There's a Big Misunderstanding About What It Means to Be Competitive
One of the most important factors undermining our competitiveness is a disagreement about what it means to be competitive. Many see it as an enhanced ability to sell -- into export markets, or to fend off foreign firms in the domestic market. In fact, competitiveness is the ability to produce at maximum efficiency for all markets and an enhanced ability to meet the needs of consumers. The ultimate goal of competitiveness is not to create more jobs – it is to create more goods and services more efficiently to ensure more satisfied consumers.
We don’t live in order to work; we work in order to live. Similarly, we don’t seek to produce wealth more efficiently in order to be able to enter the markets of other countries or keep foreign companies off our own turf. We produce as efficiently as we can in order to maximize our access to goods and services. We are all consumers; we all benefit when the range of goods and services produced is as wide as possible, at the lowest cost and highest quality possible.
The goal isn’t national competitiveness so much as personal competitiveness. One of the leading forces spurring competitiveness is Wal-Mart, and they do it by focusing on meeting customers’ needs. By constantly driving down input prices and narrowing the profit margins of its suppliers, Wal-Mart continually produces for its customers as efficiently as it can. In the retail trade in particular it would be hard to think of many companies that do a better job of competing. But Wal-Mart does not necessarily increase the number of jobs available to Americans, at least not in the production process; nor does it engage in competitive measures and systems simply in order to combat foreign competitors. In fact, Wal-Mart outsources as much production as possible offshore. Does that provide more jobs for Americans? Certainly not directly – but it makes more goods available at lower prices for its customers. Does Wal-Mart successfully fend off foreign competitors and enter foreign markets? Yes, but it also fends off domestic competitors such as Target, and captures their markets.
Quite simply, Wal-Mart does not utilize consumers as a means of creating jobs; it creates jobs – or sheds them – as a means of providing customers with low-price goods. What is true of Wal-Mart is also true of all other companies, and what is true of Wal-Mart customers is true of all customers. Consumers seek maximum efficiency to meet their own needs – whether they get it from U.S. workers, or Chinese workers, or robots.
Countries don’t compete; companies do. And they do so by enhancing efficiency and diminishing costs as much as possible. When auto companies drive down the price of steel and other inputs, they do so in order to satisfy car purchasers and potential purchasers. And consumers – of all goods and services – don’t seek competitiveness as a means of posting more positive economic metrics every month. We seek competitiveness to improve our own standard of living and enhance our quality of life. Competition among companies is merely the way we achieve that end.
Robert Reich used to conduct a thought experiment in which he asked first-year students which would they prefer, a 3 percent U.S. growth rate that is higher than any other country’s, or a 4 percent rate that is lower than many other countries. Most students raised their hand for the former proposition – less growth, but better than others. It probably took Reich a full semester to make it clear to his students why the highest growth rate possible is our goal, rather than a growth rate that is higher than that posted by others.
We produce as efficiently as possible, to compete as efficiently as possible – to live as well as possible, not to live better than someone else. For society, the goal of inventing a better mousetrap isn’t to create jobs for people making mousetraps – it is to catch more mice.
