competitiveness

Government Plays a Role in Productivity-Oriented Competitiveness

I read an article this morning about a 13-year old Somalian girl who was stoned to death for being raped. The article also characterized, in simple terms, the social and institutional landscape of her country:

Somalia is among the world’s most violent and impoverished countries. The nation of some 8 million people has not had a functioning government since warlords overthrew a dictator in 1991 then turned on each other.

A quarter of Somali children die before age 5; nearly every public institution has collapsed. Fighting is a daily occurrence, with violent deaths reported nearly every day.

Although the issue of the level of governmental control is prominent in the 2008 election, something I reflected on a couple weeks ago, it is critical to remember that macroeconomic stability is a precondition for economic growth. If the goal is growth, not just survival, we must strategically architect our country’s policies and institutions to make it happen and to make it sustainable.

The World Economic Forum takes a “productivity-oriented view” of competitiveness. Raising productivity means making better use of the policies, institutions, and resources that are available to an organization. (Notice that this suggests productivity is actually a continuous improvement process, not simply achieving a certain level of output, or achieving targeted growth.)

This organization produces an annual Global Competitiveness Report that reports a metric, the Global Competitiveness Index (GCI), calculated for almost every country in the world. The GCI factors in elements from “nine pillars” of competitiveness: institutions, infrastructure, macroeconomy, health and primary education, higher education and training, market efficiency, technological readiness, business sophistication and innovation. The WEF emphasizes that:

None of these factors alone can ensure competitiveness… [for example] the value of increased spending in education will be undermined if rigidities in the labor market and other institutional weaknesses make it difficult for new graduates to gain access to suitable employment opportunities. Attempts to improve the macroeconomic environment—e.g., bringing public finances under control—are more likely to be successful and receive public support in countries where there is reasonable transparency in the management of public resources, as opposed to widespread corruption and abuse. Innovation or the adoption of new technologies or upgrading management practices will most likely not receive broad-based support in the business community, if protection of the domestic market ensures that the returns to seeking rents are higher than those for new investments. Therefore, the most competitive economies in the world will typically be those where concerted efforts have been made to frame policies in a comprehensive way, that is, those which recognize the importance of a broad array of factors, their interconnection, and the need to address the underlying weaknesses they reveal in a proactive way.

In my opinion, what a nation really needs to increase productivity, enhance competitiveness, and promote sustainable economic growth are two elements that are not mutually exclusive: 1) a National Innovation Agenda, and 2) a multidisciplinary team of systems engineers who understand quality improvement, with broad perspectives and a penchant for data-driven decision making, advising the highest levels of government. This team’s responsibility would be to understand the structures, health and interconnections of the nine pillars of competitiveness – and how to continually improve them as a system, recognizing that we can’t do everything and we must aggressively prioritize to achieve progress.

2 replies »

  1. Question, shouldn’t it cost more to do business in America? Because after all we are America land of the free and the brave. There should be a premium to live here, to do business here? If you enjoy living here, it should be illegal for you to not have your company based here.

    If you want your company to enjoy the tax structure of a foreign country I say great, move it, but I also say move your family too. If you can’t support American workers with jobs then you can’t enjoy the benefits of America with the money you save by screwing America.

  2. I found the statement, “If the goal is growth, not just survival, we must strategically architect our country’s policies and institutions to make it happen and to make it sustainable” interesting. How much longer can we grow? The economy right now is certainly having a hard time. Maybe we need to focus on making what we have now sustainable rather than trying to grow it before it implodes.

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