01 September 2011

Philippe Maystadt: The myths that Europe's policymakers must forget

To promote sustainable and inclusive growth in the EU, economic policies should concentrate on productivity and innovation per se rather than on how globally competitive EU countries are, says Philippe Maystadt. He warns that success will depend on structural reform as much as on wiser government spending.

Interest in EU competitiveness is nothing new. Safeguarding Europe’s advanced position in the world economy was one of the motivations behind the EU’s single market programme of 1987-92. Since then, interest in EU competitiveness has risen further for several reasons, spurred particularly by the growing global role of countries like China.

“Strengthening EU competitiveness” may be a useful rallying cry to create momentum for growth-enhancing policies, but we must be clear about what it usefully means and what it does not. To set out my vision for growth in Europe, I will stress first that policymakers and the public at large should see international trade as a mutually beneficial exchange of goods and services, not as a zero-sum game in which of one country’s benefit, say that of China, comes at the expense of others. I’ll also argue that productivity and innovation are critical to reaping the benefits from this exchange, and in this context I’ll emphasise that policies that don’t cost European taxpayers a single euro are at least as important as policies requiring public funds. Lastly, I will highlight that promoting sustainable and inclusive growth has to take into account the importance of the services sector.

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