The Draghi competitiveness report (see summary here) is a good and comprehensive analysis of European competitiveness from a traditional perspective. It is typical of a traditional approach to competitiveness to consider, first, that the ultimate goal of competitiveness is economic growth. Second, that the social and environmental dimensions are subordinate to the economic; and that economic growth is necessary to make progress in social and environmental issues. Third, in line with this, that the ultimate indicators of competitiveness are GDP per capita and productivity. Fourth, that the basis of productivity is technological innovation, based fundamentally on R&D; and that technological progress is considered good in itself and neutral in nature. Fifth, that the reference model for competitiveness is the US. Sixth, that competitiveness analyses and recommendations are made by technicians or consultants and respond to a top-down logic. And finally, seventh, that especially in their early stages, competitiveness analyses should focus on countries, ignoring sub-national realities.
In contrast to this traditional 20th century conception, which fully permeates the Draghi report, more advanced approaches to competitiveness have been developed (see, for example, ESIR or Orkestra). In these new advanced models of competitiveness, first, the objective pursued is well-being (or sustainable development). Second, all three dimensions are fundamental, so that certain planetary limits must not be exceeded, nor must we fall below certain social thresholds; economic growth is only a means, not an end, and indeed it is not always necessary to improve well-being. Third, GDP and productivity do not always measure well-being correctly, because they include things that are not good for well-being (e.g. war-related expenditure) or do not take into account things that are important for it (e.g. non-market personal care). Fourth, advanced competitiveness models consider that there are other types of innovation (organisational, commercial, institutional or social) as important as technological innovation, that not all technology or innovation is good in itself, and that technology is not neutral and has biases (e.g. environmental or social). Fifth, it considers that there is no single model of competitiveness: the American model has made a high level of per capita income possible, but so has the Nordic-European model. Sixth, in this new approach, competitiveness analyses and recommendations should emerge as results of participatory processes, combining top-down and bottom-up approaches. Finally, multiple levels (local, regional, state, European...) and actors must be considered.
Many of the weaknesses of the European model highlighted by the Draghi report sound like déja vu: the EU's innovation gap with the US, its geopolitical dependence, insufficient EU integration... However, they are now presented together as components of an existential and life-and-death problem, supported by the prestige or recognition achieved by Draghi and the support of the President of the European Commission. Moreover, although the report responds to a traditional model of competitiveness that ignores key factors for well-being or sustainable development, it does propose some positive transformations, which make it possible to break with the status-quo that has led the EU to this disadvantageous situation. In particular, the Draghi report is to be welcomed for:
- Questioning the orthodoxy of austerity (by proposing an investment plan that would amount, annually, to 5% of GDP)
- Proposing the need for the EU to promote intervention strategies and a new industrial policy (combining the typical instruments of industrial policy with those of competition, international trade and investment and regulatory policies)
- Strengthening the integration of the EU, both of its markets (completing the single internal market, promoting a European capital market…) and of its governance and policies (higher EU budget, change in decision-making rules...).
However, along with these contributions, which should be applauded and supported, there are some aspects that are more questionable (e.g. the composition of this large investment, a large part of which would be used to increase military defence spending).
The Draghi report has generated mixed reactions. Neoliberal economists and politicians (for example, in Germany) are largely against it, arguing that the huge investment plan will lead to more interventionism, that the EU does not have the capacity to spend such a magnitude efficiently, that it will require issuing EU public debt at unsustainable levels, and that it will lead to inflation. They are also against relaxing competition policy or promoting new industrial policies aimed at creating national champions. But they do welcome the reductions in bureaucratic and regulatory burdens proposed in the report.
Environmental and social movements have largely opposed the report, as it does not adequately address the social and environmental aspects of an advanced model of competitiveness and proposes only efficiency-enhancing measures, neglecting those that affect sufficiency. Furthermore, they fear that the flexibility in regulation and competition policy, and the concentration and support for large corporations advocated in the report will work against consumers, workers and SMEs. They also oppose the proposed increase in defence spending and fear that the new investments proposed in the report will be at the expense of regional cohesion policies, the CAP and social protection. However, they do welcome the increase in investment (e.g. in decarbonisation of the economy) and that the proposal for competitiveness is not based on low wages.
There are quite a few analysts who, while supportive of many of the report's key proposals, see them as unfeasible at the present time. They believe that Germany and other frugal countries will not accept joint debt issuance or financing such a large-scale EU investment; that many of the policies ultimately require changes to the EU Treaties that are not possible; that despite the report's attempts to create a climate of urgency, the European economy is not experiencing a real crisis as it did in 2012 or under Covid; that the rise of the extreme right and national populisms is contrary to the strengthening of European integration; and that in the central countries of the EU there are no leaders (such as Merkel) who, rightly or wrongly, are capable of piloting the transformations.
In short, in my opinion, the Draghi Report falls far short of what should be proposed to really address the challenges we face in terms of the environment, inequalities, or loss of weight of the EU in the international context. However, some of the transformations it proposes are compatible with those that would be necessary to move forward towards a sustainable development. Therefore, instead of rejecting the report for what it lacks (which would only reinforce the forces of the status-quo that have brought us to this negative situation), let us try to support the positive aspects of the report. Although the positive impact of what I have called a traditional approach to competitiveness is less than that of an advanced model of competitiveness, there is no denying that it is even worse to have no approach or model of competitiveness at all and to continue as the EU has been doing.
Those interested in some other critical assessments of the Draghi Report can consult, in addition to the other two Orkestra posts on this subject (see Kamp and Gaztañaga), recent posts by Hickel, Piketty, Banchard and Ubide, Orange, von Thun and Cafarra.
