197 CM Competitiveness

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Competitiveness File

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Michael and Franklin

Globalization causes Competitiveness ................... ......................22Globalization causes rise of competitors and decrease Soft Power ..........................................................................22

US Competitiveness Low .................................... ..........................23Experts Agree United States is Lacking Innovation that is key to global advantages ..............................................23

**Link Extentions**...................................... ...............................24

**Link Extentions**...................................... ...............................24

Competitiveness Politics Link ......................................................25Pelosi believes U.S. Behind in technology Innovation .............................................................................................25

Competitiveness key to Economy ............................................. ....26Lack of Technological Innovation leads to decrease in Workforce and Collapse of Economy ................................26

Competitiveness key to Economy/ National Security .................27Technology Leadership key to National Security and Economy ..............................................................................27

China/India Threat to Competitiveness ......................................28China and India threaten U.S. technological Leadership ..........................................................................................28

China Threat to Competitiveness ................................................ .29China purposely undermines U.S. technological Leadership ...................................................................................29

Patents Competitiveness Link .................................. ....................30Patents are key to Technological Leadership ........................................................................................................ ....30

Competitiveness key to Research and Development Workforce

....................................................................... .................................31Lose of Technological leadership leads to decrease in research and development workforce ................................31

Globalization cause Competitiveness ......................................... ..32

Globalization decrease U.S. Tech leadership ......................................................................................................... ...32****************NEG****************................................33

****************NEG****************................................33

**Frontline**............................................................................ .....35

**Frontline**............................................................................ .....351NC Frontline ..........................................................................................................................................................36

1NC Frontline ............................................................... ................36

Foreign Nations Cant compete with US .............. .......................36US wont lose tech competitiveness, diffusion proves ......................................................................................... ....36

Tech =/= competitiveness.........................................................................................................................................37Tech =/= competitiveness..............................................................37

Competitiveness hurts global econ...........................................................................................................................39

Competitiveness hurts global econ.......................................... .....39 No Solvency social forces key...............................................................................................................................40

No Solvency social forces key....................................................40READ A CASE SPECIFIC NO SOLVENCY CARD HERE IF YOU WANT TO..................................................41

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READ A CASE SPECIFIC NO SOLVENCY CARD HERE IF

YOU WANT TO............................................ ................................41**Competitiveness doesnt exist**...........................................................................................................................42

**Competitiveness doesnt exist**..................................... ..........42Competition not real, Global Market........................................................................................................................43Competition not real, Global Market..........................................43

Idea of International Competition is Flawed, technology advances dont trade-off .................................................43

Competition not Real, Global Market ....................... ..................44Notion of Competition is misleading, not zero-sum .................................................................................................44

Competition Isnt Real, Global Market ......................................45Competition doesnt exist, there is only a global pool of technology ................................................. ...... ...... ...... ...45Competitiveness doesnt exist...................................................................................................................................46

Competitiveness doesnt exist................................................. ......46

Competitiveness doesnt exist...................................................................................................................................47Competitiveness doesnt exist................................................. ......47

**No Uniqueness**......................................... ..............................49

**No Uniqueness**......................................... ..............................49Competitiveness =/= significant...............................................................................................................................51

Competitiveness =/= significant...................................................51India and China not real Threat to Technological Leadership ..................................................................................53

AT: Low Competitiveness hurts economy ...................................54Even if Competitiveness is low, it wont hurt U.S. economy. We draw technological innovations from global pool................................................................................................................................................................................... 54

Euro cant replace dollar...........................................................................................................................................55

Euro cant replace dollar............................................ ..................55

**No Impact**.................................... ..........................................56

**No Impact**.................................... ..........................................56

Competitiveness No Impact ................................................. .........57Competitive nations dont determine U.S. Economic Success ............................................................................. ....57

**No Solvency**....................................................................... .....58

**No Solvency**....................................................................... .....58

Private Sector Solve Competitiveness Now .................................59The Private Sector makes up for federal slack in research and development ...........................................................59Econ cant solve for competitiveness.......................................................................................................................60

Econ cant solve for competitiveness...........................................60Low competitiveness =/= low econ..........................................................................................................................61

Low competitiveness =/= low econ...............................................61Intervention bad........................................................................................................................................................62

Intervention bad.............................................................. ..............62

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**Other**..................................................... .................................64

**Other**..................................................... .................................64Alt Causality ............................................................................................................................................................65

Alt Causality ............................................................ .....................65Lower dollar = higher competitiveness....................................................................................................................66Lower dollar = higher competitiveness.................................. ......66

Foreign loans =/= instability ....................................................................................................................................67

Foreign loans =/= instability ....................................... .................67 No Confidence Now.................................................................................................................................................68

No Confidence Now................................................................ .......68Competitiveness bad Extentions...............................................................................................................................69

Competitiveness bad Extentions..................................................69Competitiveness kills Japanese society....................................................................................................................71

Competitiveness kills Japanese society........................................71zero sum = bad policy...................................................................................................................................................................................72

zero sum = bad policy

....................................................................... .................................72Competitiveness = bad policy...................................................................................................................................74

Competitiveness = bad policy...................................... .................74

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*************AFF*********

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**Competitiveness High**

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US Competitiveness High

The U.S. isnt Losing Scientific Competitiveness

Titus Galama, PhD Physical Scientist at Rand Institute, and James Hosek, PhD Director of Forces and ResourcesPolicy Center, RAND National Security Research Division February 2008, U.S. Competitiveness In Science andTechnology, National Defense Research Institute, www.rand.org/pubs/monographs/2008/RAND_MG674.pdf

The United States accounts for 40 percent of total world R&D

spending and 38 percent of patented new technology inventions by

the industrialized nations of the Organization for Economic Cooperation

and Development (OECD), employs 37 percent (1.3 million)of OECD researchers (FTE), produces 35 percent, 49 percent, and 63percent, respectively, of total world publications, citations, and highlycited publications, employs 70 percent of the worlds Nobel Prize winnersand 66 percent of its most-cited individuals, and is the home to

75 percent of both the worlds top 20 and top 40 universities and 58

percent of the top 100.

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U. S. Competitiveness High

U.S. research and development is Vibrant, success of competingNations dont Undermine


High growth in R&D expenditures, patents, and S&E employment,

combined with continuing low unemployment of S&E workers,

suggest that U.S. S&E has remained vibrant. These signs do not supportthe notion that jobs are being lost at substantial rates as a result

of the outsourcing and offshoring of S&T. U.S. gains in S&T occuragainst a backdrop in which R&D expenditures, S&E employment,and patents are also increasing in the EU-15, Japan, China, Korea,

and many other nations/regions. Studies of the offshoring of high-skill

work suggest that it does not result in job losses in the originating

country, as it is increasingly driven by the need to access scarce talent,

but rather that the overall number of jobs is increasing.

