Jonah: An idiosyncrasy of contemporary American political debate is that concern with “competitiveness” is so often associated with the Democratic party, and is often used as a code word for industrial policy and a host of social engineering initiatives. I think it is a mistake for the right to concede this territory.
You link to a quote from Paul Krugman, supposedly discrediting the idea of national competitiveness:
International trade, unlike competition among businesses for a limited market, is not a zero-sum game in which one nation’s gain is another’s loss. It is [a] positive-sum game, which is why the word “competitiveness” can be dangerously misleading when applied to international trade.
But this doesn’t make a lot of sense to me. Sure, some product markets are somewhat limited, but competition between companies as a whole is not generally “zero-sum” either — hence, economic growth.
International trade can make both parties better off than they would be without the exchange. But there are still relative winners and losers. Some societies are populated by lots of people with high-wage jobs, nice houses, and good schools, and other societies are populated by lots of people hustling for tips from vacationers from the first kind of society. Over time, people who spend their working hours generating goods or services that they can sell for a big margin versus the costs of the required inputs will tend to live in the first kind of society. Nothing is forever in this world, but I want America to remain in that camp for a very long time.
In the most important sense, competitiveness is relative productivity. And relative productivity is likely to matter a lot, because it will materially influence future absolute wealth by affecting the flow of global technology and innovation. But relative productivity and the wealth wealth it produces also matter in and of themselves. First, they will impact the global prestige and success of the Western idea of the open society which we value independently of its economic benefits — people naturally look to economically successful societies for lessons and inspiration. Second, maintenance of a very large GDP per capita gap between the West and the rest of the world will be essential to maintaining relative Western aggregate GDP, and therefore, long-run military power.
In sum, we want the rest of the world to get richer, but we want to stay much richer than they get.