may be absolutely less or more efficient than all other countries, each and every country will have a definite comparative advantage in some areas while having a definite comparative disadvantage in others.
The international economic sphere is complex and it is primarily governed by the most powerful country. The American economy had been one of the strongest economic players in international trade. When a country becomes too dependent on other countries for their economic products and services, like the American society, it can be assumed that they are putting their economic welfare at the hands of other nations.
This can have a tremendous impact on American economy as the most basic services continue to be outsourced, monetary strength is diminished. It is similar to a gardener who is watering the neighbor’s lawn. The American society is pouring their money to foreign economies without thinking of whether that foreign country will do business with American companies as end consumers.
In order to turn the tide, the American government should pursue and adopt the principle of comparative advantage, instead of relying on capitalism or socialism alone. With comparative advantage each country specializes in one or two products and services, thus equalizing power and influence in the international economy. American industries should look into the dangers of outsourcing, the disadvantages of cutting costs in the expense of unemployment and the ill-effects of over dependence on foreign countries. Therefore, the government should realistically examine the present position of the country in international trade. Comparative advantage holds the key for economic stability and progress.
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Organisation Internationale des Constructeurs d’Automobiles. Available: http://oica.net/wp-content/uploads/2007/06/worldprod_country-revised.pdf., January 19, 2008.
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