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US Competitiveness High

Research and Development funding High


However, most of the increase in federally funded basic researchwas in the life sciences, whereas basic research funding for the physicalsciences was essentially flat. The allocation of federal R&D dollarspresumably was based on an assessment that the potential payoffs werefar higher in the life sciences than in the physical sciences, just as physicalsciences had received the major portion of federal R&D funds inthe decade after Sputnik. Still, taken as a whole, total basic researchand federally funded basic research have increased rapidly in real terms

(constant dollars) on average, by between 3 percent and 6 percent peryear for the last three decades.

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**Impact Extension**

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**Brink Extensions**

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Competitiveness Brink

While US still technology leader, an easily be undermined


While the United States is still performing at or near the top in

many measures of S&T leadership, this leadership must not be taken

for granted. Institutions and incentives to foster the creation of new

S&T discoveries, the education and training of new generations of

S&T workers, the nurturing of academic and industrial research centers

of excellence, the protection of intellectual property, and, at the

same time, the production and dissemination of basic scientific discoveries

have all contributed to the unparalleled S&T leadership of the

United States. Such institutions need to be sustained and, as needed,

adapted to the global economy.

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Competitiveness Brink

Lack of Competitive attempt, puts U.S. on the brink of lost leadership


The United States is in a fierce contest with other nations to

remain the worlds scientific leader, opens a Business Roundtablereport, But other countries are demonstrating a greater commitmentto building their brainpower (Business Roundtable, 2005). A journalistin U.S. News & World Report uses more colorful language: Overthe past century, Americans have become accustomed to winning everyglobal battle that mattered. . . . It was nice while it lasted. Today . . . theland of the free is slowly, but unmistakably, yielding advantages earned

over decades to foreigners who work harder, expect less, and often, are

better educated. . . . Every one of the early warning signals is trending

downward, frets Intel Chairman Craig Barrett. Were all fat, dumb,and happy, which is one reason why this is so insidious (Newman2006)

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**Solvency Extension**

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Government Key to Competitiveness

Federal Support Key to Technological Innovation


In this environment, arguments run, responsibility for basic

researchoften the wellspring of innovationfalls primarily to the

government: It is from investment in basic science . . . that the most

valuable long-run dividends are realized. The government has a critical

role to play in this regard (U.S. Commission on National Security/21stCentury, 2001). But here, according to those warning of a crisis, thefederal government has fallen woefully short. Unveiling the Innovation

Agenda, then Representative Nancy Pelosi admonished, We areallowing [our] commitment [to long-term research and development]

to falter. Our federal support of basic research peaked in 1987, and

has been flat or falling ever since (Office of Congresswoman NancyPelosi, 2005)

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**Tech Competition Good**

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Tech Competition Good

Foreign Tech Success Motivates United States and is Beneficial


A future in which a significant share of new technologies is

invented elsewhere will benefit the United States as long as it maintains

the capability to acquire and implement technologies invented abroad.

Technology is an essential factor of productivity, and the use of newtechnology (whether it was invented in the United States or elsewhere)can result in greater efficiency, economic growth, and higher livingstandards. The impact of globalization on U.S. innovative activity isless clear. On the one hand, significant innovation and R&D elsewheremay increase foreign and domestic demand for U.S. research and innovation

if the United States keeps its comparative advantage in R&D.

On the other hand, the rise of populous, low-income countries maythreaten this comparative advantage in R&D in certain areas if suchcountries develop the capacity and institutions necessary to apply newtechnologies and have a well-educated, low-wage S&T labor force.

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**Uniqueness extensions**

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Policymaking Competitiveness

Policymakers must address decrease in science work force


Fundamental steps toward ensuring that the United States

continues to benefit from its strength in S&T are to sustain U.S.

leadership in basic and applied research and to keep salaries and

job conditions competitive so that the United States remains an

attractive place for the worlds scientists and engineers to live and

work. Regular monitoring and analysis of S&T performance and

the condition of the S&E workforce will provide timely, relevant,

objective information to policymakers to aid them in addressing

adverse trends and improving U.S. S&T.

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Globalization causes Competitiveness

Globalization causes rise of competitors and decrease Soft Power


First is that the effects of globalizationincluding the growingstrength of other nations in S&Twill make it much more difficult

in the future for the United States to maintain a leadership position in

S&T. Advocates of this viewpoint cite the quickly rising S&T capacity

of rival powers, the heightened competition presented by white-collar

workers in S&T in lower-wage countries, the ability for new technologies

and information to be rapidly transmitted around the globe, andchanges in the nature of innovation, which is increasingly driven by

private investment and international clusters of emerging tech firms,capital markets, and research universities (e.g., Segal, 2004), ratherthan by large corporate laboratoriessuch as Bell, GE, and IBM.

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US Competitiveness Low

Experts Agree United States is Lacking Innovation that is key toglobal advantages


For decades, the United States has boasted the worlds leading system of

science and technology. The domestic building blocks that formed thebedrock of this system were sturdy and stable. Now, however, expertsare worried that they are slowly, but steadily, crumbling. [T]he committee

is deeply concerned that the scientific and technological building

blocks critical to our economic leadership are eroding at a time when

many other nations are gathering strength, reads the central finding ofthe National Academies of Sciences (2006) report. The call is clear,the Presidents Council of Advisors on S&T declares, we must protectand enhance the U.S. innovation ecosystem that has put our Nation in

the global economic leadership position it currently enjoys. . . . Unless

we take action to maintain our global advantages . . . we run the risk oflosing our competitive advantage. . . . [T]his issue . . . is of the utmostimportance and failure is not an option. (Presidents Council of Advisorson Science and Technology, 2004)

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**Link Extentions**

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Competitiveness Politics Link

Pelosi believes U.S. Behind in technology Innovation


One vital component of a strong research infrastructure is ample funding.Those who foresee an S&T crisis warn that the total funding neededto maintain U.S. strength in S&T is falling into short supply. First, bysome accounts, federal funding in general has waned. Independent scientific

research provides the foundation for innovation and future technologies,

state Democratic policymakers in their Innovation Agenda

legislation, but U.S. federal funding for research and development

has declined steadily over the last decade (Office of Congresswoman

Nancy Pelosi, 2005). This trend, voices claim, weakens Americas abilityto compete in S&T: If the United States does not invest significantlymore in public research and development, it will be eclipsed by others(U.S. Commission on National Security/21st Century, 2001)

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Competitiveness key to Economy

Lack of Technological Innovation leads to decrease in Workforce and

Collapse of Economy


But if U.S. leadership in science and technology weakens, theUnited States is at risk of losing its comparative advantage in R&D.

