The imperative to be internationally competitive

The free trade ideology^[1] and the advance of technology have set up the imperative for national economies to be internationally competitive. 

Technology has made us a global village.  Market information, and resources, except chattel labour^[2], spread as quickly around the globe today as gossip once did around a medieval village. 

Geographic distance is no cushion against competition.  Today our significant international competitors are all effectively next door in our global village.  If your competitor lowers prices or improves quality, the response from your customers is immediate - they go next door.  To stay in the game you have to stay up with the play and follow suit, or lead with your technological ace.  There is no escaping the imperative to be internationally competitive. 

The scale of research and development expenditure now required to keep the front of technology moving forward demands a global market.  To be able to bring new technology to market at an affordable price global-scale manufacture and distribution is increasingly required.  There are relatively few corporations or even nations in the world that have the funds and skills necessary to manage significant technological advances from conception through to marketed product. 

If a nation's citizens wish to partake of the fruits of technological advance, which they will virtually from the moment pre-release publicity is made available anywhere in the world, then that nation must have something valuable to sell in exchange on the international marketplace. 

The highly integrated natures of contemporary economies mean that any inefficiency in any one part of the economy rapidly feeds through into the cost structures of production elsewhere in the economy, including the export sector.  The need to be internationally competitive demands an economic infrastructure that is at least as efficient and low cost as those of your international competitors.  This extends to financing costs, to internal transport and communication, to rates of taxation, to the costs of government services, and, of course, to the cost ^[3]and productivity of labour^[4]. 

If an economy's taxation regime is significantly higher than that of its international competitors, investment funds will flow elsewhere and the cost of financing will rise, raising the cost of production of export goods.

If an economy is subjected to strict labour laws that specify minimum wages, maximum hours, and rates of overtime, its costs of labour will be significantly higher than an economy with a deregulated labour market, and it will therefore be at a competitive disadvantage. 

An economy that has a large and indolent government bureaucracy with tentacles of red tape throughout the productive sector is also seriously disadvantaged in the international marketplace.  Even if the government bureaucrats don't demand fees or back-handers, the time required to comply with regulations and paperwork can amount to a significant cost. 

The costs that are commonly overlooked^[5], principally because they do not come to charge immediately and are difficult to quantify, are the longer term social costs of driving down a nation's "economic" cost structure.  Low taxation implies low spending on government services including income redistribution; it implies greater social inequities and concomitant increases in social disorder^[6].  Social equity has no explicit value in the economic marketplace, but disregarding social equity^[7] will cause the deterioration and, in time, the collapse of the social infrastructure that allows the marketplace to operate. 

Where this process of increasing international competitiveness will lead us is the interesting question.  How much blood can you get out of a stone, and what happens when you and your international competitors are all down to the last drop? 

Opting out does not appear to be an option for most.  Consumers world-wide demand the latest.  The privileged demand greater profits.  It is not politically viable to deny them access to the international marketplace and the fruits of technology.  Neither do we wish to inhibit the advance of technology^[8] which is one of the critical success factors for our long term survival as a species.  But a market-driven consumerist feeding frenzy will not deliver us a sustainable collective future^[9].  If we cannot deny the imperative to be internationally competitive, can we not at least modulate it to a more equitable and therefore sustainable outcome?

Of course we can!

Measures promoting social and ecological equity do come at a price, but it is a price that enough informed citizens and consumers are prepared to pay.  Such measures^[10] if not well-managed can easily unravel into generalised inefficiency and ineffectiveness, with a loss of international competitiveness, but equity and economic viability are not inherently mutually exclusive.  There is no reason why a society cannot promote social and ecological equity while also being effective and efficient economically.

What is often overlooked or understated is that yielding to the alleged imperative of parity with the wage structures, labour practices, environmental despoliation, and taxation regimes of your most significant international competitors may deliver you a society that you and your fellow citizens find intolerable.  You may find your society not only becoming morally intolerable, but also physically intolerable, and you will be prepared to pay a great deal to ameliorate the intolerable.

There are also very definite tangible costs to sustained social and ecological inequity.  These costs can take a long time to feed through into the economic processes of a society, and for that reason, tend to be discounted by those eager to reap the immediate financial rewards which come from paying your employees lower wages and your State less tax. 

The costs of increased crime, ill-health, and civil apathy, are ultimately also reflected in the cost structures of a nation's economic entities.  Hardship and personal risk premiums may need to be paid to attract international labour.  Insurance premiums and the cost of personal and property security will rise.  All these costs also impinge on the international competitiveness of the economic entities of a nation. 

A nation that offers social and ecological equity, as well as political stability, but at the price of an internationally high taxation regime need not necessarily be fatally disadvantaged in the international marketplace.  Investors are willing to take a lower return in exchange for lower risk.  Technocrats are willing to take lower salaries in return for a more amenable lifestyle.  Consumers will pay more^[11] for products that have been produced equitably.

Social and ecological equity is not a liability that the internationally competitive nation can increasingly less afford; it is an asset that no nation with its eye on long-term viability^[12] can afford to be without or allow to run down.