The World’s Best (and Worst) Economies

September 7, 2012 by Douglas A. McIntyre

For most of the 20th century, the United States has been considered the world’s economic superpower. And up until four years ago, the World Economic Forum would agree. In 2008, it ranked the U.S. as the most globally competitive economy in the world. This year, when the group published its annual Global Competitiveness Report, the U.S. ranked seventh.

Read: The World’s Best Economies
Read: The World’s Worst Economies

Like other competitive economies, the U.S. performs well in almost all the economic measures that the report considers. However, in recent years the country’s political conflicts and growing debt have become a problem. Public confidence in elected officials has dropped following the debt ceiling crisis in 2011 and the current struggle over the “fiscal cliff,” Kevin Steinberg, chief operating officer of the WEF, told 24/7 Wall St. in an interview.

According to the WEF, competitiveness reflects the level of productivity of a country, based on its institutions, policies and economic factors. In its study, the WEF groups the 144 countries it surveys into one of three economic categories. “Factor-driven” economies are the least developed and rely on low-skilled labor and natural resources. More developed countries are considered “efficiency-driven” economies because they turn to improving output. The most developed economies, which focus on improving technology and new product and idea development, are considered “innovative.”

To create the Global Competitiveness Index (GCI) score for each country, the WEF ranked more than 100 economic indicators divided into 12 broad categories, referred to as pillars, that quantify the extent to which a country is competitive. The economic indicators and pillars were then scored 1 to 7. To rank the countries, some economic measures were weighted more heavily than others, depending on how the economy was categorized.

In the case of Burundi, which was ranked the least competitive globally, 65% of the country’s competitiveness ranking was based on economic measures that reflect what the WEF calls “basic requirements,” such as a country’s infrastructure and institutions. Only 5% of the ranking was determined by “innovation and sophistication” factors, which are used to rank the most developed countries.

In the case of Switzerland, the most competitive country, basic requirements accounted for only 20% of the ranking, while 30% was based on innovation and sophistication factors, like the availability of scientists and engineers and local supplier quality and quantity.

The most competitive countries generally had high scores among most economic measures, ranking among the best in technological readiness, business sophistication, and higher education. In the case of innovation, nine of the 10 countries with the highest ranks were among the most competitive economies overall. Switzerland received the highest ranking on company spending on research and development along with the highest mark for university-industry collaboration on research and development.

Conversely, the least competitive countries generally fared poorly across the board. In addition to innovation and efficiency, the worst countries had among the lowest scores in basic requirements, like institutions, infrastructure, health and primary education. At least five of the least competitive countries all ranked in the bottom 10 for infrastructure and health and primary education. The least competitive country, Burundi, had the seventh highest infant mortality rate. The second least competitive country, Sierra Leone, had the highest rate.

However, there were exceptions. Many of the competitive countries had less than stellar scores on macroeconomic environment, an economic measure reflecting the broader economy, because of high debt levels. According to Steinberg, public debt “is definitely an obstacle for many of the highly developed and competitive countries.” In addition to the U.S. he pointed to Japan, a highly developed economy that has been driven into debt due to high entitlement spending.

Based on WEF’s Global Competitiveness Report, which ranks 144 countries that make up almost 99% of the world’s GDP, 24/7 Wall St. reviewed the economies with the highest and lowest Global Competitiveness Index scores. Data from the World Bank and the World Health Organization were used to provide additional information on some economies.

These are the 10 most and least competitive global economies.

The Most Competitive Economies in the World

10. Japan
> GCI score: 5.40
> GDP per capita: $45,920 (18th highest)
> Debt as a pct. of GDP: 229.8% (the highest)
> Individuals using Internet: 79.5% (17th highest)
> Infant mortality rates: 2.4 per 1,000 live births (7th lowest)

Japan has the world’s third-largest gross domestic product and generates large domestic and export demand for the goods and services it produces. According to the WEF, Japan exports a diverse array of products and services from all along the value chain–from low value products to high value goods such as semiconductors and auto parts. The country’s production processes are ranked first in the world for technological sophistication. Japan was ranked second for company research and development spending, one of the leading contributors to innovation, above the U.S., which ranked seventh in this category.