The consequences of this will be felt in the R&D sector, with fewer

discoveries and innovations, lower wages and employment, less capital

investment, and less income resulting from patent licenses, and

will extend to the entire economy, with U.S. firms and workers losing

their technology-driven edge in productivity and hence at risk of losing

market share, employment, firm value, and worker wages. Freeman(2006, 2007) argues that populous low income countries such as Chinaand India can compete with the United States in high tech by focusingin a specific area and by having many science and engineering workers,even though they are only a small fraction of their workforces.

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Competitiveness key to Economy/ National Security

Technology Leadership key to National Security and Economy


Thus, capability to innovate and adopt new technologies, includingthose invented elsewhere, is crucial to the employment, sales, andprofitability of U.S. firms and hence to the U.S. economy and standardof living. Science and technology have historically contributed significantlynot only to economic growth but also to well-being (improvedpublic health, longer life expectancy, better diagnoses and treatments ofmany illnesses, etc.), standard of living (refrigerators, cars, iPods, etc.),and national security (atomic bomb, radar, sonar, etc.). The strength ofthe U.S. economy and military provide it with the foundation for its

global leadership. If claims of diminishing U.S. leadership in S&T are

true and its future ability to compete globally is in question, the prognosis

is indeed serious. S&T is directly linked not only to Americas

economic strength but also to its global strategic leadership.

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China/India Threat to Competitiveness

China and India threaten U.S. technological Leadership


An official statement from the National Summit on Competitivenesscalls attention to the resources that other countries are pouringinto building their science and technology enterprises (NationalSummit on Competitiveness, 2005). China and India are the mostnotorious examples of nations on the rise: The major development

since the mid-1990s was the rapid emergence of Asian economies outside

of Japan as increasingly strong players in the worlds S&T system.

. . . China is growing at the most rapid pace. . . . Fragmentary data on

India suggest that it is also seeking rapid technological development(National Science Board, 2006a).According to economist Richard Freeman, this does not bodewell for the United States: [A]s China and India grow and joinEurope, Japan and other high-tech competitors, the U.S. scientific

advantage is going down pretty rapidly and its going to continue to

fall (Farrell, 2006).

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China Threat to Competitiveness

China purposely undermines U.S. technological Leadership


Other nations/regions certainly have ambitions to strengthen their

competitiveness as knowledge-based economies. China and the EuropeanUnion (EU) are two examples. In January 2006, China initiateda 15-year Medium- to Long-Term Plan for the Development of Scienceand Technology. China aims to become an innovation-orientedsociety by 2020 and a world leader in science and technology by 2050,

develop indigenous innovation capabilities, leap-frog1 into leading

positions in new science-based industries, increase R&D expendituresto 2.5 percent of GDP by 2020 (from 1.34 percent in 2005), increasethe contribution to economic growth from technological advances to60 percent, limit dependence on imported technology to 30 percent,and become one of the top five countries in the world in the number ofpatents granted (Cao, Suttmeier, and Simon, 2006).

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Competitiveness key to Research and Development Workforce

Lose of Technological leadership leads to decrease in research and

development workforce


As a result, runs this line of reasoning, American companies caneasily and profitably ship advanced R&D overseas: U.S. corporationsare moving sophisticated design and R&D overseas to their own subsidiariesabroad or contracting the work to third parties. . . . Data collectedby the Department of Commerce shows that the rate at which R&Dis shifting abroad has accelerated. . . . The continued shift of corporateR&D to overseas is a threat to our economic prosperity and nationalsecurity (Office of Senator Lieberman, 2004). A Seattle Times columniststates that [b]y 2010, some U.S. companies estimate that as much

as 90 percent of their research, development and manufacturing will be

done in China and India (Peters, 2006).In this new innovation environment, offshoring is not the only

problem. The concern is that foreign STEM professionals who might

have formerly lent their talents to American S&T may choose to return

home. Also, highly skilled American workers are being courted by

foreign and multinational companies and are moving overseas: The

United States . . . used to be the first and last stop for the worlds finest

talent, in areas ranging from electronics to medicine to chemistry and

physics. . . . But as fast-growing foreign companies have begun to conquer

new markets, they have been luring away top managers and scientistslooking for exciting new challenges. (Newman, 2006) Further,As global competition for technical talent intensifies . . . the UnitedStates will have a difficult time meeting its skill needs. . . . [T]he pool

of high tech labor and, therefore, the capacity to innovate in the United

States becomes more limited, threatening long-term economic viability

(Office of Senator Lieberman, 2004).

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Globalization cause Competitiveness

Globalization decrease U.S. Tech leadership


Freeman points out, populous low-income countries such as China andIndia can compete with the United States in high tech by having manyS&T workers, even though they are only a small fraction of the workforce,and by having a low wage advantage. Even if the developingcountry has somewhat lower quality scientists and engineers or lackssome research infrastructure resulting in less productive laboratories,it can still have a cost advantage in research and development because

of the lower wages of scientists and engineers. Freeman reasons thatthis threatens to undo the North-South pattern of trade, in whichadvanced countries dominate high tech while developing countriesspecialize in less-skilled manufacturing. Loss of comparativeadvantage in the high-tech sector to a low wage competitor can substantiallyharm an advanced country, as it has to shift resources to less desirablesectors and the rents from new products or innovations shift from theadvanced to the poorer country.Freeman argues that several indicators suggest that this form of

globalization threatens U.S. technological and economic leadership.

First, major high-tech firms are locating new research and development

facilities in China and India. Second, some forms of skilled work are

being offshored, such as information technology jobs to India. Third,

indices of technological prowess show a huge improvement in the technologicalcapability of China, in particular. Finally, data on production

and exports of high-tech products show that the improved capability of

China in high tech has begun to appear in production and sales in the

global market. Freeman recommends that the United States develop

new ways of monitoring and benefiting from scientific and technological

advances in other countries.

