What Europe must do to catch up

Thorsten Groth on the measures that should be taken to make Europe more competitive. Read the World Economic Forum’s Rebuilding Europe’s Competitiveness report.

History shows that sustained prosperity is best achieved through a winning combination of distinct competitiveness strengths. Currently, however, Europe as a whole faces a competitiveness deficit compared to other advanced countries, as well as a competitiveness divide within Europe. Fundamentally, these competitiveness challenges have caused many problems such as stagnating economic growth, rising unemployment and fiscal instability.

To increase its competitiveness, Europe has embarked on a series of reforms, of which more will be needed. Specifically, competitiveness-enhancing reforms are most needed in the areas of innovation and entrepreneurship, mobilizing talent and market efficiency, where the competitiveness deficit is greatest. A proper and sustained implementation of these measures will be crucial for redressing the current situation and preparing all the regions of Europe to face the ongoing challenges of a global environment that is changing ever more quickly.

In this context, it is increasingly clear to policy-makers what kind of reforms have to be done (there is a multitude of literature from the OECD, World Bank, and IMF on the kind of reforms that are recommended). How to communicate reforms, how to galvanize support and how to successfully implement reforms, however, remains a great challenge. This holds particularly true as sustainable reform approaches can be highly complex tasks that require continued efforts over long time periods, sometimes generations.

Against this background, the World Economic Forum report Rebuilding Europe’s Competitiveness highlights not only what kind of reforms are necessary, but also how these reforms have been implemented.

The study of these successful past practices shows that multistakeholder approaches overall can prove instrumental for implementing sustainable measures, as long as they are accompanied by clear communication and education campaigns. Multistakeholder approaches create a sense of ownership among all agents of society, while policy consistency has helped to maintain reform momentum and the development of important measures that may take a long time to bear fruit.

Reforms should be considered a shared responsibility among all stakeholders. More specifically, there is a need to better inform the public of the long-term gains of reform efforts even though these may come at the expense of significant short-term pains. And in a similar vein, policy-makers need to communicate a credible commitment that reform dividends will accrue to all members of society. Finally, in periods of particular gridlock, political leadership is needed to unblocking the situation.

For continued reform, it is important for political leaders to develop a sustained and coherent strategy that provides an inspiring vision, and commitment to communicate and explain the need for reform to the general public. The described enablers are pivotal to making reforms work and overcoming traditional barriers to reform.

By successfully implementing competitiveness enhancing reforms, Europe can close the competitiveness gap both within its boundaries as well as compared to other advanced nations, thereby securing continued prosperity for its citizens. The report shows that when rebuilding its competitiveness, Europe can preserve its core values of partnership and social inclusion.

Author: Thorsten Groth is Project Manager for the Rebuilding Competitiveness initiative at the World Economic Forum.

Image: People look at a globe in an installation in Copenhagen REUTERS/Pawel Kopczynski