We’re number . . . who cares?

Paul Jacob
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Posted: Oct 22, 2006 4:33 AM
We’re number . . . who cares?

A tremor of hysteria can be detected in the headline : “Is the U.S. Losing Its Competitive Edge?” In the article, Peter Coy, Economics Editor for Business Week, elaborates how “Americans aren’t No. 1 anymore."

I’m stifling a yawn.

It’s not that I don’t want America to be prosperous. I do. I want Americans to become more prosperous.

I just don’t get all this talk about “competitiveness.”

The world’s nations are not engaged in a big track meet, with winners and losers. “Nations” as such aren’t the ones competing in global markets.

It’s businesses that compete.

For our money, our wealth.

And they aren’t competing to steal it. They are competing to co-operate with us in that most elegant of transactions, trade.

When I buy something from Target, I am co-operating with Target. I hand over some money, the cute girl at the counter hands over the t-shirt I chose. Like other forms of successful co-operation, we both gain. The people at Target may have out-competed the people at Wal-Mart for this particular item, but the goal of both companies is trade, not competition. Their competitiveness is their ability to show to me their own advantages, their better products, lower prices, more convenient shopping, whatever.

Each would prefer, I suppose, not to have to compete. Each would like not to offer me as good a deal as they do offer. Neither would work as hard to bring me my t-shirt if only one of them were in business.

So, hey: I like competition.

But I like it because it makes my co-operative experiences so much more satisfying!

Nations are in a different biz. A nation, ruled by a government, can set up the trading environment, yes. And governments do try to milk the trade for all they can get, in taxes. But how can they be competitive in this game?

Coy isn’t coy, he elaborates. It’s the World Economic Forum, “a nonprofit best known for its annual conclave of the bright and famous in Davos, Switzerland” that concocts this ranking “on official data and interviews with 11,000 executives around the world."

Last year’s ranking for the U.S. was originally reported as No. 2, but that was based on a discontinued method. By the new method, the U.S. was No. 1 in 2005 but No. 6 this year.

Behind Switzerland, Finland, Sweden, Denmark, and Singapore.

The new criteria downgrades the U.S. not for its business practices but for its government policy:

Out of 125 countries, the U.S. was 40th in health care and primary education and a lowly 69th in macroeconomy, reflecting its large budget and trade deficits. . . . the U.S. scored lower than such nations as Vietnam, Venezuela, Uganda, the Philippines, Peru, and Nigeria. (Ouch.)

Yes. Our government does tend to add the “ouch” to any economic evaluation.

For Fox News, Karen Kerrigan quotes the same report, but then contrasts it with another, published by a different organization, ranking “Ease of Doing Business.” In it the U.S. gets designated as “third” worldwide, behind Singapore and New Zealand.

And yet Ms. Kerrigan, too, found the dark spot. The U.S. has, er, competition. Around the world, pro-market reforms are taking place in Georgia (Stalin’s homeland, not Jimmy Carter’s), Romania (Dracula’s), and Mexico (Pancho Villa’s) as well as China and France and Ghana and Tanzania. “The U.S. is not a top-ten reformer,” Kerrigan writes.

Is it because other countries have such a long way to catch up? With our business-friendly, regulation-free environment?

Well, there’s nothing like a cold splash of foreign ugliness to wake you up. Yes, America may be relatively free, but that’s largely because so many other countries have been so bad. Foreign governments are catching on . . . and catching up.

But when those foreign governments “catch up” with our freedom, that doesn’t mean we’ll become impoverished as they grab all the prizes. That’s just not how trade works. As they become freer, we’ll become richer.

Great for them! Great for us! In hurrahing the market one isn’t hurrahing like a sports fan, for one team over others. It’s more like the Special Olympics, where everybody’s said to be a winner. Except that, well, everybody is a winner. Everyone who plays.

This talk of competitiveness among nations reminds me of the darker side of the International Olympics, where not only are races run competitively (natch), but so are less obviously competitive endeavors. Like art. Or skating to music. (Next up: finger painting?)

Standard talk about international competitiveness entices us to think of people elsewhere chiefly as competitors who will, if “better” than us, take something from us. Resist that. Are foreigners getting wealthier through trade? See them, then, as possible trading partners. Are they better at some things than we are? That’s not a threat, that’s an opportunity!

This idea goes back at least as far David Ricardo, who called it “comparative advantage.”

The idea that trade is co-operation, that’s at least as old.

Does this sound odd? Aren’t free-market champions always yammering about “competition”? I suppose. But some of the free market’s best minds and biggest champions emphasized co-operation. I’ll name just two: Herbert Spencer and Ludwig von Mises.

Does it sound leftist? “Co-operation, not competition!” Well, that is indeed silly. We need both. But the positive side of what we want is co-operation. Competition works as a side-constraint making us all better collaborators, co-operators.

Except when we get sucked into political games of regulation and taxation. Then everything goes whacko, as governments make it harder to co-operate through trade, making most people worse off.

Sure, competition is good for us. But don’t lose sight of what it is good for: our mutual prosperity.