The Competitiveness Trap: Why Only Shared Prosperity Delivers Economic Strength--and Resilience Against the Far Right

[Celerity]

Recent election results indicate that Europe’s pervasive far-right challenge is enduring, fuelled by public frustration and economic anxieties.

https://www.socialeurope.eu/the-competitiveness-trap-why-only-shared-prosperity-delivers-economic-strength-and-resilience-against-the-far-right



Recent elections in Portugal, Romania, and Poland clearly demonstrate that Europe’s far-right problem is here to stay. Voters are increasingly frustrated by rising housing costs, concerns over immigration, regional neglect, and a widespread feeling of powerlessness — a sentiment perfectly encapsulated by the Brexit slogan, “take back control”. However, after a belated and short-lived attempt to reverse economic policies with the European Green Deal, Europe is now witnessing a wholesale shift back to the narrative of “competitiveness” that defined the post-crisis years. This return, however, is a dead end. Not only has it failed to create shared prosperity, but it is also likely to further fuel the resentment that drives support for the far right.

How We Lost Faith in the Future

The 2008 financial crisis brought an end to the optimistic politics of the 1990s. For decades, societies had rallied around a simple promise: unleash private markets through deregulation, privatisation, and globalisation, and everyone would benefit from the growing economy. “Competitiveness” — with countries vying on low wages, weak regulations, and low taxes — was central to this promise. The 2008 crisis shattered the last shreds of credibility of this neoliberal path to prosperity. Yet, rather than changing course, political leaders doubled down on it. They bailed out banks while imposing austerity on ordinary people.

The competitiveness agenda even strengthened, with cutting labour costs becoming the go-to solution in EU policy. Without a credible path to shared prosperity, and in the context of growing inequality and regional decline, the emergent ideological vacuum has been filled by the far right’s identity politics. While a return to ethno-nationalism might offer a sense of safety to some, it will not solve anyone’s material problems. Worse still, such movements often destroy the very institutions needed for prosperity: democracy, the rule of law, and rational government. The result is a multitude of enemies, but little shared prosperity.

Why Competitiveness Will Not Work

Competitiveness policies – which paradoxically require the opposite of competition – tend to worsen inequality. Either directly through lowering labour costs, as also recent calls in Germany suggest, or through the secondary effects of market concentration on the one hand and deregulation on the other, both advocated by the Draghi report, and enthusiastically implemented by over-zealous proponents. Furthermore, competitiveness policies increase people’s anxiety about losing control over their future to uncontrolled markets and powerful corporations. The competitiveness narrative suggests that unless a country “wins” in global competition – which is never certain – its citizens will not have a prosperous future. That is not just a frightening prospect for people whose livelihoods are at stake; it is also, as economist Paul Krugman argued, a misleading framework for understanding what makes countries economically strong.

What Europe Truly Needs.......................

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