SUBJECT: CAPITALISIM AND INNOVATION
PURPOSE: This briefing note is a recommendation for changes in policy pertaining to the maintenance of the capitalist economy.
ISSUE: There is not enough action in promoting innovation.
Background:
Capitalism is an economic system whereby companies compete in order to be able to reap profits. There are many companies that deliver innovative products however, some do not get the recognition that they deserve in the modern economy. It is the governments responsibility that the capitalist system flourishes so that customers of various products can continue to support the economy. When in relation to technology, specifically, the concept and use of technology allows people to reduce the amount of effort put into a task. This creates efficiency. By addressing efficiency, people’s quality of life increases. With this, it increases the living standards, and it becomes better for the country. This is the reason why innovation is necessary in the modern world. As it pertains to nutrition, innovative foods allow people to be aware of other cultures. By being aware, they become part of the globalized world, a world when countries are expanding beyond their borders. As it is relevant to health care, new medications and treatments allow people to experience longer life spans. It is the innovation in medicine that allows people to feel good about their health. These are some specifics pertaining to innovation and why it is important. By supporting companies and their innovative products, the government ensures that the overall standards in the country are maintained. Rather than the economy regulating itself via the invisible hand, government interference and guidance of smaller companies is necessary to give them an opportunity to be able to compete with larger multinational companies who have usurped the economy. Startup companies have a lot of work ahead of them as they reduce the overhead of their initial expenditures. Usually, 1 in 10 new businesses succeed in their endeavor to penetrate the market. It is these stats that the smaller companies face. By having incentives in place to protect such companies, Canada promotes the innovation in the economy. Currently there are 38,103,773 people living in Canada as of Friday, August 6, 2021 according to Worldometer. This is a significant amount and there is a lot of demand that can be addressed here. Companies need to focus on identifying the populations needs and wants, so that they are successful in their business. Giving companies tax breaks to help them with their products helps the aforesaid companies develop more streamlined products that cater to specific segments of the population. The question here is that who should receive such tax breaks? Domestic or international companies or both? Tax breaks should be larger for domestic companies because it has a direct impact on the economy of the nation. By fostering and supporting Canadian companies in this way, it can help Canada be more competitive in the world stage.
Considerations:
Canada is a trading nation wherein commerce is the tool by which growth was achieved. It is such economy that maintains the high living standards of citizens. The USMCA is the free trade agreement currently functioned with USA and Mexico. This trade agreement allows North America to agree on various trade provisions. This agreement emerged from the NAFTA agreement of 1994. According to Canada there was $1 trillion in merchandise trade in 2008 in North America. Canada is one of the ten largest economies in the world. Canada has a rich industry in oil, lumber, canola amongst others. The three main types of industries in Canada are service industries which “different jobs in areas like transportation, education, health care, construction, banking, communications, retail services, tourism and government,” manufacturing industries which “make products to sell in Canada and around the world” and natural resource industries which include “forestry, fishing, agriculture, mining and energy.” Industries provide jobs to Canadian citizens which is why innovation is necessary in the modern world. Through innovation, new demands can be addressed and job creation can occur. It is the governments duty to ensure that the economy is maintained. Through government incentives, companies can thrive and have an equitable future in the country. It is innovation that is going to expand Canada’s rank amongst the G8 countries. Innovation is the difference between rank 1 and rank 10. By addressing innovation, Canada can remain competitive and potentially be a place whereby the highest living standards are achieved. Disruption causes shareholders to be excited as it pertains to the Toronto Stock Exchange, such activity causes the valuation of companies to increase. It allows stock holders to feel confident that the company can continue on to a fruitful future of revenues. The stakeholders for this matter are the government, companies and the consumers.
Options:
Option 1: Promote innovative products through multimedia.
This is very feasible. The government can use channels such as YouTube or Vimeo or even television to address innovative products. By focusing on Canadian made goods, it ensures that the government is giving Canadian companies a chance to succeed in the country. Such support of companies has benefited other nations. An example is Samsung and Hyundai, these companies helped South Korea emerge as a competitive Asian force. It helped lift South Korea out of poverty. By supporting Canadian companies in this manner, it would help increase the living standards but would also allow its rank to increase amongst the G8 nations. This is very equitable for smaller companies as they will ascertain the recognition they deserve for their innovative products. There is likely high public acceptability for such policy as consumers seek to make purchases based on their needs and wants. By promoting such products, the consumers are the beneficiaries of such policy. This is also an inclusive policy as companies who struggle in the market will be given more opportunities for exposure thus helping them in their objective to increase revenues and reduce the overhead. Clearly this option is very expensive however, it maintains interest within the community and serves as a method whereby people’s interest are catered to.
Option 2: Promote innovative products through spreads.
This is the most feasible and most affordable. By promoting such products and services, Canada can help people gain awareness. Through awareness, people could try new things. Option 1 and option 2 help Canada in a globalized world where nations are transcending their borders. This option is also inclusive as it promotes companies to meet the demands of the consumer. As with the former option, there is likely to be high to moderate public acceptability of such policy.
Option 3: Tax breaks for startup companies.
Tax breaks give smaller companies an opportunity by which they can achieve penetration of the market. By supporting companies in this way, it gives such companies equity because they can focus more on the revenues. There is likely to be less public support for such policy because it means less tax revenue, however, by giving these companies tax breaks, it can help Canada remain competitive in the world. This is the least feasible option because it involves a lot of approval.
Option 4: Status quo.
This option is not recommended. By selecting this option, Canada’s economy will remain relatively the same. Bouts of recession and expansion are going to continue. It should be the Canadian government’s objective to experience constant expansion. Through expansion, living standards can be increased and thus the citizen in Canada can enjoy a better life.
Recommendation:
Option one is recommended.
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