9. Hong Kong SAR
> GCI score: 5.41
> GDP per capita: $34,049 (26th highest)
> Debt as a pct. of GDP: 33.9% (52nd lowest)
> Individuals using Internet: 74.5% (25th highest)
> Infant mortality rates: 1.3 per 1,000 live births (the lowest)

Few nations have the quality of infrastructure found in the city of Hong Kong. Railroads, ports and air transportation — all vital for economic efficiency and attracting economic activity — were rated highly by the city’s residents. Despite its extremely small size, Hong Kong still had the 40th-highest GDP of all 144 economies studied by the WEF. According to the foundation, this special administrative region of the People’s Republic of China has the world’s most-developed financial market, beating out much larger countries such as the United States, which was ranked 16th, and China itself, which was ranked 54th.

Also Read: Ten Countries Where Young People Can’t Find a Job

8. United Kingdom
> GCI score: 5.45
> GDP per capita: $38,592 (22nd highest)
> Debt as a pct. of GDP: 82.5% (18th highest)
> Individuals using Internet: 82.0% (14th highest)
> Infant mortality rates: 4.6 per 1,000 live births (29th lowest)

Of the major indicators measured by the WEF, the United Kingdom scored the best in labor market efficiency, ranking fifth. It was ranked fourth for limiting “brain drain,” reflecting that highly educated residents are choosing to stay in the country. While the country scores well in many areas, it also has weaknesses. Like many of the other countries in Europe, the U.K. faces a challenging macroeconomic environment. Notably, its debt is 82.5% of GDP, placing the U.K. in the top 20 of all 144 countries. Despite austerity measures underway, the country’s Office of Budget Responsibility notes that finances are “clearly unsustainable” over the coming 50 years, and tax increases, spending cuts or a combination of both will be necessary in the future to maintain long-term fiscal health. Of course, tax hikes may not go over well with residents. Taxes, along with access to financing, were considered the greatest obstacle to doing business in the U.K.

7. United States
> GCI score: 5.47
> GDP per capita: $48,387 (14th highest)
> Debt as a pct. of GDP: 102.9% (9th highest)
> Individuals using Internet: 77.9% (20th highest)
> Infant mortality rates: 6.5 per 1,000 live births (41st lowest)

The U.S. has the world’s largest GDP and is also the world’s second-largest exporter, trailing only China. In addition to being big, the country ranks in the top 10 for innovation. Collaboration between research universities and private industry on research and development was especially strong, ranking third in the world only behind Switzerland and the U.K. The U.S. also ranked fifth for the availability of engineers and scientists, another measure that further supports future innovation. However, the country’s competitiveness may be undermined by a government deficit that, at 9.6% of GDP in 2011, was proportionally one of the largest in the world.

6. Germany
> GCI score: 5.48
> GDP per capita: $43,742 (20th highest)
> Debt as a pct. of GDP: 81.5% (19th highest)
> Individuals using Internet: 83.0% (12th highest)
> Infant mortality rates: 3.4 per 1,000 live births (17th lowest)

Germany was ranked third in the world for business sophistication by the WEF, seven spots ahead of the U.S. The country ranked first for its ability to produce a broad range of goods and services across the value chain — from low value goods like foodstuffs to high value goods like cars. Germany also ranked eighth in developing business clusters, meaning groups of interconnected businesses that are located in close proximity to each other. According to the WEF, clusters drive innovation, a category in which Germany did better than all but seven other countries. One way the country supported innovation was high spending on research and development, where Germany ranked fourth.

5. The Netherlands
> GCI score: 5.50
> GDP per capita: $50,355 (10th highest)
> Debt as a pct. of GDP: 66.2% (35th highest)
> Individuals using Internet: 92.3% (3rd highest)
> Infant mortality rates: 3.6 per 1,000 live births (21st lowest)

The Netherlands is strongest in the fields of business sophistication, and health and primary education, ranking fourth and fifth respectively out of all 144 countries. The Netherlands has among the highest rated use of sophisticated marketing strategies — a core component of developing business sophistication. The fact that primary education enrollment is almost universal boosts the health and primary education rankings. When asked to identify the biggest hurdle to conducting business in the country, the most common answer was access to financing. Despite this perception, the Netherlands ranked sixth out of 144 countries in terms to the availability of financial services.

