The US is no longer one of the most competitive economies in the world, according to the World Economic Forum. The United States fell two places to fourth place, overtaken by Sweden and Singapore in the rankings of the World Economic Forum’s Global Competitiveness Report 2010-2011. Switzerland was already in the No.1 spot in the survey a year ago.
The study said that “In addition to the macroeconomic imbalances that have been building up over time, there has been a weakening of the United States’ public and private institutions, as well as lingering concerns about the state of its financial markets.” Put another way, the US has brought the drop in competitiveness upon itself. The banking and credit system collapse exposed underlying weaknesses in the American financial system, which have yet to be resolved according to many experts. The financial reform bill may be a first step to right this, but the process to fulfill whatever progress the legislation may bring is still years off.
As for the state of the financial markets, they are dependent on whatever success the US has in the resolving its debt and deficit problems. The Congressional Budget Office and a number of private organizations have painted a bleak picture of the advances that will be made on this front, at least in the next two years. Intractable unemployment and slow GDP growth will not be overcome in the next few years if most analysis for the trouble is correct.
China continued it march up the rankings of the survey. The People’s Republic of China (27th) continues to lead the way among large developing economies, improving by two more places this year, and solidifying its place among the top 30. Among the three other BRIC economies, Brazil (58th), India (51st) and Russia (63rd) remain stable. Several Asian economies perform strongly, with Japan (6th) and Hong Kong SAR (11th) also in the top 20. In Latin America, Chile (30th) is the highest ranked country, followed by Panama (53rd) Costa Rica (56th) and Brazil.
The Global Competitiveness Report’s competitiveness ranking is based on the Global Competitiveness Index (GCI).The GCI sits on 12 pillars of competitiveness, providing a comprehensive picture of the competitiveness landscape in countries around the world at all stages of development.The pillars are: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation. The data used in the survey also includes a poll of more than 13,500 business leaders were polled in 139 economies.
Douglas A. McIntyre