Since its early years and mainly in response to the economic and social developments and challenges faced Europe in the 1970s, ‘being competitive’ was the central aim and buzzword that has preoccupied the Forum’s members until today. Competitiveness will undoubtedly be central to its agenda in the future as long as capitalism and its contradictory mode of production dominate the global economic system. While the Forum’s annual meetings were set to discuss the challenges facing the European economies and their companies, solving Europe’s problems
169
necessitated more than one annual meeting at Davos503. In addition to expanding the networks with business, state, and trade unions leaders, in 1979 the WEF took the decision to capitalise on its accumulated economic, business and social knowledge generated by its experts, members and networks. It initiated a series of reports on the competitiveness of European industry that by the mid-1980s has changed to reports on international competitiveness504. Later on, its coverage stretched beyond Europe and its competitors extended to include more economies. Until the late 1980s, the GCR was a special and private service provided by the Forum to its members to present them with an opportunity to take a snapshot of the global economy and the competitiveness status of its individual national economies. This was seen as vital for their strategic planning, investment decisions, and their very survival. Given the Forum’s desire to project its influence through its discourses outside its annual meetings and summits, the GCR has been made available for free to all the interested parties. States, companies, trade unions, NGOs, academics, business research centres have become consumers of such knowledge for various reasons, which will be explored further in Chapter Eight. As noted by Schwab, at the inception of the GCR, competitiveness had not yet gained much attention worldwide. Therefore, when looking back today one can tell that the GCR “truly broke new ground”505.
The GCR was first called the Report on the Competitiveness of the European Industry. It was changed in the mid-1980s to Report on International Competitiveness and was only named the Global Competitiveness Report in 1996. This change reflects a strategic shift in the Forum’s life from being a European organisation founded primarily to solve Europe’s problems to becoming a global organisation concerned with the health and competitiveness of global
503 At the heart of the problem was an information gap that stemmed from outdated management techniques put
at play in Europe’s enterprises since the end of WWII. This drawback was regarded responsible for a declining competitiveness and thus a sluggish economic growth in European countries.
504 The Forum cooperated with multiple public and private organizations for the compilation of the collected data;
the OECD, the European Commission, and WHO, to mention a few.
505 Klaus Schwab and Juan Rada, “Preface”, in WEF (eds.), The World Competitiveness Report 1991 (Geneva:
170
capitalism as a whole in order to maintain continued economic growth and capital accumulation506. The first report was produced in 1979 on the tenth anniversary of the Forum
and was meant to serve “as the background document” for the 1979 annual meeting theme; “An Agenda for European Business Leaders: International Cooperation, Productivity and Social Commitment”. These three objectives were the catchwords of the time and were seen by Davos’s participants as “vital ingredients” of the competitiveness of European businesses.
In short, enhancing competitiveness necessitates business experiences to be exchanged and cooperation to be established among Europe’s chief executives507. The social, economic, and political environments of a country interplay in the background; they define the way those executives interact and form a basis on which corporate present and future strategies are formulated. This background is determined to a great extent by the nature of class struggle that defines the state’s approach to economic management and thus the country’s relationship with global capital. Therefore, the priority for the European economies and enterprises, as stressed in the first report, should be given to answering key questions such as; what is the competitive position of their economies and industries? How can they stay competitive in relation to competitors? And how can they become competitive in the first place? These questions were seen as crucial because failing to answer them would put the future of Europe in risk as maintained in the reports. The circumstantial premises within which these questions were raised were characterised by “new international economic order, industrial restructuring, technological breakthroughs, and leaps in social expectations”508. All of these conditions
506 Until 1989, the GCR was distributed to the Forum’s members and participants of the Davos Symposium.
However, it was also sold to other interested but non-member companies for 1800 Swiss francs (1126 US dollars then).
507 Klaus Schwab, “Preface”, in EMF (eds.), The Report on the Competitiveness of European Industry 1979
(Davos: European Management Forum, 1979).
171
necessitate a new course of action on the part of the state and thus a new form of economic stirring of the economy.
The WEF emerged as a response to this new environment and challenges of which the lack of knowledge on competitiveness seemed highly problematic. To this end, “in autumn 1978, the idea to produce a study on the competitiveness of European industry was crystallized from earlier brainstorming within the Forum, and the project was given the green light for execution during 1979”509. Schwab notes that publishing competitiveness reports serves as a dynamic
base for “thinking about global competitiveness” and “may help to launch the necessary actions leading to a less protectionist world”510 that rose as a serious challenge both in and outside
Europe during the 1970s and 1980s.
