On the concept of 'competitiveness' and its usefulness for policy

• Key issues: Does competitiveness have a coherent meaning? Is it useful for policy?
• The concept of competitiveness is coherent in the presence of dynamic externalities.
• The core idea is ‘winner-picking’ by social planners.
• Its policy use is limited because of practical problems of picking ‘real winners’.
• Competitiveness strategies can work if they are the ‘right’ kind for a given political configuration.

This paper examines the coherence and usefulness of the contentious concept of ‘national competitiveness’. We undertake an interpretative review of the various uses of the concept in international economics. It is argued (á la Erik Reinert) that the concept of competitiveness is coherent in the presence of dynamic externalities, with a ‘winner picking’ exercise, by social planners, at its core. However, its usefulness for real-world policymaking can be limited because of practical problems (political and information imperfections) of picking the ‘real winners’. These problems are nonetheless not insurmountable. There is ample evidence that competitiveness strategies can work if they are the ‘right’ kind for a given political configuration.