Paul Krugman contends that those who speak of competitiveness fail to understand three important points. First, nations are not like companies. No single number indicates their bottom line and the analogy does not apply. Second, he says that competitiveness is at best a meaningless concept. If it has any meaning whatever, it is "a poetic way of saying productivity." Productivity is the robust and unique measure of the performance of a national economy. Third, international trade is not a zero-sum game.
These are not stinging revelations but merely oft-repeated truisms. All his assertions are set out mundanely in The Report of the President's Commission on Competitiveness, written for the Reagan administration in 1984. The report provides what even Krugman acknowledges has become the standard definition:
Competitiveness has different meanings for the firm and for the national economy . . . . A nation's competitiveness is the degree to which it can, under free and fair market conditions, produce goods and services that meet the test of international markets while simultaneously expanding the real incomes of its citizens. Competitiveness at the national level is based on superior productivity performance.
So all of Krugman's revelations are on page one of the basic text: no simple analogy equates a nation and a business, productivity lies at the center of competitiveness, and trade is not a zero-sum game; it can and should be free and fair.
What then, if anything, is Krugman flailing at? Nobody with whom Krugman should deign to take difference has ever said the silly things he pokes with his jousting spear. Lots of people vulgarize competitiveness, but that is true of just about every other idea in economics.
Krugman objects to President Clinton's likening of the U.S. economy to "a big corporation competing in the global marketplace." Presidential metaphors, which try to encapsulate complicated matters for purposes of political mobilization, have their own logic and history. Perhaps Clinton's simile is akin to Franklin D. Roosevelt's famous likening of the Lend-Lease Act to lending a neighbor
Loading, please wait...