4. Sweden
> GCI score: 5.53
> GDP per capita: $56,956 (8th highest)
> Debt as a pct. of GDP: 37.4% (64th lowest)
> Individuals using Internet: 91.0% (4th highest)
> Infant mortality rates: 2.3 per 1,000 live births (5th lowest)

Sweden is considered the most technologically ready country by the WEF, scoring higher than all 144 countries on both the availability of the latest technologies and firm-level technology absorption, which is the degree that businesses use the technology available to them. When asked to name the biggest obstacle to doing business, the most common answer was tax rates. As evidence, the country’s 52.8% total tax rate on profits was well above that of the two most competitive countries in the world. Switzerland’s tax rate is 30.1% of profits, while Singapore has a tax rate of 27.1%.

Also Read: Countries That Spend the Most on Health Care

3. Finland
> GCI score: 5.55
> GDP per capita: $49,350 (12th highest)
> Debt as a pct. of GDP: 48.6% (52nd highest)
> Individuals using Internet: 89.4% (7th highest)
> Infant mortality rates: 2.4 per 1,000 live births (7th lowest)

Contributing to its high competitive standing, Finland is the second most innovative economy in the world, only behind Switzerland. Notably, the country scores the highest in terms of the availability of scientists and engineers. Finland’s educational system is also impressive, as the WEF asserts the country has the highest quality of primary education, and the second highest quality math and science programs in higher education. While Finland scores relatively well across most economic measures, the country’s macroeconomic environment has weakened slightly due to moderately high inflation, although the problem is not nearly as serious as it is in other countries in Europe.

2. Singapore
> GCI score: 5.67
> GDP per capita: $49,271 (13th highest)
> Debt as a pct. of GDP: 100.8% (10th highest)
> Individuals using Internet: 75.0% (24th highest)
> Infant mortality rates: 2.1 per 1,000 live births (3rd lowest)

If Americans have had it with their elected officials, they may want to consider moving to Singapore — it has the highest score of all 144 countries in terms of the quality of its legal and administrative frameworks. Notably, the country has the best score of all countries in terms of public trust in politicians, minimizing wastefulness in government spending and transparency in government policymaking. Meanwhile, the U.S. scores 54th in terms of public trust, 76th in wastefulness and 56th in transparency. Singapore also ranks at the top for goods market efficiency, and second in infrastructure, higher education and training, labor market efficiency, and financial market development. The country’s 5.2% rate of inflation is dampening its competitiveness as more residents cite increasing costs as the biggest hurdle to doing business.

1. Switzerland
> GCI score: 5.72
> GDP per capita: $81,161 (4th highest)
> Debt as a pct. of GDP: 48.6% (51st highest)
> Individuals using Internet: 85.2% (10th highest)
> Infant mortality rates: 4.1 per 1,000 live births (24th lowest)

Switzerland is the most globally competitive country, receiving the top overall score from the WEF. Switzerland received a score of 6.6 out of 7 in the quality of its infrastructure, the highest of all 144 countries. Switzerland also scored at the top in cooperation in labor-employer relations and the availability of financial services. The country scored very well in higher education, receiving the highest score of all countries in quality of the educational system, availability of research and training services, and extent of staff training. However, the WEF points out that the university’s enrollment rate, while improving, still lags behind other “high-innovation countries.”

Click here to read The World’s Worst Economies

The Least Competitive Economies in the World

10. Swaziland
> GCI score: 3.28
> GDP per capita: $3,358 (51st lowest)
> Debt as a pct. of GDP: 17.5% (22nd lowest)
> Individuals using Internet: 18.1% (46th lowest)
> Infant mortality rates: 55.1 per 1,000 live births (27th highest)

Of the 144 countries studied by the World Economic Forum, Swaziland ranked 14th lowest in providing basic requirements for competitiveness. The kingdom is ranked as one of the 20 worst macroeconomic environments in the world. Swaziland is rated so poorly partly because it is just one of three nations surveyed with a negative savings rate. The country also was especially ineffective, 135th out of 144, at promoting health and basic education, both of which are necessary for a productive and competitive workforce. The health problems presently facing Swaziland are among the worst in the world: 25.9% of the population is estimated to have had HIV or AIDS as of 2009.

