Final answer:
A small country can be competitive by adopting strategies such as utilizing applicable technology, skill development, adopting market-oriented policies, and improving health and education to create a stable environment for growth, foreign aid, and investment.
Step-by-step explanation:
A small country with limited capital, land, and labor can enhance its competitiveness through several avenues. Firstly, governments can make concerted efforts to seek out applicable technology, perhaps by sending students and commissions abroad to study the most efficient industrial operations and by creating supportive policies for innovative companies. This ties into how international trade enables economies to benefit from economies of scale, and increased competition leading to a variety of products from different producers.
Educating the workforce is crucial for enabling skill development and enhancing labor productivity, which appeals to foreign investors and aids in attracting foreign aid. Such measures, in combination with market-oriented policies, help build a stable macroeconomic and political environment, crucial for economic growth.
Moreover, focusing on eradicating social issues that impede growth, like poor health and education, will create a more viable environment for investment and development. Thus, for small economies to grow, it becomes imperative to attract foreign capital and access international markets, as prescribed by economists like Abramovitz (1986). Without these opportunities, there's a risk that the economies of developing countries may diverge rather than converge with the more developed economies.