Fools' Gold Blog Post on Friedrich List's Role in the Pre-History of Modern-Day Competitiveness Thinking
Friedrich List never once mentioned competitiveness directly by name, but he nonetheless remains an important figure in the pre-history of the Competitiveness Agenda. It would be impossible to present a comprehensive account of the rhetorical structure underpinning that agenda without at least some discussion of his National System of Political Economy. It was List who first made the case in the 1840s for collective national sacrifice in the interests of stronger future macroeconomic performance. There is no plausible philosophical mechanism in his work to explain why people should agree to the privations following from this sacrifice, in much the same way that no plausible philosophical mechanism operates in the modern-day Competitiveness Agenda to explain why the population should remain passive in the face of a race to the bottom. His argument for choosing national economic champions in the name of future society-wide enrichment therefore looks like an unsubstantiated assertion, and the same surely also applies to the Competitiveness Agenda.
There are many instances in the history of economic thought where economists did not use what today has become the concept of ‘national competitiveness’ but nonetheless wrote about things that look eerily familiar when viewed through the lens of the modern-day Competitiveness Agenda. Veblen’s 1904 Theory of Business Enterprise contains many important passages of this nature. Business leaders, he noted, had become remarkably successful at presenting themselves as the selfless foot soldiers in a national struggle for international economic pre-eminence. Yet for Veblen this was all a carefully constructed smokescreen. They could hardly be seen as guardians of the national interest, he argued, because they enacted significant damage on the economy’s social provisioning capacity in the self-serving desire to protect the social inequalities from which they benefited so handsomely.
The purveyors of the modern-day Competitiveness Agenda exhibit pronounced Panglossian tendencies. They see only positive things for everyone if their advice is followed. A ‘competitive’ economy will boast high levels of growth, they say, and the whole of society will benefit when the trickle-down effects impact on their lives. However, this Panglossian scenario elevates optimism over evidence. The modern-day Competitiveness Agenda can be turned on its head in the interests of a more progressive social settlement by exploring its fundamental anti-growth dynamics.
The Nobel Prize winning economist George Stigler wrote a famous intellectual history of the concept of perfect competition in the late 1950s. The article has subsequently attained canonical status among orthodox economists. It does not mention the contemporary notion of competitiveness once, but it is nonetheless full of important implications for those who wish to question the intellectual authority of the modern-day competitiveness agenda. In particular, Stigler is forced to admit that there is no purely economic basis for supporting the idea of a perfectly competitive economy. His argument that there are still good grounds for keeping up this pretence boil down to straightforwardly political beliefs for wanting to keep the government out of economic life. Despite what can be shown to be their important differences, this is one thing that the theory of perfect competition and the modern-day competitiveness agenda have in common. Both are typically dressed in apparently economic clothes, but each in its own way must be understood as a purely political intervention into public affairs.
Fools' Gold Blog Post on Milton Friedman's Grand Denial of the Social Responsibility of Corporations
The legendary Chicago economist, Milton Friedman, was not somebody to do anything by halves. Where others before him had shied away from even thinking aloud about the limits of firms’ responsibilities to those around them, Friedman waded into the debate with both feet. Corporations can serve society best, he stated, by cutting their costs to the bone and accordingly by making as much profit as possible. This argument did not reference competitiveness directly in its original articulation, but it acts as an important forerunner of modern-day competitiveness discourse. Corporations that deny their broader social responsibilities, Friedman argued, set themselves on the road to a truly competitive zero rate of taxation.
Paul Samuelson pioneered the mathematical models of maximisation that today form a central part of the economics of competitiveness. It is significant, then, that the pioneer himself deployed his method of difference equations to come to a conclusion that is wholly opposed to modern-day competitiveness mantra. This post brings Samuelson’s argument to a wider audience as it traces the intellectual underpinnings of contemporary competitiveness discourse. It reviews his defence of collective provision of the public goods that enhance individual welfare and his view that the funding of public goods should be protected from race-to-the-bottom dynamics.
David Ricardo’s status as the first really famous economist of the nineteenth century rests on two capacities: his ability to think in pure economic abstractions and his ability to harness economic theory to a liberal political worldview. They came together most famously in his theory of comparative advantage, through which countries are encouraged to specialise in producing the goods in which their workers are relatively most efficient. Despite being two hundred years old, Ricardo’s theory is still the mainstay of the orthodox economics justification of free trade and, at one stage removed, of modern-day competitiveness discourse too. This post looks behind the façade of the numbers that Ricardo used to illustrate his theory of comparative advantage, to show that they were anything but an innocent account of essential economic relationships. It therefore helps to place modern-day competitiveness discourse in a far from flattering intellectual light.
On June 26th 2015 I was one of the participants on the closing roundtable of the Tax Justice Network's Annual Research Conference, 'Should Nation States Compete?'. The roundtable was entitled, 'The Competitiveness Conundrum', and the other participants were Will Davies (Goldsmith's University, London), Ronen Palan (City University, London) and Naomi Fowler (Tax Justice Network).
On June 25th 2015 I presented a paper at the Tax Justice Network Annual Research Workshop, 'Should Nation States Compete?'. The paper was entitled, 'Following in John Methuen's Early Eighteenth-Century Footsteps: Ricardo's Comparative Advantage Theory and the False Foundations of the Competitiveness of Nations'.
A copy of the paper can be downloaded by clicking here.
Recent research from the UK suggests that such policies constitute hand-outs, rather than effective means to shape firms’ investment decisions.
Re-posted on March 12th 2015 on the Tax Justice Network's Fools' Gold blog: http://foolsgold.international/the-false-promise-of-corporation-tax-cuts/.