The Washington consensus crowd has been imposing its neoliberal gospel of austerity on third world nations for many years. Most of the people in those countries were already living is subsistence conditions. The name of the game was to keep them there and forestall any threats to the global balance of economic power. Now the austerity gospel is being preached to the workers of Europe and the US. The solution to the lingering effects of a global recession is not economic stimulus to create jobs and economic opportunity, but belt tightening. The message being used to justify this regime is that the path to economic salvation is to improve national competitiveness. Here is an example of how it is being used to “explain” the present situation in the European Union.
The European Union and the 16 nations that use the euro face two crises. One is the immediate problem of too much debt and government spending. Another is the more fundamental divide, roughly north and south, between the more competitive export countries like Germany and France and the uncompetitive, deficit countries that have adopted the high wages and generous social protections of the north without the same economic ethos of strict work habits, innovation, more flexible labor markets and high productivity.
One of the major recurring themes is to equate the circumstances of nations with those of individuals. It is a readily persuasive argument because the only experience that most of us have in the management of economic affairs is our own personal experience. We know that in order to being in money to the household we must either make an economic trade for something like our labor on the job market or go into debt. Some people have a generous rich uncle, but most of us don’t. Governments are different. They have the power to tax and raise revenue on demand. Politics is the only force that constrains that power.
We also know as individuals that competitiveness is a fact of life, whether it is on the playing field or in the business world. Some people in specific situations are more effective competitors than others. Part of the neoliberal regime that has been dominant for the last 40 years has been the notion that nations as a whole are more or less competitive than other nations. It is the competitive nations that deserve to prosper. The World Economic Forum is an organization that has cast itself in the role of ranking national economies according to their notion of competitiveness. This is the crowd that gets together for champagne and caviar at Davos every year.
This Wiki article describes the list of variables that are held to be relevant in making such assessments and provides list of the countries relative rankings. The neoliberal flavor seems pretty obvious. Much of it is about providing a business friendly environment. There are considerations about such matters as health and education as they contribute to the quality of the work force.
Paul Krugman has provided a useful critique of the whole notion.
The view that nations compete against each other like big corporations has become pervasive among Western elites, many of whom are in the Clinton administration. As a practical matter, however, the doctrine of “competitiveness” is flatly wrong. The world’s leading nations are not, to any important degree, in economic competition with each other. Nor can their major economic woes be attributed to “losing” on world markets. This is particularly true in the case of the United States. Yet Clinton’s theorists of competitiveness, from Laura D. Andrea Tyson to Robert Reich to Ira Magaziner, make seemingly sophisticated arguments, most of which are supported by careless arithmetic and sloppy research. Competitiveness is a seductive idea, promising easy answers to complex problems. But the result of this obsession is misallocated resources, trade frictions and bad domestic economic policies.
This article was written in 1994. At the time most of the debate was about the fate of third world nations and the people of the US and Europe were enjoying bubble induced prosperity. Now it is the workers of the first world who are being told that they must have their employment, wages and benefits drastically reduced and fore-go the protections of social safety nets in order to find the path to economic redemption. The fact that they suffer economic pain for years to come is unimportant. It is their patriotic duty to redeem the national economic honor of competitiveness.
For anybody interested I have started a Facebook discussion group on the EU Financial Crisis. It is an open group and anyone is welcome to join. The name of the group is
European Union Financial Crisis
It can be located by a Facebook search.