Competitiveness and market economy:
the right and wrong of it in a wider perspective
The problem with many developing countries is that they are not sure
whether they have understood competitiveness completely
By Dr. Noor Fatima

It is not an attempt to explain the issue in any depth, but it will perhaps be worth taking a closer look at the term “competitiveness’ in the global market. No denial of the fact, that the masters of developing countries are IMF/World Bank and WTO and now the nation sates are not in control of global economy but they are just subject to their violent competitive forces and they have to compete for having capital. Clearly, third World countries are locked into a vicious circle ever since the self administrated debts billed to the World Bank and the IMF. All this was revolving around in the name of ‘improving their competitiveness’ in the global market or “short-term pain for long-term gain”. The question is that do we lack competitiveness due resource constrains or a will to develop? Why developing Nations governments is restricted in their policies implementation if it comes into in conflict with internationally mobile capital, or inflation or devaluation as it will not leave them ‘competitive’ in world market. Therefore ‘competition’ persuades fear.

Compared with the past, the word ‘competition’ is so much in assertion as an essential ‘good thing’ in present world. We are told that the economy will grow only in the world market when it is competitive. We consider it very closer to the public interest that more competition will have effluence of goods. So the question arises what ‘competitiveness’ is. Does it mean to increase the standard of living of nation, or does it talk about GDP or it says something about GNP? Is it to enhance the soft attributes with the standards of living e.g. environment protection, education, child mortality rate, employment etc? Or it is simpler to ask why poor countries are poor? Why do nations compete? Why do some succeed and others fail in international competition? This question may seems to be very simple but answer is neither simpler nor one dimensional. Since Adam Smith’s doctrine of ‘specialisation’ to John Williamson’s Washington Consensus for new Neo-liberal economic paradigm, ‘competitiveness’ has been persuading as one of the central economic policy agenda of all the nations. In the period of imperialism and mercantilism in mid 19th century, the British were controlling the resources of the world in order to be more competitive and hegemonic. In this context R.Hyam explained that: The plains of north America and Russia are our corn field, Chicago and Odessa our granaries, Canada and the Baltic’s are our timber forests, Australasia contains our sheep farms, and in Argentina and on the western prairies of North America are our herds of oxen, Peru sends her silver, and gold of South Africa an Australia flows to London, the Hindus and the Chinese grows tea for us, and our coffee, sugar and spices plantations are in the Indies. Spain and France are our cotton grounds, which for long have occupied the Southern United States are now being extended everywhere in the warm regions of the earth. Therefore, it explains the story of resources for Britain’s strength of competition and at whose expense. It has also been taken as success stories as far as the United States is concerned, with greater economic success with other trading nations as well Japan and Korea. For others, like Asian countries it is going to be the big questions that how can fundamentally these countries reappraise their economic systems for competition.

There is no scarcity of definition that why some Nations are more competitive. Fundamentals, tells us that in order to become competitive we need to transcend to the greater wealth generation through the structural transformation. What does that means? - A trade policy having export promotion or import substitutions industrialisation or both as a central economic policy. As per this definition the more ideal is that there should be least protection of domestic industries as this leads to inefficient production, because these developing countries are not using their comparative advantage. More over the Import substitution also will not encourage efficient production keeping in view high tariffs of imports. That will leave little room for the developing countries to compete. If we can not compete so what left is- little incentive for us to create more cost-efficient production.

One can go on in such explanation that why we need competition. Yet these explanations are often conflicting, generally there is no standard definition. Still it is far from clear what the term "competitive" means when referring to a nation. Problems with many developing countries are that in the place they are not sure whether they understood the competitiveness completely. If we refer to World Competitive Reports, its pillar of competitiveness of world economies depends on governance structure of a country such as Institutions , Infrastructure , Macroeconomic stability , Health and primary education , Efficiency enhancers, Higher education and training , goods market efficiency ,Labor market efficiency. These indicators themselves can not be applied to every country keeping in view the socio-economic situation. If we take explanation of World Development Report that talks about the macroeconomic phenomenon driven by such variables such as exchange rates, interest rates, and government deficits, then what about those Nations, which experienced rapid living standards such as Germany, Japan, Italy etc, with budget deficit, appreciating currencies and high interest rates?

