Competitiveness and Employment: A Strategic Dilemma for Economic Policy

Abstract

Competitiveness policy is usually described in liberal terms, suggesting a close relationship to competition and markets. However, the outcomes of such policies may work in the opposite direction. Competitiveness policy often results in heavy market intervention and distorts rather than strengthens competition. Based on misconceived problems of globalization and competition, it shifts the problem of competitiveness from the company level, where it belongs, to the level of a game between nations and their national economies. We show that the “national competitiveness game” and the “international productivity race” have perpetuated a vicious circle of high structural unemployment, global over-capacity in many markets, increased social exclusion and economic recession. These trends have been reinforced by cost-driven approaches to the exploitation of human and physical resources. We also argue that new forms of state intervention in the economy are vital to both maintain and enhance national wealth, but it has become more difficult to identify effective policy actions and their effect upon either national welfare. Governments at regional, national and supra-national levels increasingly have to manage or steer global and local interdependencies under conditions of increased uncertainty.