Special Report

The Best and Worst Economies in the World

5. Netherlands
> 2014 GDP:
$798.59 billion
> Life expectancy: 81.1 years
> Gov’t debt as % of GDP: 68.3%
> Patent applications per 1 million people: 208.9

The Netherlands moved up from being the eighth most competitive nation last year to rank as the fifth most competitive nation in the world this year. Though the country’s GDP is still below 2008 levels, the competitiveness of the Dutch economy was bolstered by strong performance and improvements in education and infrastructure — each ranking as the third best in the world. The Netherlands, which borders the North Sea, has the highest score in quality port infrastructure in the world.

Like all of the most competitive countries, the Netherlands is far from perfect. According to the WEF, in the most business friendly countries, wage levels are more often determined by individual companies. In the Netherlands, however, wages are often set by a centralized bargaining process, which can limit the flexibility of corporations in determining wages of their workers. The Netherlands ranks especially poorly for flexibility in wage determination, and restrictive labor regulations present the biggest obstacle for doing business in the Netherlands and is said to have hindered progress.

4. Germany
> 2014 GDP:
$3.72 trillion
> Life expectancy: 81.0 years
> Gov’t debt as % of GDP: 73.1%
> Patent applications per 1 million people: 225.2

Germany is the fourth most competitive country in the world. Though the country’s score remained unchanged from the previous year, Germany climbed up one spot on the WEF’s annual report. Like most competitive countries, Germany borrows large sums of money to invest in institutions and infrastructure. Though the current levels of debt mark a reduction from the previous year, government debt in the country stands at 73% of GDP.

Business is Germany’s greatest asset. The country ranks third in the world for its sophisticated business practices, and for using the latest technologies in production processes. As in many of the most competitive nations, government presented the biggest hindrance to German competitiveness. When asked to name the biggest impediments to doing business, Germans were most likely to cite inefficient government bureaucracy and complex tax regulations.

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3. United States
> 2014 GDP:
$17.42 trillion
> Life expectancy: 78.8 years
> Gov’t debt as % of GDP: 104.8%
> Patent applications per 1 million people: 160.3

The United States, one of 38 innovation-driven economies worldwide, remains in third place this year. The United States has the second largest market size of any country, just behind China. The U.S. labor market is also among the most flexible in the world, which means it can withstand wage fluctuations and workers can easily move from one economic activity to another. The United States also performs well in measures of innovation and business sophistication. American industries have the second best collaboration with universities in the world. While the American university system is part of one of the most innovative higher education institutions, the country trails other developed nations in other measures of education. The U.S. primary school system, which encompasses kindergarten through middle school, is rated worse than 28 other nations.

2. Singapore
> 2014 GDP:
$452.69 billion
> Life expectancy: 82.3 years
> Gov’t debt as % of GDP: 98.8%
> Patent applications per 1 million people: 127.0

The Republic of Singapore is a small city state off the southern coast of Malaysia, separated from Indonesia to the south by the Singapore Strait. Just 255 square miles in area and home to just 5.3 million people, the very densely populated Singapore also has one of the most advanced economies in the world. Singapore trails only one other country in competitiveness for the fifth consecutive year. The country’s higher education and training system — an essential component of a healthy labor market and competitiveness more generally — overtook Finland this year as the best in the world. When asked to identify the most problematic factors for doing business in Singapore, country residents identify restrictive labor regulation as the greatest obstacle.

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1. Switzerland
> 2014 GDP:
$472.83 billion
> Life expectancy: 82.7 years
> Gov’t debt as % of GDP: 46.1%
> Patent applications per 1 million people: 320.8

For the seventh consecutive year, Switzerland was rated the world’s most competitive economy.
Switzerland — like Singapore and the United States that round up the top three — performs very well in most competitiveness measures. The country’s infrastructure is rated better than that of any other country. As in Northern Europe and the United States, however, the quality of Switzerland’s infrastructure declined over the past year.

The country leads the world in several other measures as well, particularly innovation, which is assessed based on the presence of major research institutions and patent applications, among other factors. Switzerland trails only Britain and the United States in the average rating of top tier universities, and there are 320.8 patent applications per 1 million Swiss residents, far higher than in the vast majority of countries.

Click here to see the least competitive economies in the world.

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