Economic Problem: Low Productivity and Competitiveness

Economic Policy Recommendations
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Introduction
In the global economy companies and countries need to be competitive in order to have better growth potential. As such, to remain competitive there is a need to invest more in innovation, given that there are limited resources. Technology advancement has facilitated trade on a global scale, enabling consumers and producers to have access to a wider array of products. However, the most competitive economies have benefited from global trade because of their ability to leverage on their competitive advantages. This paper focuses on the problem of low productivity and competitiveness there impact on the society, as well as relations with neo-liberal theories and it also proposes solutions.
Briefly description of the economic problem
Even though, globalization has resulted to growth in international trade the benefits have been uneven to the extent that there has been weak productivity, the global economy has strengthened after the 2008-2009 financial crisis, but the growth in North America and Europe has been fragile. The US is still a major player in the global economy, but improving openness to trade in other countries is crucial to improving growth prospects for American companies. Growth is also dependent on improving prospects for US companies in the global markets. As such, both productivity and the competitive advantage are critical aspects to improving competiveness for global companies.
Unsustainable growth has merely benefited few industries with workers benefit little from growth in profits over time. Even though, the government’s role in private business is low in the US, fiscal and monetary policies can provide an enabling environment to enhance sustainable growth. One of the challenges for the American economy is that American exporters are not competitive internationally because of higher prices. This has hurt local producers with the need to reduce prices to compete with competitors from East Asian region and the developing economies. This has further been compounded by weak productivity form the US export sector meaning that there is a need for better innovation to spur long-term growth.
Despite growth improvement since the start of the 21 st century, productivity has fallen in the recent years (Giles, 2015). Weak productivity has a negative impact in growth prospects, and given that other major currencies have depreciated versus the dollar, American exports are more expensive more than ever before. Weak productivity also has a direct impact on the country’s living standards, since the people in the lower social classes are unlikely to move up economically and socially. There is no agreement on the specific reason for slowing productivity, but the global outlook will also depend on the prevailing productivity.
Impact the problem poses to society
There are various factors that influence economic growth including the strength of the economy, employment rates as well as demographics. Additionally, productivity is another factor that has not received much attention. As such, when there is weak productivity economic growth stall and the economic recovery is also weak. This could explain the slow recovery from the effects of the 2008 2009 global downturn. The government, companies look into the negative effect of weak productivity. As such, the government is left to decide on whether to stimulate the economy.
The weak productivity is associated with low efficiencies in the economy, and this will likely prolong unemployment in the global economy (Giles, 2015). In other words, the weak productivity is related to weakened ability to utilize both labor and capital to both goods and services. Slowing productivity growth has also resulted from slowing demand, meaning that various aspects of the economy are affected (Giles, 2014). Weak consumer demand and weak productivity in turn reduce competitiveness for global companies, while also hurting the small and medium scale businesses. Even though, weak productivity has mostly affected the emerging economies, the US is also likely to suffer because of low demand for her goods at the international scale.
The weak productivity signifies the low ability of companies to compete internationally, with job creation lagging behind even with policy formulations to boost growth. Additionally, weak productivity has resulted to stagnating wages, while the new jobs are mostly in the local businesses. This does not augur well for American companies since exports and revenues from the global market are likely to have a bigger role towards improving competitiveness. The likely negative effect of government impose regulations means that even with better management practices, growth is likely to be constrained. Hence the effects of weak productivity affect all sectors of the economy, America’s competitiveness and the consumers.
Economic policy solution to the problem
Start-up loans and private sector investments aimed at improving innovation encourage businesses to focus more on productivity. Even though, there are various start-ups that fail to yield the expected results, start up programs where the start-ups can get loans highlights on the investment function in private enterprises. Additionally, the private sector is encouraged to improve innovations and productivity when there is a better business environment. Encouraging innovation has a long-term positive impact on productivity, and should be supported over time. The challenges of lack of access to finance and red tape are the most common factors affecting the enterprises ability to improve productivity.
Even though, there is a strong push towards regulation of the financial sector, deregulation is a better policy to improve competitiveness in other industries. Government regulations often pose a challenge to the employers, and they also reduce competitiveness. Deregulation spurs growth since there is increased competition and efficiency. Deregulation policies also encourage owners of enterprises to invest more, meaning that there is likely to be improved productivity (Veltmeyer, 2013). Regulation is beneficial when absolutely necessary, and excessive regulation burden is counterproductive. As such incentives to reduce red tape help to identify reform and repeal regulation measures, and this encourages business flexibility and confidence to be more innovative.
Tax reforms targeting industries that lag behind in productivity would likely spur growth and p...