Economic Growth Is Not a Race to the Moon

The problem with "competitiveness".

The metaphor of growth as a race with winners and losers - all that stuff in the speech about Sputnik moments, falling behind, winning the 21st century - is nonsense. Over the long haul, if US productivity rises, so will US living standards. Why should growth in China or India hold back US productivity? No reason at all.

Once conditioned to think "productivity" whenever a politician says "competitiveness", you look at economic policy differently. Winning begins to seem overrated. What exactly do we win, you wonder? Being number one in worldwide production of solar panels would be nice, but how would that raise economy-wide productivity? The key to improving living standards lies not in winning the race to develop showcase technologies, but in accumulating capital, diffusing knowledge and accommodating the disruption that this entails.

I have more to say on the subject in this column for the FT.