Sep. 11, 2012 at 7:41 AM ET
For most of the 20th century, the United States has been considered the world's economic superpower. And up until four years ago, the World Economic Forum would agree. In 2008, it ranked the U.S. as the most globally competitive economy in the world. This year, when the group published its annual Global Competitiveness Report, the U.S. ranked seventh.
Like other competitive economies, the U.S. performs well in almost all the economic measures that the report considers. However, in recent years the country’s political conflicts and growing debt have become a problem. Public confidence in elected officials has dropped following the debt ceiling crisis in 2011 and the current struggle over the “fiscal cliff,” Kevin Steinberg, chief operating officer of the WEF, told 24/7 Wall St. in an interview.
According to the WEF, competitiveness reflects the level of productivity of a country, based on its institutions, policies and economic factors. In its study, the WEF groups the 144 countries it surveys into one of three economic categories. “Factor-driven” economies are the least developed and rely on low-skilled labor and natural resources. More developed countries are considered “efficiency-driven” economies because they turn to improving output. The most developed economies, which focus on improving technology and new product and idea development, are considered “innovative.”
To create the Global Competitiveness Index (GCI) score for each country, the WEF ranked more than 100 economic indicators divided into 12 broad categories, referred to as pillars, that quantify the extent to which a country is competitive. The economic indicators and pillars were then scored 1 to 7. To rank the countries, some economic measures were weighted more heavily than others, depending on how the economy was categorized.
In the case of Burundi, which was ranked the least competitive globally, 65 percent of the country’s competitiveness ranking was based on economic measures that reflect what the WEF calls “basic requirements,” such as a country’s infrastructure and institutions. Only 5 percent of the ranking was determined by “innovation and sophistication” factors, which are used to rank the most developed countries.
In the case of Switzerland, the most competitive country, basic requirements accounted for only 20 percent of the ranking, while 30 percent was based on innovation and sophistication factors, like the availability of scientists and engineers and local supplier quality and quantity.
The most competitive countries generally had high scores among most economic measures, ranking among the best in technological readiness, business sophistication, and higher education. In the case of innovation, nine of the 10 countries with the highest ranks were among the most competitive economies overall. Switzerland received the highest ranking on company spending on research and development along with the highest mark for university-industry collaboration on research and development.
Conversely, the least competitive countries generally fared poorly across the board. In addition to innovation and efficiency, the worst countries had among the lowest scores in basic requirements, like institutions, infrastructure, health and primary education. At least five of the least competitive countries all ranked in the bottom 10 for infrastructure and health and primary education. The least competitive country, Burundi, had the seventh highest infant mortality rate. The second least competitive country, Sierra Leone, had the highest rate.
However, there were exceptions. Many of the competitive countries had less than stellar scores on macroeconomic environment, an economic measure reflecting the broader economy, because of high debt levels. According to Steinberg, public debt “is definitely an obstacle for many of the highly developed and competitive countries.” In addition to the U.S., he pointed to Japan, a highly developed economy that has been driven into debt due to high entitlement spending.
Based on WEF’s Global Competitiveness Report, which ranks 144 countries that make up almost 99 percent of the world’s GDP, 24/7 Wall St. reviewed the economies with the highest and lowest Global Competitiveness Index scores. Data from the World Bank and the World Health Organization were used to provide additional information on some economies.
These are the most and least competitive global economies.
Switzerland is the most globally competitive country, receiving the top overall score from the WEF. Switzerland received a score of 6.6 out of 7 in the quality of its infrastructure, the highest of all 144 countries. Switzerland also scored at the top in cooperation in labor-employer relations and the availability of financial services. The country scored very well in higher education, receiving the highest score of all countries in quality of the educational system, availability of research and training services, and extent of staff training. However, the WEF points out that the university’s enrollment rate, while improving, still lags behind other “high-innovation countries.”
If Americans have had it with their elected officials, they may want to consider moving to Singapore -- it has the highest score of all 144 countries in terms of the quality of its legal and administrative frameworks. Notably, the country has the best score of all countries in terms of public trust in politicians, minimizing wastefulness in government spending and transparency in government policymaking. Meanwhile, the U.S. scores 54th in terms of public trust, 76th in wastefulness and 56th in transparency. Singapore also ranks at the top for goods market efficiency, and second in infrastructure, higher education and training, labor market efficiency, and financial market development. The country’s 5.2 percent rate of inflation is dampening its competitiveness as more residents cite increasing costs as the biggest hurdle to doing business.
Contributing to its high competitive standing, Finland is the second most innovative economy in the world, only behind Switzerland. Notably, the country scores the highest in terms of the availability of scientists and engineers. Finland’s educational system is also impressive, as the WEF asserts the country has the highest quality of primary education, and the second highest quality math and science programs in higher education. While Finland scores relatively well across most economic measures, the country’s macroeconomic environment has weakened slightly due to moderately high inflation -- although the problem is not nearly as serious as it is in other countries in Europe.
The least globally competitive country had problems all around. It was ranked in the bottom five in eight of the 12 major economic measures. The country ranks dead last in technological readiness, a key factor in what separates competitive and noncompetitive countries. Residents blame poor access to financing and corruption as the two most problematic factors for doing business in the country, and based on the WEF’s research it is not hard to see why. The country was ranked last also in the pillar of financial market development, which involves factors such as availability and affordability of financing. Last year, Burundi was ranked the most corrupt in East Africa, according to the nonprofit Transparency International.
2. Sierra Leone
Access to health services and education is a serious concern for the country. The country has the worst infant mortality rate of all countries, with 113.7 deaths per 1,000 live births. For children dying before the age of five, the rate is nearly 1 in 5, according to the World Health Organization. The country is in the bottom 10 in the percentage of the age-appropriate population enrolled in both secondary and tertiary education. According to the most recent data from the World Bank, only 41 percent of the population aged 15 and older is literate. While the Internet has become an increasingly important factor in the global economy, less than 1 percent of the country’s population uses it, the lowest rate of all 144 countries.
As evidenced by the devastation of the Haiti’s earthquake and the struggle to rebuild the country, Haiti lacks the infrastructure necessary to compete in the global economy. The country’s infrastructure is the weakest in the world, according to the WEF. Furthermore, the country’s second-to-last ranking for institutions, is exacerbated by government problems. The country ranks last in public trust in politicians and second to last in transparency in government policymaking. Improvement in both these fields will be necessary for Haiti to allow it to slowly begin competing on the world stage.