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****************NEG****************

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1NC Frontline

Foreign Nations Cant compete with US

US wont lose tech competitiveness, diffusion proves


As mentioned, a future in which significant innovation and R&Dtakes place elsewhere may benefit the United States if it has the capability

to acquire and implement technologies invented abroad. In addition,significant innovation and R&D elsewhere may increase foreignand domestic demand for U.S. R&D if the United States keeps itscomparative advantage in R&D. It is not clear that the United Stateswould necessarily lose its innovation edge (which we broadly equate

with strong performance in S&T) as a result of the globalization of

R&D. Eaton and Kortums (2006) model of innovation, technologydiffusion, and trade suggests that as long as trade barriers are not too

high, faster diffusion shifts research activity toward the country that

does it better (i.e., the United States). This shift in research activityraises the relative wage there. It can even mean that, with more diffusion,the country better at research ends up with a larger share of technologiesin its exclusive domain. The potential gains from the diffusionof technology depend on the size and productivity of the technologysector. Eaton and Kortums (2006) model suggests that policies thatpromote innovation, facilitate the diffusion of technology, support paymentfor intellectual property, and deter piracy of intellectual propertyare helpful.

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Tech =/= competitiveness

Technology is not key to competitiveness, potato chips prove

JAY BRYAN; THE GAZETTE, June 13, 1996, Nations' competitiveness is 'silly stuff' to economistKrugman,http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4245548546&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4245517123&cisb=22_T4245517122&treeMax=true&treeWidth=0&csi=8355&docNo=7

Krugman further points out that many of the boosters of national" competitiveness "seem to believe thatcutting-edge technologies are the only route to prosperity, although the evidence doesn't support this view.

For example, one popular U.S. slogan is that a competitive nation should focus on producing computer chips, notpotato chips. Actually, Krugman found, workers who make potato chips add more value on average than those whomake computer chips. One reason is that potato chips benefit from the extra profitability that goes with brand loyaltywhile computer chips generally don't.

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Competitiveness promotes global growth

International competitiveness promotes global growth


"Silly stuff is not that rare in this world, especially silly stuff aimed at businessmen," Krugman said, but evenby the undemanding intellectual standards of business, the obsession with national competitiveness is an"incredibly large-scale intellectual scam."Setting aside that a nation is incalculably more complex than a corporation and that it doesn't go out ofbusiness no matter how poor its export performance, Krugman pointed out that if other nations' economiesgrow faster than that of Canada, this in no way impoverishes Canada.Indeed, this foreign growth actually benefits Canada by offering an even bigger global market in whichCanadian companies can sell. What's more, if other countries grow faster because they devise cheaper orbetter products than Canada now has, we benefit doubly because Canadian consumers can now buy thoseproducts.The big fallacy - that trade is a war in which one country must lose for another to win - brings with it anumber of smaller fallacies. One is the false notion that globalization means that low-wage countries arebecoming so "competitive" that they will quickly drag all wages down.But Krugman notes that this assumption is based on the belief that workers in Singapore and Mexico willsoon be working with the same amount of sophisticated, expensive capital equipment and infrastructure asNorth America, Europe and Japan, and this belief is false.Net capital flows to all the world's emerging economic powers totals about $ 60 billion a year, which maysound like a lot, but is in fact just 2 per cent of the $ 3 trillion invested annually in advanced countries.Krugman further points out that many of the boosters of national"competitiveness"seem to believe thatcutting-edge technologies are the only route to prosperity, although the evidence doesn't support this view.For example, one popular U.S. slogan is that a competitive nation should focus on producing computer chips,

not potato chips. Actually, Krugman found, workers who make potato chips add more value on average thanthose who make computer chips. One reason is that potato chips benefit from the extra profitability that goeswith brand loyalty while computer chips generally don't.Does this mean that government policies have no impact whatever on a nation's economic well-being? Ofcourse not.

Governments can substantially help business in many ways, through sensible policies on interest rates, taxation andeducation, among other examples. But Krugman's point is that these things would be helpful even if there were nosuch thing as international trade. That's because nations don't really compete; they simply govern themselves well orbadly.

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Competitiveness hurts global econ

International competitiveness theory is the greatest threat to the continued growth of

integrated global economy.

Greg Ip, senior special writer for The Wall Street Journal, The Financial Post, 3-13- 1993,Economist blasts 'competitiveness'http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4244914205&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4244914208&cisb=22_T4244914207&treeMax=true&treeWidth=0&csi=10882&docNo=1The doctrine of ''international competitiveness'' that governments, business and academics have seized uponis misguided and dangerous, one of the world's most prominent trade economists says.''The greatest threat to the continued growth of the integrated global economy is the misperception that whatwe have is a competitive race with a limited number of prizes,'' Paul Krugman told the Canadian Graduate

Business Conference in Toronto Friday.The competitiveness doctrine thinks countries compete like companies and end up winners or losers , saidKrugman, an economics professor at the Massachusetts Institute of Technology, one of the foundingacademics of ''new trade theory'' and an influential academic in Democractic Party circles.''To what extent is country A's gain country B's loss? Very little. You ought to cringe when you hear'international competitiveness.' It doesn't exist as a meaningful concept.''Krugman said competitiveness fits neither classical trade theory, which holds countries are endowed with acomparative advantage that makes trade mutually beneficial regardless of productivity differences, nor newtrade theory that suggests mere chance can influence trade patterns.Competitiveness advocates, among whom Krugman includes U.S. Labor Secretary Robert Reich, usuallyargue a country should compete by becoming more productive and promoting high-value industries withwell-paying jobs, Krugman said.They believe there are good sectors and bad sectors, that manufacturing should be promoted, particularly

''sunrise, high-value industries.''But he said in supposedly strategic industries like aerospace, value added per worker is only US$68,000 andin electronics it's only US$64,000, while in mundane industries like cigarettes it's US$488,000 and inpetroleum it's US$284,000.

Krugman said competitiveness may create ''a tendency to protect or subsidize industries, to adopt a confrontationalattitude in trade policy where it isn't necessary.''

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No Solvency social forces key

Social forces key to competitiveness

Michael Schrage, columnist for the Los Angeles Times, The Washington Post, 3-11-1994,To an MIT Maven, 'Competitiveness' Is Just Clinton's Voodoo Economics,http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4244914205&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4244914208&cisb=22_T4244914207&treeMax=true&treeWidth=0&csi=8075&docNo=2In fact, Krugman's analyses of competitiveness do not address the underlying dynamics of innovation,evolving business practices or the changing culture of economic enterprises. He is simply looking at theoutputs based on rigorous econometric analysis. In fact, he freely acknowledges that the social forcesunderlying productivity may well be far more important than any economic policy he and his brethren mightdevise."It's fascinating," says Krugman. "I believe that sociology is more important than economics. I just don't

know how to do it."So, in the wake of Krugman's unambiguous numbers, expect the competitiveness debate in the 1990s to shift fromthe economic battlefield to the social battlefield. A White House Council of Sociological Advisers, anyone?

