10 October 2010

Is Competitiveness Europe's Problem?

I have embarked upon a quest. I think this blog might be a good way of documenting my progress.
A few months ago, doing my day job, I read a very dull report on EU regional policy. Every page of this document talked of the importance of "competitiveness". The economy of the EU needs to be more competitive. Europe's member states need to be competitive. Europe's regions should be more ...
The word was repeated so often I began to wonder what it means.
I have some economics textbooks on my shelf so that is where I looked first. Competitiveness is not in the index of my macro textbook (Mankiw, 5th edition) nor of the micro (Estrin and Laidler), nor of  a couple of development economics textbooks, nor one on international political economy.
A bit more research turned up an article by Paul Krugman from 1994 where he lays into the new fashion for discussing economies in terms of competitiveness.
"So lets start telling the truth: competitiveness is a meaningless word when applied to national economies.And the obsession with competitiveness is both wrong and dangerous."
And yet, the word is found in nearly all policy documents I read on European economic policy. Sixteen years on, the obsession continues.
My quest then is to understand what national competitiveness is. Can it be measured? Is it dangerous, as Krugman says? Is Europe's economic problem a lack of competitiveness or is it a misguided search for the chimera of competitiveness?

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