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The world order is changing, with the lead of the US waning, along with its reduced commitment to rule-based multilateralism during the past administration. China is on the way to becoming number one again, investing abroad with primarily egoistic motives and steered by an authoritarian domestic regime. Meanwhile, the EU is striving for a new geopolitical role, while becoming more heterogenous.

The paper measures performance and competitiveness not only according to conventional criteria but also based on broader welfare indicators. The ultimate aim of competitiveness is to deliver well-being. Decentralized local strategies are presented, but also the need for guidance by societal goals.

What we measure matters. The EU is underperforming in per capita GDP and failing to close the gap in labour productivity towards the frontier defined by the USA. But it is leading in environmental and social indicators, has an accessible health system and provides increasing longevity. This performance nevertheless has to be improved, if climate goals should be fulfilled and upcoming new inequalities addressed.

Localization and place-based strategies have advantages, but also harper the danger that negative spillovers may not be minimized and positive not used. Innovation is a search process but has to be directed by goals in Europe and globally. Otherwise, change incurs high costs and many losers, fostering nationalism and populistic calls to return to a past glory that never existed.

The purpose of this study is to provide broader understanding of the significant role that the pension system has in the Spanish economy by estimating the sectoral production, employment and income sustained by pensioners' consumption.

Based on input–output tables by the World Input–Output Database and consumption data from the Household Budget Survey by the Spanish Statistical Office, a demoeconomic model is applied to quantify the direct impacts, indirect impacts from interindustry links and induced impacts from income–consumption connections over a nine-year period (2006–2014). Then, the factors driving the evolution of total output, employment and value added during such period have been examined by using structural decomposition analysis.

The growing participation of consumption by pensioner households in final demand had proven crucial during the 2008 crisis to alleviate the negative trend in production and employment derived from the collapse in consumption suffered by the rest of households.

Determining the underlying factors driving changes in both employment and income during the 2008 crisis can be of interest in political decision-making on the sustainability of the Spanish pension system.

The results of estimating both the employment and income supported by pensioners' consumption reveal the significant stabilizing effect of the public spending on pensions, particularly during the 2008 crisis.

The current Spanish approach of attaining the pension system sustainability by merely reducing social protection costs ignores the adverse consequences of a lower pensioners' demand. This paper addresses an alternative view in which pension spending is not considered a burden on economic growth but rather a means of improving the level of production and employment.

The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-01-2019-0047