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**Competitiveness doesnt exist**

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Competition not real, Global Market

Idea of International Competition is Flawed, technology advancesdont trade-off


In work published over a decade ago, economist Paul Krugmanquestions whether the notion of competition in S&T is even relevant.

He argues that the idea that nations compete is incorrect; countries

are not like corporations and are [not] to any important degree

in economic competition with each other (Krugman, 1994). Majorindustrial nations sell products that compete with each other, yet thesenations are also each others main export markets and each othersmain suppliers of useful imports. More broadly, international trade is

not a zero-sum game. For example, if the European economy does well,this helps the United States by providing it with larger markets andgoods of superior quality at lower prices. Further, he argues that thegrowth rate of U.S. living standards essentially equals the growth rate

of domestic productivity, not U.S. productivity relative to competitors;

and enhancing domestic productivity is in the hands of Americans,

not foreigners. Part of the reason for this, Krugman argues, is that the

world is not as interdependent as one would think: 90 percent of the

U.S. economy consists of goods and services produced for domestic

use, i.e., produced by Americans, for Americans. But this is not to denythe importance of technological progress, and beneath it, science andtechnology, as a determinant of economic progress and improvementin the standard of living.

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Competition not Real, Global Market

Notion of Competition is misleading, not zero-sum


Given the complexity of the problem, economists and policymakersdo not know what the right amount of effort and investment in S&Tis for a nation; at a minimum, we can compare the United States withother nations to learn how much they have chosen to invest and withwhat results, and reflect on that in considering how much the UnitedStates should invest. The comparison with other countries is made fromthis perspective and not from the viewpoint of competition between

nations in S&T, which is the more common motivation for such comparisons.As we discussed earlier, the notion of competition can be misleadingwhen applied to a comparison of countries. Neither international

trade nor S&T progress is a zero-sum game, and improvement in

one country does not necessarily imply a loss for another country.

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Competition Isnt Real, Global Market

Competition doesnt exist, there is only a global pool of technology


Such new foreign R&D centers can accelerate innovation and

increase the pool of new technology. As other countries increase their

capability to innovate and conduct R&D, the global pool of technology

will increase, technology will diffuse, and countries that are

capable of acquiring and implementing such technology will do so.

Technology is a major determinant of productivity, and the increaseddiffusion of technology that accompanies globalization and increasedtrade can enable both developed and developing nations to increase

productivity and hence economic growth relative to a world with lesstrade and diffusion. The increased global pool of technology can alsohelp in addressing social issues that are global in scope, such as preventing

disease, improving health care, increasing the supply of food, and

solving environmental problems.

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Competitiveness doesnt exist

International competitiveness promotes global growth


"Silly stuff is not that rare in this world, especially silly stuff aimed at businessmen," Krugman said, but evenby the undemanding intellectual standards of business, the obsession with national competitiveness is an"incredibly large-scale intellectual scam."Setting aside that a nation is incalculably more complex than a corporation and that it doesn't go out ofbusiness no matter how poor its export performance, Krugman pointed out that if other nations' economiesgrow faster than that of Canada, this in no way impoverishes Canada.Indeed, this foreign growth actually benefits Canada by offering an even bigger global market in whichCanadian companies can sell. What's more, if other countries grow faster because they devise cheaper orbetter products than Canada now has, we benefit doubly because Canadian consumers can now buy thoseproducts.The big fallacy - that trade is a war in which one country must lose for another to win - brings with it anumber of smaller fallacies. One is the false notion that globalization means that low-wage countries arebecoming so "competitive" that they will quickly drag all wages down.But Krugman notes that this assumption is based on the belief that workers in Singapore and Mexico willsoon be working with the same amount of sophisticated, expensive capital equipment and infrastructure asNorth America, Europe and Japan, and this belief is false.Net capital flows to all the world's emerging economic powers totals about $ 60 billion a year, which maysound like a lot, but is in fact just 2 per cent of the $ 3 trillion invested annually in advanced countries.Krugman further points out that many of the boosters of national"competitiveness"seem to believe thatcutting-edge technologies are the only route to prosperity, although the evidence doesn't support this view.

For example, one popular U.S. slogan is that a competitive nation should focus on producing computer chips,not potato chips. Actually, Krugman found, workers who make potato chips add more value on average thanthose who make computer chips. One reason is that potato chips benefit from the extra profitability that goeswith brand loyalty while computer chips generally don't.Does this mean that government policies have no impact whatever on a nation's economic well-being? Ofcourse not.

Governments can substantially help business in many ways, through sensible policies on interest rates, taxation andeducation, among other examples. But Krugman's point is that these things would be helpful even if there were nosuch thing as international trade. That's because nations don't really compete; they simply govern themselves well orbadly.

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Paul Krugman,professor of Economics and International Affairs at Princeton University,

From Foreign Affairs, March/April 1994, Competitiveness: A Dangerous Obsessionhttp://infoshako.sk.tsukuba.ac.jp/~takasaki/Teaching_U/IEU/Krugman(1994).pdf

THE THRILL OF COMPETITIONTHE COMPETITIVE metaphor -- the image of countries competing with each other in worldmarkets in the same way that corporations do -- derives much of its attractiveness from itsseeming comprehensibility. Tell a group of businessmen that a country is like a corporation writlarge, and you give them the comfort of feeling that they already understand the basics. Try to tellthem about economic concepts like comparative advantage, and you are asking them to learnsomething new. It should not be surprising if many prefer a doctrine that offers the gain ofapparent sophistication without the pain of hard thinking. The rhetoric of competitiveness hasbecome so wide-spread, however, for three deeper reasons.First, competitive images are exciting, and thrills sell tickets. The subtitle of Lester Thurow's huge

best-seller,Head to Head, is "The Coming Economic Battle among Japan, Europe, and America";the jacket proclaims that "the decisive war of the century has begun . . . and America may alreadyhave decided to lose." Suppose that the subtitle had described the real situation: "The comingstruggle in which each big economy will succeed or fail based on its own efforts, pretty muchindependently of how well the others do." Would Thurow have sold a tenth as many books?Second, the idea that U.S. economic difficulties hinge crucially on our failures in internationalcompetition somewhat paradoxically makes those difficulties seem easier to solve. Theproductivity of the average American worker is determined by a complex array of factors, most ofthem unreachable by any likely government policy. So if you accept the reality that our"competitive" problem is really a domestic productivity problem pure and simple, you are unlikelyto be optimistic about any dramatic turnaround. But if you can convince yourself that the problemis really one of failures in international competition that -- imports are pushing workers out of highwagejobs, or subsidized foreign competition is driving the United States out of the high valueadded

