PERATIONALISING COMPETITIVENESS

he European Union is striving to become the most competitive region in the roductivity appears to be one of the best indicators of competitiveness. GDP

here is no explicit target for productivity increases in the EU. However, if the

he Lisbon strategy gives equal importance to increasing both, productivity and employment through higher competitiveness. In dynamic industries, a rise

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One of the key goals of the Lisbon strategy is to rais

head, with particular attention being paid to the US as a benchmark. Since economic growth in the EU fell behind this target, the Lisbon process was sometimes called a failure.

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The employment rate, particularly for women and older workers, increased in many Member States. This was, however, mainly achieved by additional part- time work. Full-time employment decreased in the EU from 139.5 million in 2002 to 138.7 million in 2004. As the majority of unemployed is looking for full-time jobs, this is one of the reasons for the stickiness of unemployment due to lack of effective demand.

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world. But what is most competitive? P

per hour and total factor productivity are the most useful concepts. But due to statistical limitations, GDP per employee is commonly used.

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"informal" targets for economic growth (3 percent per annum.) and the employment rate were achieved, this would imply a productivity increase of slightly more than 1 percent per year. This is not sufficient to become the most competitive economy in the world.

in productivity can enhance employment. However, in recent years of under- utilised resources there existed a temporary trade-off between employment and productivity in some Member States: The increase in employment was achieved at the cost of productivity developments. Productivity can also be affected by labour market conditions: High unemployment may exert downward pressure on productivity since the unemployed have to accept low- productivity jobs. Shortage of labour, on the other hand, raises productivity since jobs at the lower-productivity end disappear.

There are explicit targets for several factors behind productivity growth: • Research and development is targeted at 3% of GDP. So far,

ent Besides on there is a crucial effect of investment on growth. vestment is reflecting demand and supply conditions - capacity utilisation

ess? One reason may be the s the internal market strategy.

cal and monetary stabilisation policies. The aastricht criteria must be met by the members of the Euro area - if not, there

lity d Growth Pact there are no institutions to force the achievement of targets.

ention of national governments is devoted to the Stability and rowth Pact, much less to the Lisbon Agenda. Many Member States cannot

ean Market and the Growth and Stability Pact, the sbon Agenda has not captured so much interest of a wider academic

improvement in this most important field was rather limited.

• The share of young people without further educational attainment is to be cut by one half. Here again, there was hardly any improvem in recent years.

R&D and educati In

and reform policy. Higher investment in machinery and employment is necessary to make use of higher R&D and education. In the Euro area, however, the rate of business investment has declined since 2000. Moreover, infrastructure investment was cut in many countries to achieve the Maastricht criteria.

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Why had the Lisbon Agenda only limited succ institutional setting. Top priority in the EU ha

The basic four freedoms of goods, capital, services and labour markets have to be accomplished according to European law. There may be transition periods, but no exceptions at the end.

High priority is given to fis M

are sanctions. Monetary policy is carried out by the ECB according to law. The Lisbon strategy is given low priority in the EU. In contrast to the Stabi an

There is now even some discussion on dropping the goal for economic growth since it is not achieved. Who is in charge of the Lisbon process? [OMC] The open method of coordination has been adopted, but sometimes responsibilities have been muddled between the EU and its Member States. Thus, from an institutional perspective, the limited success of the Lisbon strategy is not a surprise.

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increase their expenditures on R&D, education and infrastructure and at the same time reduce their fiscal deficit which is “suffered” by low growth (i.e. by the cyclical component).

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community. But this is not the fault of the Lisbon Agenda. Many economists have thought that the free internal market together with sound macroeconomic policies would automatically lead to higher economic growth.