9. Timor-Leste
> GCI score: 3.27
> GDP per capita: $3,949 (56th lowest)
> Debt as a pct. of GDP: 0% (the lowest)
> Individuals using Internet: 0.9% (2nd lowest)
> Infant mortality rates: 56.2 per 1,000 live births (25th highest)

Timor-Leste was a province of Indonesia from 1976 to 2002, when it was known as East Timor. While the country, with a population of 1.2 million, has since been independent, it has struggled to compete with other countries in the world. Timor-Leste’s infrastructure is poor and is ranked as the 14th worst out of 144 countries by the WEF, partially because the country’s roads and ports were rated as some of the worst in the world. Much of this may be the product of deliberate infrastructure destruction by anti-independence militias in the late 1990s. Additionally, health concerns are prevalent in the small tropical nation, which has some of the world’s highest incidences of malaria and tuberculosis.

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8. Lesotho
> GCI score: 3.19
> GDP per capita: $1,264 (30th lowest)
> Debt as a pct. of GDP: 39.6% (71st lowest)
> Individuals using Internet: 4.2% (15th lowest)
> Infant mortality rates: 64.6 per 1,000 live births (18th highest)

According to the WEF, Lesotho was the ninth-worst country for providing the basic health and formal education necessary to develop a strong workforce. The small enclave of South Africa has among the highest prevalence of HIV/AIDS in the world at 23.6% in 2009. The country was also the fifth worst in the world for tuberculosis incidence, at 633 cases per 100,000 people in 2010. In addition to health concerns, Lesotho also had poor ratings for the quality of its legal and administrative frameworks, ranking 24th lowest, and infrastructure, ranking 19th lowest.

7. Mozambique
> GCI score: 3.17
> GDP per capita: $583 (11th lowest)
> Debt as a pct. of GDP: 33.2% (51st lowest)
> Individuals using Internet: 4.3% (16th lowest)
> Infant mortality rates: 92.2 per 1,000 live births (5th highest)

Health problems are a very serious concern in Mozambique. The country is among the top 10 in the world in terms of the prevalence of HIV, malaria and tuberculosis. More than 9% of children are expected to die before their first birthdays, while the average life expectancy at birth is just under 50 years of age. To compare, in Switzerland, the most competitive country in the world, less than one-half of 1% of children are expected to die before they turn one, and the life expectancy is 82.2 years old. While Mozambique scores very low in many other areas, it fares slightly better in some. The score of 5.0 for foreign direct investment and technology transfer, while not on par with most highly competitive countries, is higher than for more than most countries.

6. Chad
> GCI score: 3.05
> GDP per capita: $892 (23rd lowest)
> Debt as a pct. of GDP: 32.2% (47th lowest)
> Individuals using Internet: 1.9% (7th lowest)
> Infant mortality rates: 98.9 per 1,000 live births (3rd highest)

Few countries have either a lower quality of legal and administrative framework or lower quality of infrastructure than Chad. Among the problems facing the country are the poor protection of intellectual property, unreliable police services and a low quality electrical supply — all noted by the WEF as significant concerns. Worse yet, none of the 144 countries reviewed by the WEF were rated worse for health and basic education than Chad. The nation has one of the world’s highest incidences of malaria, at 37,881 cases per 100,000 people, as well as the world’s 17th-highest prevalence of HIV/AIDS. The country has one of the world’s lowest life expectancies, at 49.2 years, and highest infant mortality rates — 98.9 deaths per 1,000 live births.