sectors -- then the answers to economic malaise may seem to you to involve simple thingslike subsidizing high technology and being tough on Japan.Finally, many of the world's leaders have found the competitive metaphor extremely useful as apolitical device. The rhetoric of competitiveness turns out to provide a good way either to justifyhard choices or to avoid them. The example of Delors in Copenhagen shows the usefulness ofcompetitive metaphors as an evasion. Delors had to say something at the Ec summit; yet to sayanything that addressed the real roots of European unemployment would have involved hugepolitical risks. By turning the discussion to essentially irrelevant but plausible-sounding questionsof competitiveness, he bought himself some time to come up with a better answer (which to someextent he provided in December's white paper on the European economy -- a paper that still,however, retained "competitiveness" in its rifle).By contrast, the well-received presentation of Bill Clinton's initial economic program in February1993 showed the usefulness of competitive rhetoric as a motivation for tough policies. Clintonproposed a set of painful spending cuts and tax increases to reduce the Federal deficit. Why?The real reasons for cutting the deficit are disappointingly undramatic: the deficit siphons offfunds that might otherwise have been productively invested, and thereby exerts a steady if smalldrag on U.S. economic growth. But Clinton was able instead to offer a stirring patriotic appeal,calling on the nation to act now in order to make the economy competitive in the global marketswith the implication that dire economic consequences would follow if the United States does not.Many people who know that "competitiveness" is a largely meaningless concept have beenwilling to indulge competitive rhetoric precisely because they believe they can harness it in theservice of good policies. An overblown fear of the Soviet Union was used in the 1950s to justifythe building of the interstate highway system and the expansion of math and science education.

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Michael and FranklinCannot the unjustified fears about foreign competition similarly be turned to good, used to justifyserious efforts to reduce the budget deficit, rebuild infrastructure, and so on?A few years ago this was a reasonable hope. At this point, however, the obsession withcompetitiveness has reached the point where it has already begun dangerously to distort

economic policies.

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**No Uniqueness**

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Competitiveness =/= significant

Industries relating to international competitiveness are not significant

Michael Schrage, columnist for the Los Angeles Times, The Washington Post, 3-11-1994,

To an MIT Maven, 'Competitiveness' Is Just Clinton's Voodoo Economics,http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4244914205&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4244914208&cisb=22_T4244914207&treeMax=true&treeWidth=0&csi=8075&docNo=2Krugman takes no economic prisoners. He apologizes for what he says was an out-of-context quotecriticizing Tyson in the New York Times and in the next breath statistically demolishes a competitivenessargument Tyson recently put forward in the Wall Street Journal."Laura Tyson had an article about expanding the Japanese market for American goods," recounts Krugman,"so that we'd have not just more jobs but better jobs. She said, at best, we could sell another $ 20 billionannually. Now, let's suppose all of these new jobs are high-tech. We know that average value-added for thesejobs is about $ 80,000 per year.

"With that volume of trade, we're talking about creating 250,000 high-tech jobs [as opposed to non-high-techjobs]. In essence, we're talking about giving 250,000 people an extra $ 6,000 a year. That's just over $ 1.5billion a year. A billion and a half dollars a year is 1/40th of a percent of GNP."So," Krugman concludes, "if we get everything we want from trade in Japan, we will get an increase of1/40th of 1 percent in our national income. Now, suppose I'm wrong at each stage of my calculation by afactor of 2. We're still only talking about one-tenth of 1 percent of GNP. Is that what we really want in ourrelationship with Japan? What's so shocking about 'competitiveness' is, when you go beyond the rhetoric andsee what's at stake, you find the stakes are absurdly low."The clear policy implication?"I think we should talk about the productivity of the whole U.S. economy," says Krugman, "not just the partsof the economy that happen to be in competition with foreign rivals." This administration's focus on globalcompetitiveness, he fears, is undermining the far more vital issue of stimulating productivity.

"Where I disagree with Paul Krugman is that the international reference point is really important," maintains theCompetitiveness Council's Burton. "To ignore the impact of the quality movement, the push toward leanmanufacturing and reduced cycle times is to underestimate competitiveness's profound impact on Americanbusiness... . Reducing it to numbers is to miss the point. Adjusting to world markets is how a lot of Americanenterprises are getting organized."

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**No Link**

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Michael and FranklinIndia/China Not threat to Leadership

India and China not real Threat to Technological Leadership


Among scientifically proficient nations, China will fall below

these top seven countries; however, it will lead the group of scientificallyproficient nations, with a high level of S&T capacity and manydrivers. India, Poland (representing Eastern Europe), and Russiatheother three scientifically proficient countrieswill be less capable thanChina of implementing the applications they can acquire. In these

countries, although the S&T capacity will be high, in the authors estimation

the number of barriers will slightly exceed the number of drivers,

making it more difficult to introduce and sustain the full range of

possible technology applications.

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Euro cant replace dollar

Euro cant replace the USD, at least, not before food and gas prices soar / No fiat currency can solve if the

USD loses confidence, gold standard inevitable

Alex Stanczyk, editor of Your Financial Future and CEO of a Publicly Traded US Company, 7-26-2008 The Domino Effect: When Foreign Capital Stops, Do the Lights Go Out?http://www.istockanalyst.com/article/viewarticle%20articleid_2439127.html

I have written on several occasions in the past in regards to how the US is currently borrowing up to $2billion a day to keep the government running. I have also suspected, that when the foreign funding stops, ourgovernment and financial system will run a real risk of hyperinflation.Today, we find ourselves one step closer to the funding stopping. The day that the world loses finalconfidence in the credit worthiness of the US, is the day foreign governments stop buying US paperinstruments.When China and other major trade partners make this decision, be prepared for a huge slide in dollar value,and many overseas USD coming back to US shores. The effects of this will be higher food and gas prices,and higher prices of all commodities for not just Americans, but people the world over as dollar denominatedgoods that are required for basic life will see dollars flood into those markets. There are Trillions of USDnow currently held in national reserves of China, Opec, Japan, Russia. The time will come when the holdersof those reserves will no longer be willing to sit on them and watch them burn as the dollar devalues at 12%-18% a year.

Governments the world over will be looking for a safe harbor as the value of USD plummets. They will likely turnfirst to the Euro, but over time as they realize it has no true strength behind it, and that it is just one more fiatcurrency, may eventually find their way back to gold.

