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The World Economic Forum's Competitiveness Contradiction

23/09/2014 11:53 | Updated 22 November 2014

The release of the World Economic Forum's 2014-15 Global Competitiveness Report has brought swathes of articles from the global media, as politicians, business people and commentators clamour to rejoice or recriminate over the rise or fall of their nation's ranking amongst the world's most competitive countries.

There's no doubt that in an economy that's already global, national competitiveness is a measure that individual nations cannot afford to ignore. Stay internationally competitive and a nation will keep inward investment and jobs flowing in. Fail to do so and, like France, it'll soon find capital and jobs moving elsewhere and the national economy heading for trouble. So, keeping a nation internationally competitive must be a good thing, right?

Well, not quite. In the short-term, moves to create a more business-friendly economic environment - by cutting regulations and business taxes, for example - will undoubtedly attract inward investment, keep unemployment low and make a nation more competitive. But it seems to have escaped the WEF (and virtually all mainstream economists) that this remains true...only until other nations follow suit. Once they do, all nations are back to square one. In the longer-term, then, no nation will have gained much at all. But all nations and their peoples will have lost a great deal. The interests of society and the environment will have irrevocably lost out due to the looser regulations, lower taxes and poorer public services that all nations will have accepted.

The unfortunate reality is that protecting society and the environment and dealing with problems like climate change inescapably require business regulations and taxes to increase, not decrease. The dilemma is that they require policies that would make any nation UNcompetitive. National competitiveness on the one side, and protecting society and the environment on the other, therefore turn out to be mutually exclusive goals which cannot ultimately be reconciled in the present circumstances where we have a global economy but only national governance.

But so gung-ho are the WEF and the neo-liberal consensus about the idea that national competitiveness is an exclusively beneficial pursuit, they've become blind to the vicious circle nations are now caught in. This circle causes governments to engage either in a tit-for-tat down-levelling of taxes and regulations on corporations and the wealthy, or to perpetuate a situation known as "regulatory chill" where, despite mounting problems like climate change, no nation dares move first to significantly reduce its emissions for fear that the higher costs will cause business and jobs to simply move elsewhere. The pursuit of national competitiveness, it turns out, is a Catch- 22 - a double bind. It's an illusory 'pot of gold at the end of the rainbow' which, try as each nation might, can never be reached.

It's all the more ironic, then, that the WEF's report acknowledges that extreme wealth inequality is a problem that requires urgent action. But it seems entirely blind to the reality that maintaining national competitiveness is what prevents governments from taking the necessary measures. For at the heart of the problem lies the inability of governments to fairly tax the rich, the multinational corporations and the bankers and to redistribute that wealth in support of the less fortunate. The ability of these globally mobile entities to move elsewhere to escape such taxes of course makes this impossible, so leading to a widening gap between the globally mobile winners and the nationally rooted losers. In recognising, now, that extreme wealth inequality needs addressing, either the WEF has not realised that its own cause célèbre - the pursuit of national competitiveness - is the culprit, or it is disingenuously attempting to conceal the fundamental contradiction the lurks at the very heart of neo-liberal doctrine.

As the gap between rich and poor continues to widen and as marchers around the world protest at the on-going lack of action on climate change, it's surely high time for the WEF, governments and global justice campaigners alike to ponder how the 'Competitiveness Contradiction' might be resolved. They'll no doubt find that, in a global economy, only global cooperation can ultimately balance the interests of capital with the interests of society and the environment. Only global cooperation in the form of highly co-ordinated transnational action can get the global free-market genie back in the governance bottle.