Competitiveness: From a Dangerous Obsession to a Welfare Creating Ability with Positive Externalities

Abstract

The attempt to define the term “competitiveness of nations” has reached the phase of decreasing returns. Fortunately, the literature seems to be converging slightly, a tendency, we hope to accelerate. We propose (1) defining competitiveness as “the ability of a country or location to create welfare.” We maintain (2) that a comprehensive evaluation contains an output evaluation and a process evaluation. We claim (3) that the output evaluation (competitiveness achieved) is closely related to a welfare assessment, with a specific slant and stepwise operationalisations. Furthermore, (4) process evaluation (investigating the ability) is related to the analysis of production and technology functions, adding qualitative elements like strategies, and the strengths and weaknesses of a country. This consensus is at variance with the concept of price competitiveness; it sidelines the importance of external balances, while the productivity approach to competitiveness is nested within. Dangerous obsessions and wrong policy conclusions can never be excluded, but are much less likely if we use this approach to competitiveness—as compared to concepts focusing on price competitiveness or on external balances. Specifically, the greater competitiveness of one country must not necessarily go hand in hand with lower competitiveness in other countries. In advanced countries specifically, policies promoting the ability to create welfare will create positive spillovers into other economies. Copyright Springer Science + Business Media, LLC 2006competitiveness, welfare evaluation, innovation, Lisbon strategy, F10, F15, F43, O31, O40, O57,

The causal impact of material productivity on macroeconomic competitiveness in the European Union

“…For instance, a fall in wages or the exchange rate does not make a country more competitive if competitiveness is defined as raising the standard of living (Snowdon and Stonehouse 2006). Aiginger (2006) argues that 'price competitiveness' is a reasonable measure in perfectly competitive markets and for low-income countries since they are competing along homogeneous goods, but not in imperfect markets and highincome countries, as they typically compete along innovations, qualities as well as environmentally sustainable and socially inclusive growth (Rozmahel et al 2014). Consequently, price measures are important in determining competitiveness, but are insufficient and potentially misleading if they are not complemented by non-price indicators.…”

The East Asian Economy Post-rebalancing: Domestic Demand-led Growth, Social Security, and Inequality

“…In order to attract foreign direct investment (FDI) and remain competitive in world export markets, firms and governments prioritized productivity while repressing wages, limiting the provision of social security, and ignoring environmental controls (Holliday & Wilding, 2003;Suehiro, 2008, p. 111-115;Deyo, 1989). This "dangerous obsession" with minimizing labor costs reduced domestic demand and enhanced dependence on exports for growth (Krugman, 1994;Aiginger, 2006). It also increased inequality and damaged the natural environment.…”

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“…słowa kluczowe: konkurencyjność gospodarki, nurt pozycyjny, nurt zasobowy, zdolności dynamiczne wprowadzenie "Kraje, tak jak korporacje międzynarodowe, rywalizują na światowych rynkach". Ta prowokacyjna teza B. Clintona, wygłoszona w 1993 roku, od lat rozpala ożywione dyskusje (Dunn, 1994;Thurow, 1994;Krugman 1994Krugman , 1996aWziątek-Kubiak, 2004; Olczyk, 2008;Aigigner, 2006), sprzyjając tworzeniu wielu rankingów i porównań pozycji poszczegól-nych krajów w ramach gospodarki globalnej. Jak jednak słusznie podkreśla P. Krugman, popularyzacja problematyki konkurencyjności w kręgach politycznych i wśród opinii publicznej wiąże się często z brakiem zrozumienia istoty tego złożonego zjawiska (Krugman, 1994, s. 28).…”