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Competitiveness No Impact

Competitive nations dont determine U.S. Economic Success


There is no reason to believe that the globalization of S&T and

the rise of other nations affects the capability of the United States to

absorb and apply new technology directly, as this capability is to a largeextent determined by business incentives, consumers willingness totry new technologies, and the legal and regulatory framework. Sometechnology applications may not require much S&T capacity, or much

knowledge of S&T within the user community or the general public.

For example, solar collectors or filters for water purification can significantly

enhance the productivity of workers in a developing countrywithout the need for workers to understand their workings.

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**No Solvency**

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Intervention bad

Eurozone about to bust, emp proven / efforts to stabilize prices hurts economies

Edward Chancellor, The Financial Times, 7-27-2008 Central banks policies can wreak havoc: The pursuitof price stability by central bankers around the world lies at the root of the current financial crisis.

The trouble isnt with stable prices in themselves. Rampant inflation is an obvious curse. And a deflationarybust is a very painful thing. Rather, it comes from the attempt by the monetary authorities to achieve pricestability in the face of countervailing forces. This policy led to the US and UK housing bubbles. It is nowthreatening to wreak destruction on certain countries in the Eurozone.Economists and central bankers generally associate falling prices with the Great Depression and Japanslingering economic malaise. As a result, they seek at all times to prevent the general price level fromdeclining. This is misguided. There are times when the economy benefits from improvements to the supplyside. Technological advances, rising productivity and the removal of impediments to global trade allconstitute supply shocks. If left to their own devices, they also lead to falling prices. The public has nothingto fear from this outcome. In fact, people are better off when consumer prices decline because theirpurchasing power is enhanced.Nevertheless, central bankers resist the good deflation by lowering interest rates. This policy hasunintended consequences. Low interest rates induce people to spend more and save less. They also send asignal to firms to raise their level of investment. As a result, a credit boom develops and asset prices start toinflate.Over time, the boom puts pressure on scarce resources and prices start to rise. The central bank is forcedbelatedly to raise rates. Later, it becomes apparent that there has been over-investment in certain areas of theeconomy.When the good times end, households and companies find themselves left with too much debt relative totheir incomes. Defaults erode banks capital and bankruptcies soar. Both borrowers and lenders become morerisk averse and less willing to transact. As the credit crunch worsens, the money supply contracts and pricesstart to fall.This is the bad deflation, or more properly the debt deflation to use Irving Fishers phrase. However, thisdeflation doesnt appear out of the blue. As we have seen, it follows directly from the central banks attempt

to stop prices from falling during the preceding boom.There is nothing new in this analysis. Several years before the Great Crash of 1929, the Austrian economist(and future Nobel laureate) Friedrich Hayek argued that the Federal Reserves pursuit of price stability hadcreated a credit bubble that would end in disaster. More recently, officials at theBank of Japan haveacknowledged their responsibility for creating the bubble economy of the 1980s. Inflation was quiescent atthe time, so the BoJ kept interest rates low and allowed bank credit to escalate and property prices to soar.Once again debt deflation appeared after Japanese banks suffered enormous losses while companies andconsumers became reluctant to borrow.The last decade or so has witnessed another powerful supply shock, which followed from the informationrevolution and the growing role of China and India in the global economy.Yet prices werent allowed to fall. Instead, the Fed under Alan Greenspan responded to the decline ininflation by keeping interest rates lower than otherwise.This policy resulted in the tech bubble and later the US housing bubble. If the Bernanke Fed wasnt doing

everything in its power to shore up the financial system, the US would face a severe debt deflation.The Federal Reserve isnt the only culprit among central banks. The Bank of England has been shackled withan inflation target since achieving independence in 1997.While inflation remained in check earlier this decade, UK interest rates were kept low. Consumer debt soaredand house prices climbed far higher than in the US. Britain now faces a painful hangover from its housingbust.The Fed, at least, has a dual mandate to seek to achieve both stable prices and economic growth. TheEuropean Central Bank has a narrower focus. Its primary aim is to achieve price stability. The ECBsmonetary policy has inflated several housing bubbles this decade. Irish house prices nearly tripled over the

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Michael and Franklinlast decade, while Spanish homes more than doubled. In both countries, there was substantial over-building.Now the Irish and Spanish economies are on the verge of collapse.They can expect no succour from the ECB, whose governor Jean-Claude Trichet, reiterating his commitmentto head off inflation across the Eurozone, raised rates in early July. In recent years, both Irish and Spanishlabour costs have risen relative to German costs. They face a painful squeeze.

Not for the first time, a central banks mistaken pursuit of price stability threatens to end with a bad case of debtdeflation.

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**Other**

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Alt Causality

Society reform is key to Japan recovering from economic disaster

By Michiyo Nakamoto, July 9 2008, Poverty widens the crack in Japans faade,http://www.ft.com/cms/s/0/b35f70e2-4dcc-11dd-820e-000077b07658.html

There is growing concern that spreading poverty is leading to an increase in suicide, crime and the divorcerate and even aggravating Japans falling birth rate. Poverty is not just a situation of low wages but isolationfrom society, from family, friends and workplace, says Tsuyoshi Takagi, president of the Japanese TradeUnion Confederation. Japans silent public is reaching the limit [of its patience], he says.As public frustration has grown, the finger is being pointed at past policies of deregulation, particularly of thelabour market. There are calls for tighter regulation, higher taxes on the rich and a redistribution of wealth. Ina bid to placate a worried public, the government has responded with plans to ban in principle thecontracting of unskilled day labourers.But in an era of global competition, turning back the clock on labour reforms would be a simplistic responseto a complex problem. A labour contract based on lifetime employment and seniority, coupled withcompanies hiring straight out of college, rewards those already in the system with stable employment, payand benefits, no matter how unproductive they may be, says Naohiro Yashiro, professor of labour economics

at the International Christian University. It also penalises those who have slipped through the cracks,regardless of their potential.Many of the working poor are those who, having failed to secure a place within the system to begin with,become destitute as they grow older and their chances of finding even part-time work decrease. Manyfreeters, for example, cannot find full-time work because Japanese companies are reluctant to hire anyonewho has not been in stable employment. The system also discourages much-needed venture businesses, sincethe opportunity costs for anyone who dares opt out of it are prohibitively high, Prof Yashiro says.

Japan, no doubt, needs to rebuild its social safety net, with greater security for its ageing population and measures toimprove conditions for those outside the regular workforce. But unless Japan can also find a way to promote labourmobility and allow those who have fallen out of the employment system to come back in, it may not be too far-fetched to conceive of the social unrest witnessed in Nishinari spreading to other parts of the country.

