Let me start with the ranking. It has lately emerged as the most effective weapon in the hands of global development-walas and its discursive power is not to be easily dismissed. However, while ranking is a good way of situating ourselves in the world and monitor our progress (or decline), these fashion parades are more hegemonic and less informative unless they are cross-examined in a specific context. So many of these indicators have been churned out just in the past few months as in the past few decades that at least several of the best policy brains in every country are left today running chores around indicators – promoting or denouncing them, supplying statistics or deconstructing models, offering explanations or issuing dismissals.
This being said about the indicators on competitiveness is an irony in itself. The debate on competitiveness started with an agenda for action. A stage was set in the 1970s by Paul Krugman’s idea of new economic geography calling for countries to produce goods that are different from each other because the ‘market’ values diversity of products and the cut in price. To this, Michael Porter added the idea that competitiveness is not achieved by doing everything and anything at once but by being selective and making difficult decisions in the right time and place. Let’s be frank about it – everything under the sun matters for business, ranging from electricity to political stability, but the countries that have achieved competitiveness in a short span of time are those who, simply put, developed and delivered on a coherent ‘competitiveness strategy’– two words that led to foundation of the much acclaimed Harvard Business School on Strategy and Competitiveness and kept Professor Porter in business for several decades.
Anyone who has looked closely at the Harvard competitiveness approach will agree that the gloss and glamor of GCI harps on macro-economic fundamentals and micro-economic business environment along with firm sophistication and human capital, but that it duly emphasizes the point that a competitive thrust can only come from development of a critical mass of industries that triggers the effect. In other words, a nation must first decide and agree on what kind of industrial trajectory it wants, and then begin to build the blocks and eventually put the puzzle together. Indeed the Harvard competitiveness approach argues that a small industrial cluster of related units – firms, their suppliers and service providers, banks, and regulators – are almost like a small industrial ecosystem which will grow far and wide once life seeps into it. Such a method – it argues – is lot more effective than the more ambitious neoliberal claims of ‘getting the market right,’ and then leaving it to gods whatever happens thereafter.
Time and again, it has been argued that the difference between a competitiveness-based approach (i.e. engaging with industries and people) and market-based liberalisation (i.e. engaging only to have the market rein-free and distortion-free) is about ‘policy’ and ‘practice,’ or in plain words, the enlightened thinkers and the riff-raff doers. Such an interpretation is stuck in the wisdom of 1776 which claims there is an ‘invisible hand’ that makes sure everything goes right as long as a field called ‘market’ is made free for the homo economica to wrestle each other out to win that biggest pot of material benefits. It overlooks the later wisdom, for example one proposed by Schumpeter, that economic trajectories emerge from within societal values and are bound to be different from one another, and that economic development is a continuous process of creative destruction through which old ways of doing things are endogenously destroyed and replaced by new ways. Linking competitiveness with changing societal values and circumstances is fundamentally different from leaving the economy to be ruled solely by the omnipresent market forces and equating competitiveness with parading of indicators.
It is easy enough to dismiss the competitiveness approach as the remnants of state dictatorship if not downright communism – mismatched planning and lack of accountability, corrupt institutions sitting on white elephant projects, and not-so-creative destruction of individual entrepreneurial spirits. But there are compelling conceptual arguments for thinking that the only way in which indicators can be gauged without limiting them to global fashion-parading is to gauge them against a specific strategy that a nation has developed and owned. This year’s competitiveness ranking particularly underscores this point. Nepal lags behind furthest in three core indicators: Infrastructure, technological readiness and innovation. All three of these are investment-demanding areas, which are also bound to have long gestation periods and large externalities. It does not require much common sense to realize that such investments will have trade-offs, i.e., we will always have to choose some projects over several other considerations. Such decisions tend to be random and haphazard; but they need not be – if there is a sound competitiveness strategy in place, why a certain public action was chosen over the other will have to be explained in more concrete terms, and any progress (or retreat) will have to be explained accordingly.
It is worth highlighting that national (or regional) competitiveness strategies have been deployed as much in the capitalistic countries as in socialist. The only difference that explains difference of experiences between countries who succeeded in their competitiveness strategies from those who failed has had to do with that fine balance between the role of individuals versus the role of the state. It is the people who must come forth to risk their personal properties to capitalize on the opportunities offered by a given competitiveness strategy. The role of the state is to make sure that the opportunities offered are genuine but also to make sure that these individuals do not compromise on the societal values pursued by others.
The genuineness of entrepreneurial opportunities need the economy to have a certain degree of freedom, predictability, stability and support from the state; the protection of societal values need the state to ensure that entrepreneurship emerges from within and that entrepreneurs’ advances do not cross those fine lines of morality and justice. A good competitiveness strategy is more human – it does not refrain from building on the societal values that may aid entrepreneurship nor does it dismiss morality just because it is not economics.
Writer is a Postdoctoral Research Fellow at University of Oxford’s Department of International Development.
mallika.shakya@qeh.ox.ac.uk
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