This first report clarifies some questions and clearly establishes that productivity and competitiveness are two different concepts with very different implications, in particular within the context of a monetary union. Productivity gains are the main source of growth in industrialised countries. Understanding the sources of its slowdown over the past twenty years is therefore a fundamental issue. This slowdown constitutes a puzzle which is not completely understood today, and which has given rise to a debate around the concept of "secular stagnation". If the low productivity gains scenario were to become persistent, it would imply a stagnation in purchasing power for most people as well as difficulties in financing the ecological transition and social protection for instance, in a context of growing ageing-related needs.
While the two concepts are sometimes confused, competitiveness raises a different set of questions than does productivity. Competitiveness takes on a particular dimension in a monetary union. It is defined here as a country's ability to balance its flows of resources with the rest of the world. Measured by the current account, this external balance depends largely on the ability to sell one’s goods and services internationally, which in turn is mainly determined by cost-competitiveness and non-cost competitiveness (e.g. product quality). As opposed to productivity, competitiveness is necessarily defined relative to our partners. From an accounting point of view, a national current account surplus can only exist if partner countries are running a current account deficit. Unlike productivity improvements, an increase in competitiveness happens necessarily at the expense of other countries. Thus, productivity gains are a positive-sum game at the global level, whereas it is necessarily a zero-sum game for competitiveness.
Hence, the accumulation of current account surpluses cannot in itself be considered an economic policy objective. Still, monitoring the current account balance, the trade balance, and the evolution of market shares, remains legitimate. Indeed, accumulating external deficits over too many periods can eventually put at risk the external debt financing and take the form of a balance of payments crisis with a large fall in wages, consumption, investment and employment. External debt sustainability is particularly relevant within the euro area, as cost-competitiveness can no longer be rapidly restored through exchange rate movements between euro area partners and requires an adjustment in relative wages. which can be particularly painful from a social and economic point of view for deficit countries. The accumulation of current account surpluses is not risk-free either.
As far as productivity is concerned, all countries in the area, both individually and collectively, have an interest in its improvement because it is a guarantee of prosperity. With respect to competitiveness - particularly between euro area countries - the purely national dimension of determining labour costs is not sufficient. It must be part of a cooperative framework under which imbalances that could endanger the area as a whole are mutually monitored. Current rules have failed to correct the serious imbalances of current-account surplus countries, which have severely damaging consequences for all euro area countries.
This first report of the National Productivity Board (NPB) is organised in two parts. The first part presents a fairly broad overview of the factors, which may be common to OECD countries or specific to France, that can be behind the national productivity slowdown. In the second part, the report focuses on the link between the country's competitiveness and current account imbalances in the particular context of the euro area.