ABSTRACT
The role of the state in international economic competition has changed over recent decades. Trade liberalization, privatization and the shift towards supranational regulation have deprived governments of many tools they once used to control economic activity in their own jurisdictions, and have allowed capital to move freely across borders. Unable to influence the behaviour of firms directly, states have had to concentrate their efforts on manipulating other socioeconomic factors so as to best capture the interest of increasingly footloose capital. They have thus become more self-conscious participants in the economic race, vying with one another for investments from mobile private actors. At the same time, these changes have also meant that from the standpoint of public policy, ‘competitiveness’ has ceased to be the exclusive concern of individual companies and has become instead a feature of society as a whole, spanning a variety of policy domains, from taxation and labour market regulation to education, welfare and land management (Stopford and Strange, 1991; Fougner, 2006). Viewed from this perspective, interstate rivalry for capital may be seen as a special case of social dumping, in which governments are at the same time regulators and participants in the competitive process. This makes it possible to extend the definition of social dumping developed in the Introduction to this volume so as to encompass state attempts to tailor social and labour policies to the needs of foreign investors.
