03 February 2011

Competitiveness Patch

According to press reports, tomorrow's EU summit will discuss a "competitiveness pact".

My questions remains: is competitiveness Europe's problem?

I don't mean: is Europe uncompetitive? As Paul Krugman argued a long time ago, countries and major economic blocs do not compete economically with each other. Companies seek competitive advantage, countries seek comparative advantage.

My question means: is chasing competitiveness the problem? Pursuing the wrong goal will lead to adopting the wrong policies, and allocating funds to the wrong places. Which is why Krugman described "competitiveness" as a dangerous obsession.

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