US stays competitive; EU loses ground
Category: Economy & Business...
Posted Wednesday, September 28, 2005 at 04:23 PM [GMT-6]

The World Economic Forum (WEF) has released its Global Competitiveness Report, and Finland retains the top spot, followed by the US. Sweden, Denmark and Taiwan round out the top five, which was identical to last year's ranking (with the exception that Denmark and Taiwan swapped places).

The nations of western Europe continue to lose ground in these annual rankings. Here's what the Wall Street Journal has to say about this situation:

Western Europe's slip in competitiveness from the beginning of the decade – though from fairly high levels -- reflects the region's economic development of late. Gross domestic product in the 12-nation euro zone that forms the bulk of the region's economy is projected to have expanded on average at just 1.3% during the first five years of this decade, compared with more than 2% during the previous decade. The euro zone is forecast to grow just 1.2% this year, behind 3.5% growth in the U.S. and 4.3% growth globally, according to recent forecasts by the International Monetary Fund. The region's budget deficit has risen to 2.7% of GDP in 2004 from 1.9% of GDP in 2001.

Italy trails powerhouse economies like Tunisia, and is barely ahead of Botswana. France and Spain rank 30 and 29, respectively, behind Chile (23), Estonia (20) and New Zealand (16). Interestingly, China and India rank only 49 and 50, with China dropping three spots since last year; India is up five spots. Full rankings including a comparison with last year's survey results are found here.

Here's how the study is described in the WEF's press release:

The rankings are drawn from a combination of hard data, publicly available for each of the economies studied, and the results of the Executive Opinion Survey, a comprehensive assessment conducted by the World Economic Forum, together with its network of partner institutes (leading research institutes and business organizations) in the countries covered by the Report. This year nearly 11,000 business leaders were polled in a record 117 economies worldwide. The survey questionnaire is designed to capture a broad range of factors affecting an economy’s business environment that are key determinants of sustained economic growth. Particular attention is placed on elements of the macroeconomic environment, the quality of public institutions which underpin the development process, and the level of technological readiness and innovation.

Here's what the study's Executive Summary has to say about the US performance:

The United States is ranked second, its strong performance attributable to its continuing technological supremacy, and a pipeline of innovation second to none in the world.The US has companies that are aggressive in adopting new technologies, and spend heavily on research and development. However, the country’s technological prowess is offset by its significantly weaker performance in other areas measured by the index, in particular aspects of the macroeconomic environment.This is not surprising in the context of intensifying international concern regarding macroeconomic imbalances in the country, especially in the area of the public finances.

Macroeconomic imbalances. That's econospeak for huge budget and trade deficits.

Very interesting reading. Given all the other problems in the world, it's also difficult to engage in any schadenfreude regarding the EU's continuing decline. Difficult, but not impossible. ;-)

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If somehow cellphones become passe, then Finland's economy would fall to about 233 I reckon.

Posted by: Wallace-Midland, Texas at September 28, 2005 10:16 PM

You say that jokingly, but the report actually mentions Nokia as one of the key components of Finland's success, and one of the country's risks as being Nokia's ability to stay competitive with the Asian manufacturers.

We used to worry about Midland being too dependent on a few major oil companies. Wonder what it would be like for your whole dang country to be dependent on one company?

Posted by: Eric at September 28, 2005 10:19 PM

"Wonder what it would be like for your whole dang country to be dependent on one company?"

A very troubling thought considering the clout that company would be able to exercise politically.

Imagine Bill Gates being able to dictate US policy.

This is one of the reasons I'm secretly pleased that Apple is alive and well, that Macs continue to sell briskly, that Linux continues to gain ground.

Posted by: Mr. Freen at September 29, 2005 01:06 AM

I don't think the US has a corporation whose dominance -- or even potential dominance -- comes anywhere close to that of Nokia in Finland.

If I had to pick one whose demise would shake our economy to its foundations, it wouldn't be Microsoft...it would more likely be Wal-Mart.

Posted by: Eric at September 29, 2005 08:28 AM

The amazing thing to me is that politicians and others continue to hold up Western Europe as a model for us to follow. There are few Americans that would be willing to trade our standard of lving for that of Europe's, no matter much people try to romanticize the virtues of their cradle to grave nanny-state policies.

Posted by: John Peter Smith at September 29, 2005 09:20 AM

Although it seems that the "nanny-state" concept doesn't automatically doom an economy to irrelevance. The study seems to indicate that the Scandinavian countries have figured out a way to keep tax rates AND competitive ability high. However, I suspect it's due more to an empowering of their workforce than a coddling. Whether that model is sustainable in the long run remains to be seen.

Posted by: Eric at September 29, 2005 09:29 AM
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