André Schneider, through his consultancy, André Schneider Global Advisory, partners with Global Footprint Network on one of our strategic programs, Competitiveness 2.0.
Building on Schneider’s 10+ years as Managing Director and COO at the World Economic Forum, together we are well positioned to engage senior administrators and economic decision-makers on how to succeed in the new era of resource constraints.
André Schneider explains why he believes resource constraints are becoming so central to a nation’s competitiveness.
Q. What are indications that resource constraints are affecting competitiveness?
A. When we look at the competitive positioning of countries today, we can see that the most important negative factor is the macroeconomics situation (like debt, import-export balance, government budget balance—see cases like Greece). If we look at some countries that have trouble managing this and are hence under pressure, we can see how the need to import resources (like food and fossil fuel) increases the pressure on the macroeconomics situation through rising costs.
To illustrate this, let’s look at Egypt. Here are the facts: 1) Egypt has a continuously increasing biocapacity deficit, and has to import food. Furthermore it needs to subsidize food, given the rising prices and the fact that food represents more than 30 percent of the average household expenditures. This puts pressure on the population and the public debt (due to the subsidization). 2) Egypt has been using more and more of its own fossil resources for its own use, also due to subsidizing, and is now close to having to import energy. This again will put more pressure on the public debt and further worsen the macroeconomics standing of the country. 3) In conclusion, all this pressure on public finances diminishes the country’s ability to invest in a better infrastructure for food and alternative energies, and improve the economic development for its citizens. Many of these effects have also been important factors in the rise of civil unrest.
Q. What are the opportunities for promoting an updated competitiveness approach?
A. In the coming years, prices will increase and resources will become more difficult to procure. Every country will have to find a sound and balanced approach between resource needs, macroeconomic capacity to develop the country and to access these resources, and a real continuous improvement of the social evolution of the country. Global Footprint Network and I call this “Competitiveness 2.0,” an upgrade of the widely used competitiveness idea promoted by Michael Porter. Competitiveness 2.0 shifts the focus on these three important areas, to give a better understanding of the current situation and the trends that led us here. Competitiveness 2.0 will give the elements necessary to define a framework of future development that will protect a country from continued pressure due to increasing resource constraints around the globe. Such a strategy will improve a country’s competitive standing and allow it early on to profit from its repositioning due to a better economic, and hence social, evolution.
Q. How will this change the way countries’ economic success is viewed today?
A. Today, economic success is generally measured by looking at GDP growth, and to a lesser extent at the overall macroeconomic situation. This does not show if such a success is sustainable because a success uniquely based on resource exploration and on the assumption of low prices cannot be maintained. This view does not allow us to identify and address quickly unsustainable economic patterns, like constantly increasing debt. Finally, it does not allow us to value social development, based on a more equally distributed wealth, improved life conditions, and access to better education. In conclusion, using the Competitiveness 2.0 approach will allow a country to develop a really sustainable competitive strategy, and hence ensure a much more sustainable and long-term favorable environment for economic and social development.
Q. Which countries will emerge as the most competitive, and the least?
A. When we look at trends, we can see that countries like Norway are positioned quite strongly, with a good prospect for a sound and sustainable future. For instance, they are using their fossil energy resources to finance future projects to increase sustainability and using renewable energies, like hydro, for their own energy needs. By doing so, Norway is creating a very sound macroeconomic situation. Such a positioning unlinks them from the negative effects of resource scarcity and creates the wealth for future sustainable development.
On the other hand, countries like Egypt expose themselves to major risks of food crises and energy dependency, which will limit their capacity to create the infrastructure to improve social and economic development. Furthermore, given the advanced state of these trends, solutions without a major short-term negative impact will be very difficult to find and implement.
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