Issues related to international competitiveness with regard to social protection, labour markets and effective government are not too many. Hence, this paper pleads for a new vision, one that puts social policy issues' influence, distributive justice and equality firmly back at the centre of the debate about the type of international competitiveness that should be pursued in post-transformation societies, such as Hungary. The study explores the effects of labour-market policies, introduces the term “disembedded social policy” and explores later the possibility of re-embedding this policy. State attention must be focused on reasonable ratios of income equality, similar levels of welfare. The state budget will have to concentrate the neccessary resources for these purposes which limits assets meant for enhancement of competitiveness. Efficient and well-functioning competitiveness policy requests an efficient state administration, as well. The study explores the issue of decentralization and state administration, the role of the state in delegating certain powers to lower levels of administration. Impoverished and weakened governments find it increasingly difficult to pursue the kind of effective micro-economic policies (industrial support and regional development strategies) that are essential features of all successful competitive policies and development experiences. The final part of the study deals with the connection between local governments, competitiveness and democracy.
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