Kevin Rowan column

Oct 3 2005 By Kevin Rowan, The Journal

Like everyone else, no doubt, I enjoyed immensely being reminded by our Prime Minister last week in his tumultuous Labour Conference speech, that we live in a fast-moving global environment and that we need to be "ahead of the curve", open and international in our aspirations and activities. Sentiments I wholly agree with.

It was interesting the following day to read the news from the World Economic Forum on the competitiveness of nations - a report which should really go to the heart of current international and national debates about the kind of economic and political models we should be pursuing in this country to achieve the kind of success we all aspire to.

We constantly hear about the terrific success of the United States in driving forward its economy and raising productivity and competitiveness year on year; and we are all meant to be intimidated by the raw economic power of the Asian tigers.

We rarely hear about success in Scandinavia or the Nordic countries. Yet, for the fourth year out of five, Finland sits at the top of the global competitiveness league, with Sweden, Denmark, Iceland and Norway all in the top 10.

America finished second (surely regarded as a major disappointment for that country!), with its "overall technical supremacy ... and very powerful culture of innovation" offset by poor legal framework and concern about the government's ability to maintain arms-length relations with the private sector.

Going in favour of the Nordic states were a number of characteristics which made them all "extremely competitive".

The WEF specifically highlighted a very healthy macroeconomic environment; effective and efficient public institutions that are highly transparent; government spending priorities that are aligned with the general agreement of society; and an efficient public spending system that has "delivered world-class educational establishments, an extensive safety net and a highly motivated and skilled labour force."

So what can we learn from this report? Firstly, we ought to be prepared politically to accept that there is a successful alternative to the low-tax, laissez faire approach to macroeconomic policy. The `American way' isn't the only route to achieving progress.

Secondly, it is OK to provide a high safety net for those who need one.

Having a good level of social protection is not automatically a barrier to strong economic performance.

Thirdly, investing well in the public sector through direct taxation can contribute effectively to the competitiveness, as well as the social well-being, of a country.

Another world is possible.