Competitiveness and Economic Policies

Raising competitiveness in domestic and overseas markets is a key objective for many governments. The usual focus is on improving supply-side performance but keep in mind that a sufficient level of demand is needed for many supply-side policies to be most effective

Education policy

• Investment in / improvements in functional literacy
• Stronger vocational education / apprenticeships
• Investment in higher education, encouraging inward migration

Infrastructure

• Transportation systems
• Communications e.g. super-fast broadband
• Investment in public service infrastructure such as new schools and hospitals

Labour markets

• Improving labour mobility
• Improving work incentives
• Better management

Supporting Enterprise

• Incentives for new business formation
• Access for small/medium sized businesses requiring finance for expansion
• Incentives for innovation and invention

Exchange rate and trade policy

• Possible intervention in currency markets
• Currency devaluation to boost export industries
• Tariff and non-tariff barriers
• Trade agreements

Macro Stabiility

• Maintaining low inflation / price stability
• Financial stability e.g. a sustainable banking system
• Avoiding credit / debt bubbles
• Avoiding boom and bust in property markets

Exam Tip: Policies to improve competitiveness must always be contextual i.e. they must suit the specific challenges and demands facing businesses in a particular country. Be prepared to evaluate the likely effectiveness of different supply-side policies.