Competitiveness – a Poetic Way to Talk about Efficiency?

The following commentary presents LFMI’s opinion about the ongoing talks about competitiveness in Lithuania. It was broadcast on the National Radio.

It has become fashionable to talk about competitiveness in Lithuania lately. Competitiveness is identified as one of priority goals in a number of economic development strategies, seminars are held to discuss this issue, plans are made to establish a board of competitiveness and so on. This enlivenment in part can be understandable: as the EU and NATO membership is approaching, politicians need to find new attractive slogans to capture the attention of their electorate and sponsors. Competitiveness, country’s in particular, suits the best for that purpose as this notion may mean a variety of things and can be interpreted in lots of ways.
On the other hand, in this particular case, as in many others, we are walking on the beaten track: in Western Europe public leaders started talking about competitiveness in the 60s when Europe’s lagging behind America caused a concern. Later on this issue became popular in the US as well when their experts and politicians began to fear that they were loosing a competitiveness race to Japan and countries of South Asia. In the beginning of the last decade, the issue of competitiveness regained its popularity in the EU who felt concern over a widening gap between the US and EU countries. This particular concern can be testified by one of the key priorities set for the EU today – to become the most competitive economy in the world by 2010; in other words, to catch up with, and outride, America.
It is small wonder then that Lithuania is taking over this concern over its competitiveness from the EU. But are we really taking over the best things from what was developed in this field during the heated debates in the US and EU? It doesn’t seem so. Routinely, we start complicating everything around us: we talk about innovations, technologies, investments, priority industries, the state, companies, and establishment of new boards and so on.
It is worth to remind that after long discussions many US and EU experts decided to apply this notion solely to companies, not countries. The main reason was the ambiguity of this term. Competitiveness of a country is understood as ability to sell in the international markets, at the same time ensuring conditions for employment and an increase in personal income. It says virtually nothing about the conditions needed for competitiveness and often determines a fallacious economic policy – promotion of exports, restriction of imports, support for priority sectors at the expense of other areas, etc.
Not vainly one well-known US economist said a right thing ten years ago that discussions about competitiveness are, at best, a poetic way of talking about efficiency, and it makes sense only when we talk about companies, not countries.
This should be reminded to those who are getting increasingly concerned about Lithuania’s competitiveness and usually forget such a simple thing as competition. And so long as there are no conditions for free competition in Lithuania, other measures for enhancing competitiveness will fail to achieve their goals and will even choke it off.
The prime example is the application of import duties as it diminishes competition and companies’ motivation to increase their efficiency most of all. More than that, market entry is restricted not only for foreign products, but also for opening of Lithuanian companies, and barriers for the entrepreneurship single out Lithuania from other countries in the region from the negative side.
Only when free competition is in place will we be able to think about investments, innovations and information technologies. But, perhaps, forced to compete, by then companies would have taken care about that themselves.