Economy

Frank Stronach: Competition is key to any economy – National Post

Published

2 years ago

May 24, 2022

Harry Miller

Competition is the best tool for ensuring that customers get a better-quality product or service at a better price

Publishing date:

May 24, 2022 • 11 hours ago • 3 minute read • 39 Comments

Competition is one of the most important aspects of a properly functioning market economy. Without competition, you will have stagnation, deteriorating quality and a lack of innovation, progress and growth.

Back in the late 1980s, when Mikhail Gorbachev was introducing a number of wide-ranging economic reforms in the Soviet Union, my company became the first manufacturer in North America to open a facility behind the Iron Curtain. On one of my visits there, a senior Communist party official invited me to tour some Soviet automotive factories and assembly plants.

After seeing the various factories, filled with antiquated equipment and assembly lines that looked like they hadn’t changed since the days of Henry Ford, the minister asked me what I thought. I told him that I didn’t think they could make quality cars at the right price, and they couldn’t make enough of them to satisfy the needs of their people. And then I said: “You know why your country always does so well at the Olympics? It’s because you’ve got competition. If there was only one runner in a race, time wouldn’t mean anything. Even a slow guy could win.”

Competition was a deeply held principle at Magna International, the auto parts I company I founded. One of the hallmarks of how we operated as a company was that every factory was an independent business unit. Our manufacturing divisions were so decentralized and independent, they even competed against each other.

For example, back in the early ’90s, we had one division that made running boards for trucks. Traditionally, this was a metal-stamped component. But one of our plastics divisions began experimenting in its R&D unit and came up with a lighter-weight plastic running board that was stronger and cheaper. It ended up capturing the business from the other Magna division.

I always encouraged our people to be at the forefront of change, rather than being forced to play catch-up with the rest of the industry. Some people thought it was crazy that we’d allow our own factories to compete against each other. But when push came to shove, I would sooner lose business to one of our own product groups than to an outside competitor. That’s one of the main reasons why we became known as one of the most innovative companies in the automotive industry.

Evolution and change are inevitable and relentless: just as the small, stainless steel trim pieces we made in Magna’s early years gave way to aluminum trim and then to plastic, technological innovations and new competitors force companies to continually change. But this would never happen without competition — it’s the force that drives individuals and organizations and countries to be better, to go faster, farther and higher.

I learned that powerful lesson on a business trip to Japan back in the late ’70s, when companies such as Honda and Toyota were quickly but quietly emerging as serious competitors to the Big Three carmakers in Detroit, which had grown fat and inefficient.

During my travels throughout the country, I had an opportunity to visit a traditional Japanese silk farm. I was amazed to see the silkworms feeding on mulberry bushes and spinning the spectacular strands of silk used to make fine clothing and other materials.

My guide explained that the operation was going to shut down because it could no longer compete against the synthetic silk producers that were grabbing a larger and larger share of the market. Human ingenuity being what it is, someone had figured out a way to make a product as good or better than nature, at a much lower cost.

It was a vivid example of how entire industries can be wiped out overnight by technological advances or sudden changes in the economic landscape — changes that only happen when there is free and unfettered competition.

That’s the reason why monopolies, whether they are government-run or privately operated, are always bad for society. I believe one way to constrain the inevitable drift toward market concentration is to enact a law that no company can have more than 30 per cent market share in any industry and that there must be a minimum of four competitors operating in each industry — everything from packaged goods and phones, to internet search engines and automobiles.

Wherever they exist, monopolies lead to poor service, lower quality and higher prices. At the end of the day, competition is the best tool for ensuring that customers get a better-quality product or service at a better price.

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Economy

Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

Published

5 days ago

November 8, 2024

Anne Joseph

OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

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Economy

Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

Published

7 days ago

November 6, 2024

Anne Joseph

The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

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Economy

Trump’s victory sparks concerns over ripple effect on Canadian economy

Published

1 week ago

November 6, 2024

Anne Joseph

As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

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