Public Policy for Economic Competitiveness: An Analytical Framework and a Research Agenda

Abstract

The prime concern is to highlight the strategic choice framework (SCF) for analysing localities’ economic development and competitiveness policies in the context of globalisation. The SCF is centred on hypotheses relating to the governance of production, where ‘governance’ is understood in terms of the processes and associated structures for identifying and making strategic choices. The argument is illustrated from discussions of current realities at micro, meso and macro levels, and from analyses of the potential for ‘democratic’ development paths. This leads to an explicit focus on competitiveness policies. The conceptualisation of ‘competitiveness’ is discussed, and we advocate a focus on the degree to which policies serve the democratically determined public interest. The paper’s secondary concern is to highlight implications of the SCF for the research agenda. We envisage an emphasis on boundary spanning research. It is suggested that the SCF be applied in the context of experiences in actual localities, in diverse forms of enterprise, and in networking and clusters; and that the SCF be deepened by focusing on aspects of three topics: economic democracy, economic performance and policy evaluation.

Key Words:

• Strategic choice
• governance
• economic development
• competitiveness
• public policies

JEL Classification:

• B41
• R11
• D20
• L50

Acknowledgements

An earlier version of parts of this paper was presented at the EUNIP International Conference (Birmingham, UK, December 2004). We would like to thank participants for comments and discussion. Parts of the paper are also strongly influenced by discussions at the European Science Foundation Exploratory Workshop on ‘The Governance of Networks as a Determinant of Local Economic Development’ (San Sebastian, Spain, November 2005). Thanks to all participants at that event. We would also like to thank Helena Lenihan for discussion on aspects of the paper, and most especially Keith Cowling, for his comments and discussion on various drafts of this work. Of course, all errors and omissions are our own.

Notes

1. As Chief Economist at the World Bank, Stiglitz spoke of movement towards a ‘post‐Washington consensus’, but his recent criticisms of practices within the Washington institutions and the circumstances in which he left his job at the Bank (in 1999) suggest an essentially unchanged approach. In an interview with Stiglitz, Palast (2002) reports that ‘what drove him to put his job on the line was the failure of the banks and the US Treasury to change course when confronted with the crises—failures and suffering perpetuated by their four‐step monetarist mambo. Every time their free market solutions failed, the IMF simply demanded more free market policies.’ See also Wade (2002) for an interesting critique of the World Bank in the context of the departures of Stiglitz and Ravi Kanbur.

2. We elaborate on the ‘competitiveness’ concept later in this paper, distancing ourselves from a connotation of competition.

3. See, for example, The Financial Times, 19 November 2004, on the ‘new industrial policy’ of the British Government; and European Commission (2005) on the EU’s concern for the future of manufacturing.

4. See also European Commission (2002), seeing competitiveness in terms of the ‘ability of the economy to provide its population with high standards of living and high rates of employment on a sustainable basis’.

5. Our language here echoes that of Richardson (1972); in his analysis of the ‘organisation’ of production, he conceives of industry as carrying out ‘activities’.

6. For an interesting discussion of the criticisms often levelled at economics, see Dasgupta (2002).

7. United Nations (1997) views transnational corporations as ‘central actors’. Hertz (2001) points out that the largest 100 transnationals account for 20% of global assets. Dicken (2003) provides a detailed analysis of their influence, alongside ‘States’, in the global economy.

8. See Cowling & Sugden (1998b) on international trade managed by corporations.

9. We do not dispute that many so‐called corporate universities in fact have no research function. We would also point out that a similar argument to the one we have made about corporate universities also applies to ‘traditional’ universities. They have come under increasing pressure to mimic and serve corporate interests, and such tendencies can throw into conflict the determination of research agendas and research practice. For example, Jarvis (2000) suggests that ‘universities are increasingly behaving like corporations and competing with each other’; Aronowitz (2000) contends that faculty and administration in leading US research universities have engaged in a ‘rush to tailor their intellectual and cultural capital to the needs of … corporations’; Bok (2003) warns that ‘thus far, … university leaders have paid too little heed to the risks that profit‐making activities often bring in their wake’.

