Chapter 1: What ‘Competitiveness is and Why it is Important
1. What ‘competitiveness’ is and why it is important INTRODUCTION: GROWING CONCERNS ABOUT COMPETITIVENESS Governments are increasingly concerned about national competitiveness. This concern is not conﬁned to developing countries exposing sheltered economies to global market forces: it was the governments of industrialized countries that ﬁrst expressed worries about the erosion of their industrial leadership (OECD, 1997). This has evolved over time into concerns about economic competitiveness in a more general sense; with liberalization and adjustment, the concern has spread to many developing countries. Today, competitiveness is accepted as a legitimate basis for policy discourse. Thus, rich countries worry about keeping ahead, not just of each other but also of lower cost, newly industrializing competitors. Middle-income countries worry about catching up with advanced countries in new technologies and skills and about the inexorable encroachment of lower-wage entrants. The least-developed countries worry about getting onto the technology ladder, and the risk of remaining conﬁned to low-wage or primary products that are increasingly marginal to a technology-driven global economy. The opening of the UK Government’s third competitiveness White Paper (UK Cabinet Ofﬁce, 1996) illustrates the approach of most industrialized countries: Improving competitiveness is central to raising the underlying rate of growth of the economy and enhancing living standards. Achieving this means removing the impediments to investments in machines, people and ideas and improving the efﬁciency with which resources are used throughout the economy, not just in those sectors directly involved in international trade. It means giving people the freedom...
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