Tuesday, September 26, 2006
Is the US losing competitiveness?
Switzerland, Sweden and Japan were the big gainers in global competitiveness this year, while the United States slipped was the big loser, falling from first to sixth place (see US summary here). That's according to the World Economic Forum's Global Competitiveness Report 2006-2007, published today.
Switzerland moved up from fourth to first place, displacing the US. It was followed by Finland (unchanged in second place), Sweden (up three places to third), Denmark (down one place to fourth) and Singapore (steady in fifth place). The Forum's chief economist, Augusto Lopez-Claros, is quoted in the press release as saying:
The top rankings of Switzerland and the Nordic countries show that good institutions and competent macroeconomic management, coupled with world-class educational attainment and a focus on technology and innovation, are a successful strategy for boosting competitiveness in an increasingly complex global economy.
Business activity in these countries benefits from a well-developed institutional framework, characterized by the rule of law, an efficient judicial system and high levels of transparency and accountability within public institutions. Excellent infrastructure is an additional positive feature of the business environment. Our indicators point to the rapidly growing importance of higher education and training as engines of productivity growth.
Countries that, like the Nordics, are investing heavily in education are likely to see rising levels of income per capita, growing success in reducing poverty and an increasing ability to establish a presence in the global economy.
Other noteworthy developments: the UK slipped from ninth to tenth place (see UK summary here), Japan gained three places (from tenth to seventh), and beleaguered Italy continued its downward trend, dropping another four places in this year’s report (Italy summary here).
Of course, one needs to take these rankings with a large pinch of salt. The annual WEFreport is a quirky compendium of disparate data of varying quality, along with opinions from their own survey:
...results of the Executive Opinion Survey, a comprehensive annual survey conducted by the World Economic Forum, together with its network of Partner Institutes (leading research institutes and business organizations) in the countries covered by the Report. This year, over 11,000 business leaders were polled in a record 125 economies worldwide.
Let's see now: 11,000 divided by 125 is an average sample of 88 people per country. Now that's really representative, isn't it?
The surprising thing is that despite such doubtful data, many of the report's judgements ring true. Here's the report's take on Germany and the UK, drawn from the 16 page Executive Summary (PDF):
Germany and the United Kingdom continue to hold privileged positions, ranked eighth and tenth, respectively. There are interesting contrasts in the performance of both economies from the perspective of the GCI pillars. Both countries have excellent institutional underpinnings, and in some areas namely, the property rights environment and quality of the judicial system, Germany is second to none.
The United Kingdom excels in market efficiency indicators, with the most efficient financial markets in the world. The flexibility of the UK labor market and its low levels of unemployment stand in sharp contrast to that of Germany, where the business community is saddled with cumbersome labor regulations. But Germany does somewhat better than the United Kingdom in innovation indicators and the sophistication of its business community, which are among the best in the world.
Sounds about right to me.