Who are EU? Ambiguities in the Concept of Competitiveness

Borrowing the title from Robert Reich’s 1990 article, ‘Who is US?’, I argue that it is first necessary to clear up some of the ambiguities in the current debate about European competitiveness if we are to develop a coherent and effective industrial and macroeconomic policy for Europe. Reich was adamant that the foreign‐owned firms (FOFs) that located production – and increasingly their research and design teams – in America were doing more for the American people (and, in the long run, for the American economy) than firms registered and headquartered in the US but whose output, and employees, were largely located elsewhere. Now that Asian firms as well as American ones are increasingly locating production in Europe rather than at home, the same argument holds good for Europe. Second, in order to determine and adopt the policies appropriate to making national societies, rather than national firms, competitive and viable, it is necessary to clear up some of the confusion concerning the causes of increased competition among states and among firms. It is argued that these causes are structural and (since the end of the Cold War) global. The most important of these are the accelerating rate of technological change and its escalating capital costs and, as auxiliary factors, the added opportunities for internationalizing production opened up by the increased mobility of capital, the improved efficiency of transport and communications and the general liberalization of the global trading system. Third, if the conclusions of the first and second part are accepted, the crucial political issue concerns the choice of means appropriate in a world market economy to the chosen end of European competitiveness in terms of societies rather than of firms. The third part of the argument therefore discusses some of the relevant policy issues: trade and investment policies, EU enlargement, the common currency, social rules and charters, and welfare issues like health and education.