WEF Report Gives Competitiveness Standings

The World Economic Forum, the big shots who meet in Davos every year, has produced its annual Global Competitiveness Index. The US is no longer top of the heap, according to the WEF, ranking no better than sixth. Currently, Switzerland is alleged to be the most competitive economy followed by Finland, Sweden, Denmark and Singapore. While the ultra-patriots in the US may be upset, the GCI illustrates a few points worth considering.

First, despite efforts to be objective and mathematically rigorous, indices like this are, as any London cab-driver would say, “a load of bollocks.” The GCI relies on nine “pillars” to assess each economy: institutions, infrastructure, macroeconomy, health and primary education, higher education and training, market efficiency, technological readiness, business sophistication and innovation. Coming up with a fair, numerical assessment of any of these factors in a single economy is well nigh impossible. Attempting to do it for all nine in ways that apply to all 125 countries on the list is laughable.

Given a few grains of salt, though, the index does show a few other things. The top five are all small countries, small economies, that have to compete globally. The US, with the dollar as the world reserve currency, is the 800-pound gorilla. Where it is less competitive, it can rely on economies of scale to do things Singapore, as fantastic a story as the city-state is, simply cannot. Rounding out the top 10 are: Japan, Germany, the Netherlands and the UK. This suggests being a big economy helps; or as Mao put it, quantity has a quality all its own.

At the other end of the table, there are a few things to learn as well. Angola is at the bottom, and in ascending order are: Burundi, Chad, Timor-Leste (formerly Indonesian occupied East Timor), Mozambique, Ethiopia, Zimbabwe, Mali, Malawi, Burkino Faso and Zambia. Except for Timor-Leste, they are all African nations. They either have governance problems (or have had in recent history) or simply too many people with too few resources to support them. Being poor doesn't insure competitiveness.

The good news for America is in the Business Competitiveness Index, “the Business Competitiveness Index (BCI) ranks countries by their microeconomic competitiveness, identifies competitive strengths and weaknesses in terms of countries’ business environment conditions and company operations and strategies, and provides an assessment of the sustainability of countries’ current levels of prosperity.” America remains number one on this index, with Germany and Finland following. The report’s authors say, “the BCI explains more than 80 percent of the variation of GDP per capita across the wide sample of countries covered, a confirmation of the critical importance of microeconomic factors for prosperity.” All the same, it really is a load of bollocks.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

Home