The World Economic Forum has produced a new study on the competitiveness of each of the worlds many nations. This report is available as a nearly 500 page pdf file, and shows some surprising elements as they downgraded the US from the most competitive economy in the world to second behind Switzerland.
And competitiveness is important as the report writer notes in the first pages as he writes:
Competitive economies are those that have in place factors driving the productivity enhancements on which their present and future prosperity is built.
And this has been the great advantage the US has maintained in the economic world and part of why the US economy is bigger than the combined economies of Japan and China (the nations with the #2 and #3 economies by annual GDP). Actually you could add in Germany (#4) and the UK and only barely beat the US. But the report indicates that the economists of the World Economic Forum are worried about the situation in the US.
Their analysis is simple, but elegant and they note:
We define competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the sustainable level of prosperity that can be earned by an economy.
It’s a good point. And plays into the analysis.
Its past the intro and the writers discussion of the twelve factors they base their results on that one can see the comparisons. The Us scores extremely well in efficiencies and innovations, and is rated #1 for those two economic elements which are composed of eight of the twelve “pillars’ that the writers identified, but the US only scores #28 in having the basic foundations of a good economy, and in the charts just after the prologue, the writers reveal that they rate the US #93 for economic stability. A sign that the economists surveyed do not believe that the economic environment in the US is conducive to business growth.
This is detailed later as the writers talk about the top economies. The write up on the US in the prologue covers several paragraphs and includes the following:
Although the country is very competitive overall, there are some weaknesses in particular areas that have deepened since our last assessment. Some aspects of the institutional environment could be strengthened, with particular concerns on the part of the business community about the government’s ability to maintain arms-length relationships with the private sector (48th), and in the perception that the government spends its resources wastefully (68th).There is also increasing concern related to the functioning of private nstitutions, with a measurable weakening of the assessment of auditing and reporting standards (down from 20th last year to 39th this year), perhaps not unexpected in the context of recent turmoil and scandals within the financial sector in particular. More generally, given that the financial crisis originated in large part in the United States, it is hardly surprising that there has been a weakening of the assessment of its financial market sophistication, dropping from 9th last year to 20th overall this year in that pillar.
The country’s greatest overall weakness continues to be related to its macroeconomic stability, where it ranks 93rd, down from 66th last year.
The write up spans nearly forty pages and gives a brief impression of every nation included in the report as well as some comments as to why a nation might have been upgraded or downgraded. However, the vast majority of the report is the graphs and charts formed from the data gathered, as well as pages detailing how to read the supplied charts. While it’s a lot of information, and will seem daunting, its worth reviewing for anyone interested in how economists and the business world views the US economy. A good example is the two-page breakdown of the US data available on pages 320 and 321 of the report. When asked for the biggest problem impeding US competitiveness 19 percent of the responders came up with access to funding, but the next 3 most common answers combine for nearly 40 percent of responses and were tax rates, tax regulation and government inefficiency, indicating that there is a huge mistrust of the government among businessmen. And this information shows up against when you look at the breakdown by question. The US scored below the midpoint indicating a neutral position on many of the questions asking if the governments actions where helpful to business. (The scoring is on a scale of 1 to 7, with 1 always being the more negative answer.)
This is an extensive review of the business environment around the world. And it follows much of the information I’ve presented previously. There is a growing worry in the business world about the direction of the US economies ability to make the quick changes necessary to stay ahead of markets and continue to drive the world economy. I recommend reviewing this for anyone interested in how macro-economists try to put together a picture of a national economy and its direction.
By Mark Vargus – examiner.com
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