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The Challenges of Measuring Competitiveness – Montana ranks 28th – was 21st last year

Whether it is explicitly stated or implicitly understood, one of the distinctions between technology-based economic development (TBED) and more traditional economic development functions is TBED’s goal of encouraging the creation of high-skill, high-wage jobs to raise the standard of living for the state or region’s residents. An area’s income levels and its positive change over time could be considered measures of success toward that goal.

An SSTI Editorial

But should affluence be the measure of competitiveness? The Boston-based Beacon Hill Institute (BHI) http://www.beaconhill.org/ answers yes in its fourth annual indicator report, Metro Area and State Competitiveness Report 2004 http://www.beaconhill.org/Compete04/Compete2004WebONLY.pdf . Authors Jonathan Haughton and Cagdas Sirin define competitiveness as "the policies and conditions that ensure and sustain a higher level of per capita income and its continued growth.”

In actuality, median household income in the U.S. has declined in real terms each year since 2000 by an aggregate 3.4 percent (source: Economic Policy Institute http://www.epinet.org/content.cfm/webfeatures_econindicators_income20040826 ). Apply the BHI definition of competitiveness and one would have to conclude the U.S. is increasingly non-competitive in the global market.

We’d argue that, instead, the decline in household income means we are losing our affluence. That loss might make us more competitive through lower wages but threatens our standard of living.

The words competitiveness and compete are so often used in economic development policy today that they have lost much of their meaning or impact. Advances in information and communications technology, as well as international free-trade policies, make some of our long-held notions of competitiveness inconsistent with reality, anyway. Add the falling value of the dollar, Congress’s recent cuts for scientific research, and the rapid adoption of policies and programs by many countries to encourage education, innovation, research and investment (see related article below), and it would appear the U.S. should prepare for more challenges in the future.

How does the U.S. compete in a truly global market while simultaneously maintaining or, more importantly, increasing its standard of living? Our sense is the second part of the question has been lost in much of the debate in Washington. We look forward to seeing how the Council on Competitiveness http://www.compete.org/ addresses the question next week with the release of the final report for its National Innovation Initiative.

Copyright State Science & Technology Institute 2004. Redistribution to all others interested in tech-based economic development is strongly encouraged ­ please cite the State Science & Technology Institute whenever portions are reproduced or redirected.

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Copyright State Science & Technology Institute 2004. Redistribution to all others interested in tech-based economic development is strongly encouraged ­ please cite the State Science & Technology Institute whenever portions are reproduced or redirected.

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