A consultative approach for national competitiveness

Abstract

Among the many definitions of competitiveness available, perhaps the most comprehensive is that used by the OECD, which describes the concept as "the degree to which a country can, under free and fair market conditions, produce goods and services which meet the test of international markets, while simultaneously maintaining and expanding the real incomes of its people over the long-term". This definition requires businesses to be successful in the long run without relying on protectionist measures, government subsidies or cheap labour. It underlines the unsustainable nature of any "competitiveness at all cost" strategy. Indeed, if a country needs to rely on policies to hold down local wages and devalue its currency to expand exports, this reflects a lack of competitiveness rather than economic strength. Exports of low priced products, which support only subsistence wages, do not guarantee long-term prosperity. It is the capability to manufacture high-quality products that support rising wages that really matters. The OECD definition thus highlights the roles of knowledge, productive efficiency, entrepreneurship and technological innovation as the crucial factors that are likely to contribute to raising the level of prosperity of people, which can be defined as a combination of the standard of living, accumulation of wealth and quality of life.