IESE Insight
Competitiveness = Productivity
Eduardo Ballarín Fredes
Editor: World Economic Forum
Artículo basado en: Global Competitiveness Report 2003-2004
Año: 2003
Idioma: English

Spain ranks 23rd in the Growth Competitiveness Index 2002-2003, but still lags behind some of its main European competitors. Six European nations are among the top ten, and other countries such as Taiwan, Singapore and Estonia also outperform Spain. The ranking is based o­n an extensive opinion survey conducted by the World Economic Forum in 102 countries.

IESE is the World Economic Forum´s partner institute in Spain for the report. IESE´s contribution is led by Professor Ballarín, holder of the Nissan Chair of Corporate Strategy and International Competitiveness. The work has the support of the Anselmo Rubiralta Center for Globalization and Strategy.

Although reports of this kind are sometimes criticized o­n the grounds that competitiveness is a nebulous concept that cannot easily be captured in a single, measurable indicator, Ballarín maintains that the report is very clear in this respect. The concept of competitiveness is assimilated in the report to the much more definable and reliable notion of productivity. With two important qualifications: the report aims to capture not o­nly the productivity of labour, but also the productivity of capital, natural resources and other factors of production. And secondly, it aims to estimate future productivity, using indicators that reflect the continuous improvement of companies´ environment, companies inevitably being the source of any increase in productivity.

The emphasis o­n the future is important because previous years´ productivity is water under the bridge. Those who voice concern at the low productivity growth of the Spanish economy have a point, but they omit to add that the counterpart of recent years´ growth has been the very welcome fall in the unemployment rate in our country.

There is no doubt that if we ever reach "full employment", the critical variable for sustained growth will be the productivity of labour and the other factors. That is why productivity is such an important indicator to analyze. The WEF report is very revealing in this respect.

The report focuses o­n two different indexes. o­ne of them, the Growth Competitiveness Index (GCI), which could be described as a "macro" index, is based o­n a diagnosis of the macroeconomic, institutional and technological environment. In this index Spain ranks a respectable 23rd, ahead of countries such as France and Italy.

By contrast, the Business Competitiveness Index (BCI), which we could call a "micro" indicator and which is intended to capture the underlying drivers of future productivity, gives a different picture. Spain drops to 25th place and its position relative to other countries changes significantly. In this index Spain is no longer more competitive than France or Italy. And there are other surprises, such as the fact that Malta, ranked 19th in the GCI, appears in 42nd place in the BCI.

Ballarín contends that these data are a warning signal for Spain. The report contains a sophisticated statistical analysis of each country´s per capita income and its position in the "micro" indicator (BCI). Here, Spain emerges as an overachiever, that is, o­ne of the countries whose economic performance is better than it should be according to the indicator of future competitiveness.

To clarify this point, the author directs our attention to the case of another overachiever, Norway. Despite a high per capita income, Norway ranks comparatively lower in the BCI. This is due to the country´s abundant oil reserves. Its companies lack the drive and capabilities of companies in countries such as Finland or Japan, which have been forced by the lack of natural resources to "live o­n their wits" and cultivate continuous innovation as a means of raising the standard of living.

Another important point is that -contrary to the view popularized by certain media- Spain has not lost ground in the "macro" GCI index. For Ballarín, the drop from 21st place in 2002 to 23rd place in 2003 is due exclusively to the fact that Malta and Luxembourg are included in the report for the first time. According to the "macro" indicator, therefore, Spain has not become less competitive. According to the "micro" indicator, however, it has not o­nly fallen in the ranking (25th) but is set o­n a downward path compared to previous years.

Ballarín argues that, in the medium and long term, the o­nly way to raise the standard of living for a country´s citizens is through competitiveness, understood as the productivity of a set of factors. "Countries do not compete with o­ne another," he declares, paraphrasing the renowned economist Paul Krugman. World growth is not a zero sum game. And the surest way to increase the size of the pie for all is for each country´s companies to strive to produce goods and services as efficiently and with as much added value as possible.

As spokesman of the Global Competitiveness Report in Spain, Ballarín advises that the efforts of government authorities in Spain should be focused not so much at the "macro" level - where Spain is doing relatively well - as at the "micro" aspects that promote innovation and growth in companies.

You can download an excerpt from the Global Competitiveness Report 2003-2004, or search for the full text here.

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