5. Yemen
> GCI score: 2.97
> GDP per capita: $1,340 (32nd lowest)
> Debt as a pct. of GDP: 42.5% (66th highest)
> Individuals using Internet: 14.9% (37th lowest)
> Infant mortality rates: 57.3 per 1,000 live births (23rd highest)

Yemen is the lowest-rated country when it comes to innovation, ranking last in company spending on research and development. But it’s hard to drive innovation in a non-technologically-advanced country such as Yemen. Low technological readiness scores were the biggest indicator of a noncompetitive country than all other economic measures and Yemen was no exception, scoring the sixth worst of all 144 countries. A weak educational system is also a problem for the country — it ranks dead last in terms of quality of primary education, quality of math and science education and overall quality of the educational system. The government has not provided the necessary help. Like many uncompetitive countries, Yemen suffers from a dysfunctional public sector. Nowhere is the diversion of public funds to various groups and individuals due to corruption more common. Yemen was also rated to have the third-most wasteful spending government. Respondents to the WEF said the two most problematic factors for doing business are policy instability and corruption.

4. Guinea
> GCI score: 2.90
> GDP per capita: $492 (8th lowest)
> Debt as a pct. of GDP: 72.2% (26th highest)
> Individuals using Internet: 1.3% (5th lowest)
> Infant mortality rates: 81.2 per 1,000 live births (10th highest)

Few countries have a poorer infrastructure than Guinea, where the nation’s roads and electrical supply are rated among the lowest quality in the world. Further, the country has a poor institutional environment, with bribes more common than in all but two other countries and auditing standards for businesses among the world’s weakest. Guinea’s economy also faces significant inflation concerns, as Guinea’s CPI rose 21.5% last year — the second highest increase among all 144 countries studied by the WEF. Aside from economic concerns, health issues were also a problem in the country, which had the highest incidence of malaria in the world, at almost 39,710 cases per 100,000 people.

Also Read: The 10 Most Educated Countries in the World

3. Haiti
> GCI score: 2.90
> GDP per capita: $738 (18th lowest)
> Debt as a pct. of GDP: 10.6% (13th lowest)
> Individuals using Internet: 8.4% (23rd lowest)
> Infant mortality rates: 70.4 per 1,000 live births (14th highest)

As evidenced by the devastation of the Haiti’s earthquake and the struggle to rebuild the country, Haiti lacks the infrastructure necessary to compete in the global economy. The country’s infrastructure is the weakest in the world, according to the WEF. Furthermore, the country’s second-to-last ranking for institutions, is exacerbated by government problems. The country ranks last in public trust in politicians and second to last in transparency in government policymaking. Improvement in both these fields will be necessary for Haiti to allow it to slowly begin competing on the world stage.

2. Sierra Leone
> GCI score: 2.82
> GDP per capita: $366 (5th lowest)
> Debt as a pct. of GDP: 60% (39th highest)
> Individuals using Internet: 0.3% (the lowest)
> Infant mortality rates: 113.7 per 1,000 live births (the highest)

Access to health services and education is a serious concern for the country. The country has the worst infant mortality rate of all countries, with 113.7 deaths per 1,000 live births. For children dying before the age of five, the rate is nearly 1 in 5, according to the World Health Organization. The country is in the bottom 10 in the percentage of the age-appropriate population enrolled in both secondary and tertiary education. According to the most recent data from the World Bank, only 41% of the population aged 15 and older is literate. While the Internet has become an increasingly important factor in the global economy, less than 1% of the country’s population uses it, the lowest rate of all 144 countries.

1. Burundi
> GCI score: 2.78
> GDP per capita: $279 (the lowest)
> Debt as a pct. of GDP: 35.3% (58th highest)
> Individuals using Internet: 1.1% (4th lowest)
> Infant mortality rates: 87.8 per 1,000 live births (7th highest)

The least globally competitive country had problems all around. It was ranked in the bottom five in eight of the 12 major economic measures. The country ranks dead last in technological readiness, a key factor in what separates competitive and noncompetitive countries. Residents blame poor access to financing and corruption as the two most problematic factors for doing business in the country, and based on the WEF’s research it is not hard to see why. The country was ranked last also in the pillar of financial market development, which involves factors such as availability and affordability of financing. Last year, Burundi was ranked the most corrupt in East Africa, according to the nonprofit Transparency International.

Ashley C. Allen, Samuel Weigley and Alexander E. M. Hess

Click here to read The World’s Best Economies