Fools’ Gold has generally urged extreme caution when considering using c-words such as ‘competitiveness’ or ‘compete,’ in the context of the behaviour of whole countries or states. As we’ve noted, a failed company that can’t compete is one thing: a failed state is quite another; and the processes that these words are normally trying to describe tend to be generically harmful.
A particular bugbear of ours is what we call the Competitiveness Agenda – the idea that it’s essential to shower tax cuts and other subsidies on footloose Capital and its owners, for fear that they’ll run away to more hospitable climes. It is a policy prescription (or set of policy prescriptions) dressed up as a threat.
Many politicians and vested interests know that the c-words (and their like) are a remarkably effective set of tool for bamboozlement: a way to get people to accept these prescriptions without really thinking about them. Who, after all, could be against something called “competitiveness?” Because of the risk of bamboozlement, we really don’t like using the c-words to talk about whole countries unless we really have to.
Yet of course ‘competitive’ is a word in the English language that people can choose to define in ways that don’t subscribe to the Competitiveness Agenda, and in some senses countries do ‘compete’ for investment. One thinker who does use the c-words in more progressive (and thoughtful) ways is Bob Jessop of Lancaster University. In conversations with FG, Jessop has talked of a “high road to competitiveness”, which might be summarised as ‘upgrading’, and a “low road” via deregulation. He dislikes critiques by Krugman and others (see here) because, he says, their starting point is neoclassical economics, which airbrushes out a lot of messy institutional and other factors from the real world. Jessop adds:
“My critique of competition is: be brutally clear about how competition works, and how competitiveness works, and don’t just dismiss it as so much rhetoric because it is misused by politicians and ideologues.”
Now Jack Copley of Warwick University has written us a guest post looking at his ideas in more detail.
Bob Jessop: An historical approach to national competitiveness
by Jack Copley
Bob Jessop is a prominent political economist who has written extensively on the relationship between states and the economy, from a new Marxist perspective. Coming from a politically progressive tradition, it might come as a surprise that Jessop uses the idea of ‘national competitiveness’ in some of his most important work.
In this blog post I try to show that Jessop has a very different understanding of competition than Milton Friedman, Charles Tiebout, or the David Ricardo associated with the ‘comparative advantage’ dogma. Indeed, he takes competition to mean something quite different than what we generally associate with the ‘competitiveness agenda’.
For Jessop, national competition doesn’t emerge automatically from competition between firms – instead, states’ competitive promotion of technological and organisational innovation is a contingent historical development, caused by the crisis of the post-WWII economic miracle. As such, national competition is not inevitable, nor necessarily desirable. While I have some reservations about Jessop’s approach, I think that this is a very important insight.
Jessop is a very systematic thinker, which means that it’s difficult to understand how he uses a single concept like ‘competitiveness’ in isolation from the rest of his work. To break down this complexity, I’ll first take a look at Marx’s theory of market competition and its emphasis on technology. Next, I’ll focus on Jessop’s view of the state’s role in regulating this competition. And finally, I’ll explain how he understands national competitiveness as emerging from the end of the post-war boom, as states sought to foster new pattern of growths within their territories.
The classical theory of market competition
Marx saw his own work as a sympathetic critique of the ‘classical’ economists who came before him, particularly Adam Smith and David Ricardo. While for neoclassical economics market competition is a static, idealised phenomenon made up of individual agents, for Smith, Ricardo and Marx competition is a messy, dynamic processes powered by social classes.
In a capitalist economy, how is it that companies are forced to not only compete with those businesses that sell their same product, but with all other companies? Smith, Ricardo and Marx explained that this is because of the mobility of financial capital: an investor can shift their money from the stocks of a US restaurant chain to those of a Chinese electronics manufacturer if they feel they can earn a higher return, thus forcing these companies into competition with one another.
Apart from engaging in shady activities like corporate espionage and lobbying for tax cuts, firms can raise profitability in ‘absolute’ terms by cutting wages, intensifying labour, and extending working hours. But these methods have definite limits, not least the exhaustion of the workforce and the fact that taxes can only fall to zero! As such, Marx argued that the main way that competition manifests itself is through technological innovation – a theoretically limitless endeavour. Companies seek to out-innovate one another by introducing technology that will reduce the labour time needed to produce their commodities, therefore reducing their costs. For Marx, then, the history of economic competition is the history of the replacement of labour by machinery.
Jessop endorses this understanding of the dynamics of market competition, while adding on certain insights from Joseph Schumpeter. Schumpeter argued that entrepreneurs innovate by introducing new commodities; new methods of production or commerce; discovering new markets; finding new sources of material; or rejigging the way an industry is organised.
We can therefore see that competition, for Jessop, is inextricably tied to the drive towards technological and organisational innovation.