10. For Dewey (1927), if the consequences of an act are essentially confined to the persons directly engaged in it, the act is private. However, if the consequences are felt more widely then ‘the act acquires a public capacity’, the public being those who are ‘indirectly and seriously affected for good or for evil’ by the act. Drawing on Dewey, for Long (1990) the public interest is an evolving consensus amongst a public. He argues that the ‘consequences of private parties’ actions create a public as that public discovers its shared concern with their effects and the need for their control. The public’s shared concern with consequences is a public interest.’

11. Although the term ‘stakeholder’ is frequently used in the literature and debates, it can refer to substantively different scenarios, and often represents a narrow approach to conceptualising interests and their empowerment; see, for example, discussions in Kelly et al. (1997) and Branston et al. (2006a).

12. For a consideration of the practicalities of broadening firm governance in the specific context of the reform of public utility sectors comprising a number of firms, see Branston et al. (2006c).

13. See also various contributions from the influential ‘Florence school’ on ‘industrial districts’, such as Becattini et al. (2003). A variety of issues surrounding the potential for ‘clusters’ to offer alternative development choices in the context of globalisation are also explored in contributions to Pitelis et al. (2006).

14. This would be linked to the possibility of a route towards more democratic and universally beneficial forms of globalisation, a prospect related to Falk’s (1996) stress on rethinking citizenship and moving towards ‘people‐driven globalism’.

15. This is a broader notion of ‘evaluation’ than is often seen in the literature. Compare, for example, the discussion in Storey (2000).

16. This perspective is not to deny the significance of issues typically addressed as market failures. For example, a particular concern with market failure is monopoly power, but the implication we draw from Friedman’s (2002) discussion of the origins of US antitrust policy is that market power and the concentration of power in strategic choice are closely correlated. Friedman reports that the Sherman Act of 1890 ‘was directed at economic power’. The Act was rooted in the perception that ‘top businesses were big—huge—gigantic; and their tentacles spread over the whole country. It was not just a question of economic efficiency, or higher prices for consumers; it was also the sense of threat, the danger to small business people, to the little shop on the corner. The trust crisis was a culture crisis as much as it was a crisis in prices and business.’ In other words, ‘one of the historical foundations on which antitrust policy rested was “fear of huge, overwhelming conglomerates, whose power was an evil in itself, a threat to American values”’. See also the more general discussion of the relation between market and strategic failure in Bailey (2003).

17. Indeed, a specific and identical objective of different localities might be a desire that they mutually benefit from economic activity.

18. Branston et al. (2006c) recognise that a democratic process might reveal a unique set of aims and objectives for a particular locality, implying that there would be no other real locality with which to compare performance. Accordingly they suggest the appropriateness of comparisons with imagined localities: ‘we would suggest that the comparison that is the essence of competitiveness could be with both real and imagined localities. Then, unique objectives need not prevent an assessment. Moreover, allowing for comparisons with both real and imagined localities is important even when localities have common objectives, because otherwise a locality might be deemed competitive when it performs better than others, even though in practice all localities fail to reach their potential.’

19. Countless discussions of competitiveness would imply that we are not alone; for example and to indicate just one, consider the inclusion of innovation and of ‘higher education and training’—which might be argued to be related to the nurturing of creativity and imagination ‐ as two of the nine ‘pillars’ of competitiveness in World Economic Forum (2005).

20. On cross‐locality networking and clusters, see, for example: Sugden (1997) and Cowling & Sugden (1999) on ‘multinational webs’ of smaller firms; Simmie & Sennett (1999) on ‘global or local linkages’; and Malecki (1997) and Ruigrok & Van Tulder (1995) on transnational networks involving large firms. On proximity, see, for example, the discussion of various types in Boschma (2005).