Competitiveness of Nations

Recently I had a reading assignment from the class of Transformation of Modern Industrial Society: Finnish Model. It was an article written by Paul Krugman, titled Competitiveness-A Dangerous Obsession. You can find the article on this link:

Paul talks about the danger of regarding a country as a business company, competing with other companies in order to stay sustainable. At first, I thought the notion of positioning a country as a business entity in the industry is pretty much natural. A country certainly needs compete with other countries to make sure their people live a certain high level of living standards. As the case in Indonesia where a huge influx of ‘Made in China’ products into the domestic markets lures the Indonesians to buy theses Chinese products over locally produced ones, mainly due to their cheaper price and higher varieties. And I have seen some of the impacts, such as the bankruptcy of local clothes/textile manufacturers in my hometown. It is clear that by this simple example, China has better competitiveness over Indonesia. Hence, what the Indonesian government needs to do would be to increase its own competitiveness over China.

Well, I am not really sure whether my understanding is correct, but the article says that increasing the living standards of a country’s people is not by being more competitive over other countries, but being concentrating on solving its own problem, by increasing the domestic productivity of its own people. With regards to Indonesia, what shall we be doing then?


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