Competitiveness: A Dangerous Obsession

THE HYPOTHESIS IS WRONG

In June 1993, Jacques Delors made a special presentation to the leaders of the nations of the European Community, meeting in Copenhagen, on the growing problem of European unemployment. Economists who study the European situation were curious to see what Delors, president of the EC Commission, would say. Most of them share more or less the same diagnosis of the European problem: the taxes and regulations imposed by Europe's elaborate welfare states have made employers reluctant to create new jobs, while the relatively generous level of unemployment benefits has made workers unwilling to accept the kinds of low-wage jobs that help keep unemployment comparatively low in the United States. The monetary difficulties associated with preserving the European Monetary System in the face of the costs of German reunification have reinforced this structural problem.

It is a persuasive diagnosis, but a politically explosive one, and everyone wanted to see how Delors would handle it. Would he dare tell European leaders that their efforts to pursue economic justice have produced unemployment as an unintended by-product? Would he admit that the EMS could be sustained only at the cost of a recession and face the implications of that admission for European monetary union?

Guess what? Delors didn't confront the problems of either the welfare state or the EMS. He explained that the root cause of European unemployment was a lack of competitiveness with the United States and Japan and that the solution was a program of investment in infrastructure and high technology.

It was a disappointing evasion, but not a surprising one. After all, the rhetoric of competitiveness, the view that, in the words of President Clinton, each nation is "like a big corporation competing in the global marketplace", has become pervasive among opinion leaders throughout the world. People who believe themselves to be sophisticated about the subject take it for granted that the economic problem facing any modern nation is essentially one of competing on world markets, that the United