If we take standards of competitiveness of International Labor Organisation, it will argue that competitiveness has its relation with cheap and copious labor. Whereas the European development history shows that some countries like Germany, Switzerland and France have emerged as competitive economies despite high wages of labors and the scarcity too.

Furthermore, if the parameter of “competitiveness” is defined on the basis of natural resources of a country, South Asia is not less in possession of natural resources if not all. Whereas, the emerging economies like Korea, Japan and Singapore, has emerged as successful economies, but with least natural resources.

If one defines competitiveness in the context of government success in intervention policy in trade regime, the history of development of Japan and Korea does not support the argument that government’s policy was much influential in terms of interventions of the policy and internationally it is evident that countries where the tradition of liassez-faire has remained mostly unsuccessful.

Another argument of competitiveness is industrial and labor management on the United States management style of 1960 for boosting exports. One cannot overlook the fact that EU and U.S has its history of industrial development and labor management since 150 years, so their standards of industrial and labor management might not prove successful in every country as well as to every industry. If we compare the oil management industry of Arab Counties with the electronic industry or automobile Industry of Japan or to the American Aircraft with the Leather industry of Pakistan, or that of Japanese style management, it would just bring the catastrophic results.

If we define that this term means trade balance or the country which has more suitable exchange rates for its goods is competitive in the international market, than Italy would have not fallen in this terms of strengths as it had chronic trade deficit but still it managed growth in national income. There may be many much poorer countries particularly those depend heavily on the tourism revenue, and have their balance trade terms or surplus such as Egypt, Maldives and Morocco which had surplus trade balance in 2007. Many other countries, therefore, does that mean they are competitive in the world market? And finally if we define the competitiveness a ‘knowledge’ factor as most of scholars define that itself one has to define the term ‘knowledge’. What is the basis of development of China, Singapore and other East Asian economies, was it just ‘knowledge’ or collective will of the people to utilise their human resources is another question.

As per the debated definition that a country is competitive, where every firm and industry is competitive, then there will hardly any country qualifying for ‘competitiveness’. So pertinent question is can we clearly rely on any of the standards or pillar of the competitiveness as discussed above and following it blindly or we need to define exactly what does a competitive nation. In this context, do not we need to look for anew concept which explains more about how to attain an economic affluence.

In the context of economic policy a government’s fundamental job is to comprehend and enhance the potential mode of production land, labor and capital. The core issue is that how we can enhance our productivity, without being prejudiced of such terms of ‘competitive’. It is only productivity which determines strength of a nation not the devotion and falling in love with such notions. Very clearly we are a labor intensive country, what productivity will bring us shall depends on what of kind of human resources developed.

Let me take you to a state of mind where if we imagine for a minute that there is no international competition then what would be the scenario of productivity of a country. Definitely its productivity will be independent of what is being produced in the other countries and what their productive potential is. Where does it lead us to? Simply that international trade though provides opportunity to be competitive but also gives a threat to maintain the country’s own productivity. There is no disagreement that specialisation can steer the growth and productivity both but under the idea we should produce the things we have relatively more mastery, with combination of judicious policies and institution. Imports to be concentrated only to those items where firms can not produce, now it is our choice we want to be threatened from internationalisation of competition, pressure of globalisation, post WTO regime or we want to face it by understanding the real potential as now the WTO is on constant progress to its new areas. Initially the GATT was much concerned on imports and exports of a country but now the new agreements. WTO is now more concerned with the protection of the investor than the domestic stakeholders. The implications are that it will reflect badly on the balance-of-payments situation as we are experiencing in these days. Actually to make competition constructive, it needs cooperation of all stakeholders and their governing rules only then the competition will be productive. Cooperation can bring innovational ideas as well as indigenous growth that will bring lower rates for goods for consumer rather high prices competitive goods. Though it will be a challenging step in the context of today’s world economic integration but still we need to focus on cooperation and not a war of competitiveness. As when we expect the institutions to be competitive, they do it with the mind-set of competitiveness in the global economy which makes the things more worst and tit-for-tat situation. It is not only the doctrine of competition which can provide economic justice but other paradigm need to be explored to integrate ourselves into global trade constructively without making it a zero-sum game and ones victory on the others price of lost. Finally, it is not only about winning.

At this point of time when there is globally established need of reevaluating the economic structure beyond neo-liberalism and competition, a new economic paradigm of economic cooperation is highly desired so that affluence should not come to one nation on the expense of other nations.