U.S. Competitiveness Showing Weakness

The United States remains the most economically competitive nation in the world, but signs of weakness loom on the horizon, according to the World Economic Forum. Following the United States at the top of the Forum's "Global Competitiveness Report 2007-2008" are Switzerland, Denmark, Sweden, and Germany.

"The United States confirms its position as the most competitive economy in the world," notes the report's co-editor, Columbia University economics professor Xavier Sala-i-Martin. "The efficiency of the country's markets, the sophistication of its business community, the impressive capacity for technological innovation that exists within a first-rate system of universities and research centers all contribute to making the United States a highly competitive economy."

The recent problems in the U.S. housing market, especially with the flood of defaults on so-called subprime mortgages, raised warning flags among the world's analysts on the overall health of the U.S. economy, as well as its impacts globally. The U.S. subprime mortgage crisis was followed by a global credit crunch, notes Sala-i-Martin.

In developing its most recent Global Competitive Index, first introduced in 2004, the World Economic Forum used both publicly available data and its own Executive Opinion Survey, polling 11,000 business leaders in 131 countries. The Index rankings are based on 12 key indicators of competitiveness: Institutions, Infrastructure, Macroeconomic Stability, Health and Primary Education, Higher Education and Training, Goods Market Efficiency, Labor Market Efficiency, Financial Market Sophistication, Technological Readiness, Market Size, Business Sophistication, and Innovation.

A second part of the report focuses on business competitiveness, since not all countries scoring high on economic competitiveness can translate that into business dominance, according to the report's co-director, Harvard Business School professor Michael E. Porter. For instance, the high wages found in Switzerland, Norway, and Spain are "much above the level supported by their competitiveness," he notes.

"Many countries have achieved progress by opening up to the world economy, stabilizing macroeconomic policies, and removing internal barriers to competition," says Porter. "Our findings reveal the need to build underlying microeconomic competitiveness to translate these gains into sustained prosperity. If improvements in the business environment and company sophistication fail to materialize, . . . nations expose themselves to declining competitiveness and are vulnerable to economic and social risks."

Source: World Economic Forum, 91-93 route de la Capite, CH - 1223 Cologny/Geneva, Switzerland. Web site

Top 10, Global Competitive Index 2007

Based on their high scores on macroeconomic stability, market efficiency, innovation, and other factors, the world's most competitive economies are:

1. United States

2. Switzerland

3. Denmark

4. Sweden

5. Germany

6. Finland

7. Singapore

8. Japan

9. United Kingdom