The Geneva based World Economic Forum, an independent international organisation, has published the latest Global Competitiveness Report, which is essentially a sophisticated measure of a country’s economic productivity.
This comprehensive document, covering 142 countries, was compiled with the help of worldwide partner agencies and respected academics including Professor Xavier Sala-i-Martin from Columbia University who took a lead role in the project. The data contained in the report comes from a range of international sources, including the International Monetary Fund, Organisation for Economic Co-operation and Development (OECD), and the United Nations as well as the Executive Opinion Survey, also published by the World Economic Forum.
World Economic Forum’s Global Competitiveness Report
In the report’s preamble, there is a recognition by Klaus Schwab, Executive Chairman of the World Economic Forum that world economies continue to face, “multiple challenges in their attempts to return to growth.” Although the report notes a hesitant recovery in some parts of the world, Schwab highlights its uneven spread. While much of the ‘developing’ world is experiencing moderate growth, high levels of public debt and rising commodity prices are curtailing consumer spending in the more advanced economies.
The Forum, while making the point that many factors drive economic competitiveness, has compiled the data using what they call, “the 12 pillars of competitiveness,” with each pillar having a number of subsections allowing a comprehensive range of statistical information to be gathered. The 12 pillars of competitiveness are:
- Institutional environment determined by legal and administrative framework
- Extensive and efficient infrastructure
- Macroeconomic environment
- Health and primary education
- Higher education and training
- Goods market efficiency
- Labour market efficiency
- Financial market development
- Technological readiness
- Market size
- Business sophistication
- The interrelation of the 12 pillars.
The list of top performers shows seven European countries in the first ten. Switzerland remains in top spot, “with a continuing strong position across the board” while the United States dropped to number five in the rankings. Propping up the table are: Burundi, Haiti and at number 142 the Central African country Chad.
The top ten most competitive countries out of the 142 examined are:
- Switzerland
- Singapore
- Sweden
- Finland
- United States
- Germany
- Netherlands
- Denmark
- Japan
- United Kingdom
United States Categorised as an Innovation-Driven Economy
Economic Forum’s Jennifer Blanke, the Lead Economist Director, considered some of the issues that affected the U.S. position. While recognising that the U.S was an innovative powerhouse, she notes, “fiscal weakening” and the inability of American policy makers to deal with the issue. Among a number of vulnerabilities in the U.S. economy, she emphasised the erosion of confidence over the last few years, in particular its trust of its politicians and worries over the government’s ability to maintain appropriate relationships with the private sector.
The report also mentions both wasteful and less transparent government spending as issues affecting the U.S. position. However the major factor that has pushed the U.S. ranking down is the continuing lack of macroeconomic stability, which has led to increasing public debt.
Out of 15 factors, this list represents the most problematic areas for companies doing business in America:
- Tax rates
- Inefficient government bureaucracy
- Poor work ethic in national labour force
- Inadequately educated workforce
- Restrictive labour regulations
- Government instability/coups
- Corruption
- Poor public health.
U.S. Public Debt
The report also examines, in some detail, the relationship between public (government) debt and competitiveness. For example the Forum make the point that in OECD countries (U.S. has been member since 1961) public debt will rise from an average of 73% of GDP in 2007 to over 100% in 2012 which means that tough fiscal consolidation will be necessary.
As the following list of public (government) debt levels in G7 countries reveals, the United States at 91.6% is already perilously close to the 100% mark.
- Japan ... 220.3%
- Italy ... 119%
- United States ... 91.6%
- France ... 84.3%
- Canada ... 84%
- Germany ... 80%
- United Kingdom ... 77.2%.
Note that the above statistics shows public debt as percentage of GDP, with an average of 101.3%.
A passage from a recent article carried by CNN Money, perhaps representing the voice of many Americans, sums up the U.S. position succinctly. It said, “… the United States is hamstrung by its distrust of politicians.”
Sources:
Organisation for Economic Co-operation and Development (OECD) Library, United States statistical profile, site accessed 11 September 2011
World Economic Fourm, The Global Competitiveness Report 2011-2012, site accessed 11 September 2011
Smith A, U.S. losing competitive edge, CNN Money, 9 September 2011
