U.S. Decline In Global Competitiveness

http://economix.blogs.nytimes.com/2012/09/06/a-look-behind-the-u-s-decline-in-global-competitiveness/?ref=business

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"Concentration is the secret of strength in politics, in war, in trade, in short in all management of human affairs." (Ralph Waldo Emerson)
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The World Economic Forum (WEF) which sponsors the annual week-long cocktail party in Davos, Switzerland - a cocktail party which has come to be known simply as "Davos," has published its annual study of country "competitiveness." So, if you're one of the 144 countries evaluated, you can plug into the study and actually click on a worldwide map to see where you rank.

Actually, I wouldn't want to try to figure out how to rank the various countries and their economies. But Catherine Rampell has been kind enough to sort thru the study and supply us with the study "click-on" so we can understand with her what's going on.

It would appear that the U.S. has "fallen" in the rankings to 7th in the world. According to Rampell, this is because of "...worsening criticism of the American government." The WEF defines competitiveness as "the set of institutions, policies, and factors that determine the level of productivity of a country" and thereby lead to sustainable growth. Again, according Rampell, "The report graded economies based on an index of categories like over-regulation, property rights, tax burdens, transparency and trustworthiness of both the government and the financial sector, infrastructure, inflation conditions, the health and education attainment of the population, access to technology, and research and development."

(Further) "The main reasons the United States has been slipping in the rankings appear related to distrust of and lack of confidence in government leadership."

Rampell goes on to discuss where the U.S. ranks in various categories but I found myself most impressed, or rather "unimpressed," with the the U.S. ranking of 111th in "macroeconomic stability." It would seem that we have learned nothing from what we teach or "preach" at the great institutions where the best economists reside.

So, who's ahead of the U.S.? Well, "Switzerland" comes in 1st! Should we be "shocked?" This report is, after all, produced by an organization headquartered in "Switzerland." So, who else is ahead of "us?" Well, Singapore is #2. My perspective on them is that they are a highly controlled "city-state" where they've created an economic miracle that can only be admired. #3 thru #5 are Finland, Sweden and the Netherlands. Hard to argue there. And, last ahead of us: Germany at #6. Again, hard to argue.

The problem with all of this is "size." How many oceans do their (the six countries ahead of us) navies control? When you have a big economy and a worldwide "footprint," it's difficult to compare. Incidentally, the answer to the "navies" question is that the U.S. controls them all. That's expensive.

For those economies that play ball in our (the U.S.) league, Japan (which used to be the second largest economy in the world) ranks 10th. And, China, which now is the second largest economy in the world, ranks 29th.

How about if we "weight" everything by size of economy? I'm guessing the U.S. would still have no idea what it was doing "macro economically" but so what? I'm guessing China doesn't either - China has its own rules. And, sadly, Japan is descending rapidly for demographic and deflationary reasons. So, there you go.

I applaud what the WEF is doing each year for its sophistication and the care with which it is put together. But, it's probably a better "scorecard" for countries that are trying to improve and grow. Russia, for example, should probably pay attention. They've just been accepted into the World Trade Organization (WTO). Russia ranks 67th in the WEF overall competitiveness index. I'm surprised they're that high. Let's see if membership in the WTO helps Russia be more "competitive."