Definition of competitiveness

Competitiveness is about boosting the ability to compete by increasing productivity in the long run. It stresses a continual improvement through constant innovation in products, processes and management, which in turn transforms inputs into the valuable products and services that allow a nation to support high wages and achieve attractive returns on capital invested. It consequently creates a strong currency and promotes innovative ways to better use resources. The result is that the standard of living and the prosperity of a nation or society improve.

Competitiveness is not to be confused with competition. Competition is more concerned with how a country, region, sector or firm can outflank rivals and gain at their expense. Competition is therefore a zero sum game.

Unfortunately, this confusion means that competitiveness is often used to justify state intervention. Reacting to imports of competitive products and services, many countries resort to providing subsidies, which effectively endorse inefficiencies and, more lethally, dampen the innovation central to economic growth as well as suppressing local wages and devaluing their currencies, both of which are akin to selling local labour power on the cheap. True prosperity – and therefore competitiveness – is only created when both companies and governments place innovation and productivity at the centre of their policies and actions.[1]

 

competitiveness in the news

Protectionist policies would seem most likely to damage competitiveness. In April 2013, Pascal Lamy, director-general of the World Trade Organisation spoke about the rising threat of protectionism. An FT editorial commented: "The belief that protectionism can preserve jobs is an illusion. Shielding a sector from more efficient foreign competitors comes at the expense of other domestic businesses, which are denied access to cheaper goods."