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Lower dollar = higher competitiveness

A weakening dollar, makes American goods more competitive and boosts employmentAlex Stanczyk, editor of Your Financial Future and CEO of a Publicly Traded US Company, Duncan Cameron,

precious metals analyst, Affiliate of Anglo Far-East Bullion Company, and an accomplished businessman, writer,public speaker, and investor, 10-8-2007, Charge-it America, http://www.rapidtrends.com/blog/2007/10/08/charge-it-america/blogMeanwhile, our weak dollar supposedly makes American goods more competitive and keeps employment herestrong as we export products and services to dollar-laden customers. In any case, despite European trade surpluses inthe last few years, the U.S. economy has outperformed the European Unions, and our standard of living remainsmuch higher.

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Foreign loans =/= instability

Foreign loans does not cause instabilityAlex Stanczyk, editor of Your Financial Future and CEO of a Publicly Traded US Company, Duncan Cameron,

precious metals analyst, Affiliate of Anglo Far-East Bullion Company, and an accomplished businessman, writer,public speaker, and investor, 10-8-2007, Charge-it America, http://www.rapidtrends.com/blog/2007/10/08/charge-it-america/blog

The annual budget deficit is shrinking but still will come in this fiscal year at about $160 billion. Economistsand government officials, of course, attempt to explain away all this red ink. Creditor nations, they remindus, simply lend us back money at relatively cheap interest to keep buying their goods. So they cant reallycall in their debts without ruining their own best market.

Where else will Japan and China bank their profits but in the politically stable, transparent and honest United States an atoll of security in a world of political upheaval and corruption in Africa, Latin America and Asia?

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No Confidence Now

US investor confidence low now.

Jamil Anderlini, Charles Clover, Krishna Guha, Kathrin Hille, Song Jung-a, Michiyo

Nakamoto, James Politi, Saskia Scholtes and Henny Sender, The Financial Times, 7- 24- 2008The Credit Rating of America: Steps taken to calm investor fears over agency debthttp://www.ft.com/cms/s/0/1abb233e-5918-11dd-a093-000077b07658.html

Last Thursday the Kuwait Investment Authority, the worlds sixth-biggest sovereign wealth fund, received acall from the US embassy to reassure them that bonds issued by Fannie Mae and Freddie Mac were sound,according to one person with knowledge of the matter. The call came after Kuwaits minister of financeannounced that the KIA was not planning to invest in their debt in future.The Treasury was unable to comment on the specific episode but said US officials had been in contact withother governments throughout the market turmoil as part of their regular responsibilities.This certainly includes providing information on the steps weve proposed to provide temporary authoritiesto give confidence to markets and create a strong, independent regulator for the government-sponsoredenterprises (GSEs), said the Treasury.

Foreign investors - particularly in Asia and Russia - have been among the biggest buyers of so-called agencydebt, which they viewed as a safe investment. In recent years this debt served as an important conduit forrecycling global trade and petrodollar surpluses into US housing investment.A key objective of the rescue plan winding its way through Congress is to calm global nerves shaken by theplunge in Fannie and Freddie stock prices. The plan appears to be succeeding for now, but an undercurrent ofunease remains.Two weeks ago there was nothing more stable than Fannie Mae and Freddie Mac. These were notconsidered risky assets. In the last 1 weeks we have seen this view corrected, Alexander Vinokurov, chiefexecutive of Kit Finance, a Russian investment bank, told the Financial Times.Executives at many sovereign wealth funds believe the Federal Reserve and US Treasury have lost credibilitywith international investors in recent months.If foreign governments were to scale back their buying of GSE paper, even at the margin, it could have asignificant effect on US mortgage rates.

A senior Fed official told the FT: Central banks are asking themselves, Where is the upside? They areincreasingly thinking about and questioning the size of their holdings and the rationale behind thoseholdings.Still, most financial officials contacted said they were reassured by the strengthened promise of governmentsupport for Fannie and Freddie. Chinese officials and government economists said Beijing was satisfied withthe moves to prop up the agencies. China may hold as much as $400bn to $600bn in Fannie and Freddie debt,most of which is held by the State Administration of Foreign Exchange.Bank of China has an estimated $20bn in Fannie and Freddie debt, according to investment bank CLSA. LiLihui, the banks president, said the bank will be able to fully manage the risks related to this matter.Kang Sung-kyung, head of the Bank of Koreas reserves management planning team, said: We dont thinkthat we are exposed to big credit risks with our investment in the agency papers.Meanwhile in Japan the Financial Services Agency denied reports that it was discouraging banks frominvesting in Fannie and Freddie debt.

Generally speaking, we have been encouraging banks not to invest in products simply on the basis of a triple Arating, but we do not tell financial institutions what they should or should not invest in, an FSA representative toldthe FT.

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Competitiveness bad Extentions

Competitiveness wastes resources

Paul Krugman,professor of Economics and International Affairs at Princeton University,From Foreign Affairs, March/April 1994, Competitiveness: A Dangerous Obsessionhttp://infoshako.sk.tsukuba.ac.jp/~takasaki/Teaching_U/IEU/Krugman(1994).pdf

During the 1950s, fear of the Soviet Union induced the U.S. goverment to spend money on usefulthings like highways and science education. It also, however, led to considerable spending onmore doubtful items like bomb shelters. The most obvious if least worrisome danger of thegrowing obsession with competitiveness is that it might lead to a similar misallocation ofresources. To take an example, recent guidelines for government research funding have stressedthe importance of supporting research that can improve U.S. international competitiveness. Thisexerts at least some bias toward inventions that can help manufacturing firms, which generallycompete on international markets, rather than service producers, which generally do not. Yetmost of our employment and value-added is now in services, and lagging productivity in services

rather than manufactures has been the single most important factor in the stagnation of U.S.living standards.

Competitiveness causes trade conflict

Paul Krugman,professor of Economics and International Affairs at Princeton University,From Foreign Affairs, March/April 1994, Competitiveness: A Dangerous Obsessionhttp://infoshako.sk.tsukuba.ac.jp/~takasaki/Teaching_U/IEU/Krugman(1994).pdf

A much more serious risk is that the obsession with competitiveness will lead to trade conflict,perhaps even to a world trade war. Most of those who have preached the doctrine ofcompetitiveness have not been old-fashioned protectionists. They want their countries to win theglobal trade game, not drop out. But what if, despite its best efforts, a country does not seem tobe winning, or lacks confidence that it can? Then the competitive diagnosis inevitably suggeststhat to close the borders is better than to risk having foreigners take away high-wage jobs andhigh-value sectors. At the very least, the focus on the supposedly competitive nature ofinternational economic relations greases the rails for those who want confronta

197 CM Competitiveness

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