Sep 14 2009

Step aside America, Switzerland is the new global leader in competitiveness

World Economic Forum – Latest Press Releases

The World Economic Forum, a group of researchers, leaders, educators, entrepreneurs and others with a vested interest in global economic performance, assembles an annual list of the world’s nations ranked according to “competitiveness”. This year, for the first time ever, the United States does not top this list, instead, Switzerland has been promoted to the status of global competitiveness leader.

What does this ranking really mean?

Competitive economies are those that have in place factors driving the productivity enhancements on which their present and future prosperity is built. A competitiveness-supporting economic environment can help national economies to weather business cycle downturns and ensure that the mechanisms enabling solid economic performance going into the future are in place.”

Competitivness means a nation posesses an evnvironment that leads to improvements in the productivity of its resources, most importantly labor. America, with record budget deficits, in the trillions of dollars, faces a future of tight budgets financed by government borrowing, which eventually means higher taxes and less ability for government to spend on public goods like education and health.

America’s demotion in the rankings is attributable to falling expectations about the country’s future growth potential rather than concerns about its current economic slowdown. Switzerland has also been in a recession for the last year, although due to targeted fiscal policies unemployment has remained low, near its level before the recession begain (around 4%).

The index used to rank countries is based on several factors:

The GCI is based on 12 pillars of competitiveness, providing a comprehensive picture of the competitiveness landscape in countries around the world at all stages of development. The pillars include Institutions, Infrastructure, Macroeconomic Stability, Health and Primary Education, Higher Education and Training, Goods Market Efficiency, Labour Market Efficiency, Financial Market Sophistication, Technological Readiness, Market Size, Business Sophistication, and Innovation.

Discussion Questions:

  1. How can a nation’s labor productivity be improved by making policies aimed at improving three of the factors measured by the GCI identified above?
  2. How does America’s gigantic budget deficit ($1.8 trillion) threaten its future ability to provide its citizens with the “pillars” identified above?
  3. Does economic integration with the global economy improve or limit a country’s ability to achieve economic competitiveness? Explain your answer.

About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

One response so far

One Response to “Step aside America, Switzerland is the new global leader in competitiveness”

  1. Jordan Reidon 15 Sep 2009 at 3:47 am

    (This is a response to question 3)

    Although It is good for countries to trade because it makes people better off, I thin that national competitivness is one area where international tradeing has perhaps more cost that benifit. I say this not only because trade takes away more local competition among businesses in some profesions, but because of the mentality within the nation itself. If I know that I have to provide goods and services for my country, or we wil all suffer, I have a stronger motivation to do so. Whereas if I know that my country imports most of the goods and services within my profesion, I am less inclinded to put in the extra work. This theory can be confirmed when looking at the "score board", Switzerland, who is not part of the EU, does better than the countries within international collectives like the EU, so does Singapore, who is also rather self sufficient. If a country is big enough to be a big and competitive force in a big enough market, then it is also possible to be competative.