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

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

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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.

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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.”

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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.

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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.

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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.

National Post

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    Kean Birch: Competition is important — in the digital sphere and in the debate over competition policy

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Charting the Global Economy: Factories Slow Down From US to Asia – BNN

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(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

Manufacturing from the US to Asia is very much in a slowdown as factories continue to struggle with supply snarls, labor shortages and elevated materials costs.

A measure of US manufacturing activity weakened in June to a two-year low, and several regional Federal Reserve surveys indicated business activity shrank. Factory purchasing managers’ gauges across Asia eased, with South Korea, Thailand and India among those showing the biggest declines, according to S&P Global.

Similar indexes in Poland, Spain and Italy also showed weaker activity compared to May.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:

US

Consumer spending fell in May for the first time this year and prior months were revised lower, suggesting an economy on somewhat weaker footing than previously thought amid rapid inflation and Fed interest-rate hikes.

Regional Fed manufacturing surveys have taken on a grimmer tone, with four of five indicating business activity shrank in June. Separately, a measure of overall manufacturing slid to a two-year low as new orders contracted, restrained by lingering supply constraints and some softening in demand.

The pandemic housing boom is careening to a halt as the fastest-rising mortgage rates in at least half a century upend affordability for homebuyers, catching many sellers wrong-footed with prices that are too high.

Europe

Confidence in the euro-area economy slipped as households become more pessimistic amid fears a Russian energy cutoff will spark a recession. At the same time, they’re less worried about inflation than they were a month ago, though there’s a split between core and peripheral euro-area countries.

After suffering from unprecedented shocks in recent years, the UK is succumbing to more intractable problems marked by plodding growth, surging inflation and a series of damaging strikes.

Asia

China’s economy showed some improvement in June as Covid restrictions were gradually eased, although the recovery remains muted. That’s the outlook based on Bloomberg’s aggregate index of eight early indicators for this month. The overall gauge returned to the neutral level after deteriorating for two straight months.

Japan’s factory output shrank at the fastest pace since the height of the pandemic as the lagged impact of China’s virus lockdowns continued to disrupt supply chains and economic activity in the region. The weakness in manufacturing extended across Asia, particularly in South Korea, Thailand, India and Taiwan.

Emerging Markets

Colombia’s central bank delivered its biggest interest rate increase in over two decades. Policy makers are bracing for another spike in annual inflation that’s already above 9%. 

Two years after Argentina emerged from its latest default, a debt crisis in brewing once again. This time, the immediate trouble is in the local bond market, where creditors have become reluctant to roll over maturing government bonds.

Zambia’s inflation rate dropped below 10% for the first time in almost three years in June, bucking a global trend of record consumer-price growth. Optimism over the nation’s economy since the election of Hakainde Hichilema as president in August, a potential debt restructuring and a $1.4 billion bailout package from the International Monetary Fund has seen a rally in the local currency, which has helped contain prices.

World

Differences in underlying inflation trends call for different policy outlooks among the world’s top central banks, according to Bloomberg Economics. The Fed will have to go well into restrictive territory, the Bank of England may go a little above neutral and the European Central Bank might not even get that far.

©2022 Bloomberg L.P.

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Quarterly Investment Guide 3Q 2022: US economy on shaky ground – CNBC

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Minister Of The Economy Franz Fayot On Luxembourg’s Transition Towards A Green Economy – Forbes

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Just last week, Luxembourg’s Minister of the Economy, Franz Fayot, came to the cities of Toronto and Montreal as part of an economic mission organized by the Luxembourg Chamber of Commerce in close cooperation with the Ministry of the Economy. I had the opportunity to sit down with Minister Fayot at the InterContinental Toronto Centre, and get some insights into the Grand-Duchy’s economic transition towards sustainability.

A transitioning economy

With up to one-third of its GDP related to the finance sector, Luxembourg’s economy is widely dominated by the financial sector. However, the past 20 years have been characterized by a push for economic diversification, and increased transparency and regulations following the financial crisis, said Minister Fayot.

“What we are trying to do is diversify [the economy] even more into new sectors to make us less dependent on the financial sector and adaptable to new circumstances,” he said. “We are also more and more developing a green finance sustainable finance sector, which is doing very well.”

A green state responsibility

Minister Fayot, whose guiding principles are a strong welfare state and sustainability, firmly believes that the government must assume its pivotal role in shifting the economy towards sustainability — “both in terms of environmental sustainability, but also social sustainability,” he added.

In June 2020, an international consultation was launched to gather strategic spatial planning project ideas considering the climate-related challenges and social issues, and support for the country’s ecological transition towards a zero-carbon territory by 2050.

“We need to understand that we have to help businesses innovate, and invest in the future,” said Minister Fayot.

A rising startup ecosystem

Luxembourg has seen a steady growth in startups over the past decade.

Earlier this year, the Ministry of the Economy launched a strategic initiative aimed at providing a thorough understanding of the startup ecosystem based on data analysis and interviews with key stakeholders.

Luxinnovation, the national innovation agency, identified over 500 active startups offering innovative digital and data-driven solutions in its latest mapping.

These assessments will also provide relevant comparisons with international markets, and aim to identify the necessary next steps for development opportunities in the upcoming years.

“Our innovation agency is there to guide startups, but also other more established businesses, to get access to grants,” explained Minister Fayot. “We have a state aid framework in Europe which we have to comply with, but the main message is that there is an obvious need to co-finance innovation, particularly in times when we are in this transition towards a more green economy.”

Going above the limits of territory

Surrounded by Belgium, France and Germany, Luxembourg is one of the smallest countries in the world — slightly smaller than Rhode Island. Yet, despite its dependence on its neighboring countries’ energy supplies, it is making continuous efforts to increase its share of renewable energy by also investing in projects across its borders, said Minister Fayot.

“We don’t have that much sun in Luxembourg, and we don’t have an unlimited space to build wind power,” he said. “It’s a bit of a limiting factor, but it shouldn’t excuse anything.”

“We are investing a lot into energy efficiency,” he added. “We are trying to get people to e-mobility and pushing for geothermal heating and energy in new constructions.”

A growing space sector

Luxembourg might not be the first to come to mind when we think of space, but, the country owns one of the world-leading satellite operators, and is increasing its investment into space resources.

“The SpaceResources.lu is an initiative that we launched about six years ago, and it is very much focused on the space resources segment of the space industry,” he said. “We are not launching anything in space out of Luxembourg, but focusing on services like space traffic management.”

As part of the economic mission, a group of space companies participated in a distinctive program set up by the Luxembourg Space Agency in collaboration with the Canadian Space Agency. This included on-site company visits, workshops and B2B opportunities that led to the signing of a Memorandum of Understanding between the two national space agencies.

Stephanie Ricci contributed to this story.

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