The first competitiveness report covered 16 countries, compared to 148 in 2014. It was planned to examine the “competitive situation” of industries in those countries with an intention of drawing a comparison between them and the rest of the world in future reports in order for Europe to benchmark itself against its competitors511. The challenge at its commencement was to investigate the factors that constitute the competitiveness of Europe. Such a challenge was deemed existential for Europe’s survival as evident in the following statement from the first report: “our future will depend on our competitiveness, on our ability to discern the elements that will determine competitiveness tomorrow and on the rapidity with which we can formulate appropriate practical measures”512.
509Ibid. p. 92.
510 Klaus Schwab, “Preface”, in WEF (eds.), The EMF’s Report on International competitiveness 1985 (Davos:
World Economic Forum, 1985), p. 3.
511 These countries are: Austria, Belgium/Luxembourg, Switzerland, Federal Republic of Germany, Denmark,
Spain, France, Great Britain, Greece, Italy, Ireland, Norway, Netherlands, Portugal, Sweden, and Finland.
172
The information gap to which the Forum has attempted to respond does not only apply to the lack of innovative business management techniques or the waning competitiveness of European companies. Rather, it is also genuinely linked to threatening shortcomings of all European stakeholders. As stated ubiquitously in the reports, governments in Europe fell far short from providing the necessary conditions which would make European companies more competitive on the global market. More specifically, the embedded Keynesian welfare system in Europe represented a serious obstacle to a competitive Europe. Hence, the ‘big governments’ of the time were blamed for the sinking of European economies and, therefore, this out-of-date governance structure had to be dismantled. Moreover, trade unions then had an excessive bargaining power in corporate governance, which affected the management of the European enterprise negatively. That is, the rigidity of the European labour market in terms of wage bargaining, inflexibility and unskilled labour force endangered the profitability of business and, hence, the sustainability and competitiveness of European companies deemed as the source for growth, prosperity and higher living standards. It is principally these reasons that required a new course of action on the part of the government that the GCR attempts to deliver.
Despite Schwab’s belief that it is the creative entrepreneur that survives and succeeds even within less favourable national environments, the final judge is the market-place. Schwab argues that “the non-competitiveness of enterprises in countries at the top of the ranking may imply an unnecessary waste of resources and indicate to governments that structural changes should be facilitated”.513 These changes, as will be discussed below, are more necessary at the
microeconomic levels than the macro since the former is primarily where class struggle has to be managed in a way that enable capital to reproduce itself.
173
The Forum believed that these problems were not entirely realised by politicians nor by trade unionists. Change was felt crucial by businesses while governments and trade unions were reluctant to employ structural changes. When considering the larger picture, the Forum’s revolutionary project has focused on bringing all three main parties together and on bridging the three gaps in order to overcome Europe’s challenge. The fundamental backwardness in Europe was reflected in the lack of awareness of the significance of stakeholders’ partnership and collaboration. The GCR speaks primarily to such deficiency and seeks to raise the necessary awareness among all stakeholders that a successful and profitable business is a competitive and sustainable business, one which brings about growth, employment and prosperity to all. Thus whatever hinders the creation of such environment should be eliminated. The politics of consensus were deemed a failure and the power of labour had to be reduced. Ten years from 1979, Schawb and Abell celebrated the Forum’s triumphal approach represented through the GCR when they stated that “as more and more corporate leaders recognize the influence of the economic and political environment, and as political leaders strive to provide the most fertile ground possible for corporate success, this report provides a valuable frame of reference”514. By 1985, the Forum believed that the GCR had become a
“well-known and appreciated tool for assessing the opportunities and drawbacks of various national business environments relative to the other key players in the international competitiveness race”515. This reveals that the GCR is taken to be a framework for action and a practical ground of judging the soundness of such actions. It is the national environments and the governmental actions that the GCR is set to correct and it is the mindset of national
514 Klaus Schwab and Derek Abell, “Preface”, in WEF (eds.), the World Competitiveness Report 1989 (Geneva:
World Economic Forum, 1989).
174
policymakers that it longs to ameliorate in order to produce such soundness and readiness. It is here where the heart of the GCR project lies.
In the next section I turn to the Forum’s definition of the GCR and its factors of competitiveness. Moreover, I will shed light on the changes that these factors have undergone from 1979 until 2014. My primary objective is to map out the role ascribed to the state in the composition of each factor in order to reach an understanding on how integral the state is for enhancing national competitiveness from the WEF’s perspective.