But what is the link between Jessop’s understanding of business competitiveness and the national arena? Certainly there are hints that the nation state could be an important scale: global mobility of investment implies the potential that capital can flee an insufficiently profitable territory, with serious implications for that particular nation. Still, Jessop is vague on this question. When considering the claim that “cities, regions, nations, or supranational blocs” can be thought of as “units of competition”, he simply concludes that the “extent and manner to which this is literally true, metaphorically feasible, or merely rhetorically useful needs to be investigated”.1
So, state competition is not a logical outcome of business competition. Instead, the key to grasping Jessop’s use of national competitiveness lies in his understanding of the state’s role in ‘regulating’ the dynamics of business competition.
The regulation of competition
Jessop draws a lot on the French regulation school: the main idea behind which is that capitalism hurtles forward without looking where it’s going. The competitive drive of individual companies to accumulate more profit causes serious problems for the functioning of the system as a whole – for example, by producing more commodities than the market can absorb. Capitalism therefore needs a system of ‘regulation’: a set of norms, rules, and methods of governance, implemented by a number of actors, including the state.
Yet this governance or regulation is only a temporary fix. As Jessop likes to say, trying to govern the economy is like running to keep from falling. You might be on your feet, but only just, and probably not for long. Periodically, a particular way of organising the capitalist economy, and its method of regulation, will collapse under the weight of its own contradictions. Most notoriously, the post-WWII Fordist methods of production, regulated by an active state, negotiations with trade unions, and international monetary agreements, fell apart in the 1970s. Consequently, society must find new ways to organise production and regulation.
It’s through this lens that we can understand how Jessop views national competitiveness. He argues that out of the ashes of the collapsed post-WWII consensus, many nation states began to promote competitive innovation within their territories in an effort to foster a new economic boom.
The Schumpeterian state
For Jessop, the slowing of post-WWII growth and the emergence of the stagflation crisis also correlated with states losing control over their national economies in different ways – most importantly by letting go of the reins of Keynesian demand management. In this context, states created new strategies to govern competition.
The most important characteristic of this remoulded state template, argues Jessop, is its promotion of technological and organisational innovation; in other words, its active fostering of ‘Schumpeterian entrepreneurialism’. As well as nation states, cities and regions have also pursued these strategies – attempting to attract investment into their territories and to give competitive advantages to those businesses already located there.
One aspect of this strategy is what Jessop terms “technological intelligence gathering”, whereby the state tries to ensure that “as many firms as possible benefit from new technological opportunities created by R&D activities undertaken in specific parts of the economy”.2 For example, the Brazilian agricultural research agency EMBRAPA developed soybean varieties that would be suitable for tropical environments – an innovation that was then adopted by large agribusiness and contributed to the growth of the soy industry in the region.
A different aspect is organisational innovation, whereby the state helps to reorganise the relations between different businesses. For instance, in the 1990s the Irish state, through bodies such as Industrial Development Agency – Ireland, advised new entrepreneurs in the software sector and helped forge relations between them and the managers of foreign TNCs so as to promote the concentration of computer firms within Ireland.
In both scenarios, states market themselves to mobile capital as a dynamic territory for investment, at the expense of others.
A historical understanding of competition
It should be clear now that Bob Jessop uses the idea of ‘national competitiveness’ in a special way. It is not understood idealistically, as a model for how states should behave. Neither is it understood as a logical outcome of competition between firms. Instead, for Jessop, national competition is an historical observation. States adapted to the crisis of the 1970s by competing with one another for investment, primarily through the promotion of innovation. But this wasn’t inevitable, and, most importantly, it doesn’t have to be this way.
Despite his caveats, Jessop’s theory sometimes appears to split history too neatly into different compartments – the post-war welfare state versus the post-1970s competition-oriented state. In reality there was much overlap, which it’s tough to glean from Jessop’s abstract writing style. Furthermore, the emphasis on innovation downplays the more nefarious activities that corporations engage in, such as tax evasion and cartel-formation.
Yet overall this appears to me to be the most realistic way to think about competition between states. It would be naïve to assume that states do not come under pressure to compete for investment into their territories. Yet it would be even more naïve to assume that this pressure is eternal, emerges from our human nature, and results in optimal outcomes. I think we can learn from Jessop’s treatment of national economic competition as an historical phenomenon, because it doesn’t ask us to awkwardly cram reality into a pre-determined, rose-tinted model. It instead advises us to look at current economic realities as the result of past events, therefore allowing us to imagine how we might forge a better state system in the future.
- page 119, in Bob Jessop (2013) ‘The Complexities of Competition and Competitiveness: Challenges for Competition Law and Economic Governance in Variegated Capitalism’, in M.W. Dowdle, J. Gillespie, and I. Maher, eds, Asian Capitalism and the Regulation of Competition: Towards a Regulatory Geography of Global Competition Law, New York: Cambridge University Press.
- page 127, in Bob Jessop (2002) The Future of the Capitalist State. Cambridge: Polity Press.