Page 193 - Global Political Economy_Understanding The International Economic Order

CHA PTER S EVEN
Do Nations Compete with One Another? 49
The Clinton Administration assumed power believing that pursuit of
a “competitiveness strategy” would restore the international competi-
tiveness of the American economy. The United States, as the President
told the American people, is “like a big corporation competing in
the global marketplace.” Clinton raised the competitiveness issue in
response to America’s huge trade deficit and to growing concern
about the deindustrialization of the economy. The immense trade
deficit with Japan alarmed the Administration and convinced many
that the United States had become noncompetitive with Japan, espe-
cially in high-tech industries. The newly elected President created the
National Economic Council in response to these concerns and
charged it to developa national strategy to deal with such problems.
About the same time, many West European leaders also began to
express concern about the international competitiveness of Western
Europe. In June 1993, Jacques Delors, then president of the European
Commission, stated that the European economy’s most basic problem
was loss of international competitiveness. The fundamental reason
for high unemployment, he proclaimed, was that Europeans were no
longer competitive with the Americans and the Japanese, and the so-
lution should be to increase competitiveness in high-tech industries.
Other West Europeans have also spoken of the intense global eco-
nomic struggle. Many political leaders and the general public began
to believe that the economic well-being and even the political survival
of Western Europe was at stake in this international struggle. Al-
though both European and American concerns moderated in the late
1990s, concern over competitiveness continued to be very much alive.
The idea that nations qua nations are engaged in a zero-sum com-
petition for market share and economic superiority is anathema to
every mainstream economist. It was economist Paul Krugman who,
in an article in the Foreign Affairs journal (1994), launched the attack
on the Clinton Administration’s competitiveness strategy and even on
50
the very idea of national competitiveness. Krugman previously had
been a principal author of the theory of strategic trade and thus had
inadvertently contributed to the intellectual rationale supporting the
Administration’s policies. In a series of books and articles, Krugman

49
The question of whether national differences lead to economic and political con-
flicts is discussed in my book, The Challenge of Global Capitalism: The World Econ-
omy in the 21st Century (Princeton: Princeton University Press, 2000), Chapter 8.
50
Paul R. Krugman, “Competitiveness: A Dangerous Obsession,” Foreign Affairs
73, no. 2 (March/April 1994): 28–44.
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