“At the time this [Global Competitiveness] Report is being released, the world economy continues to emerge slowly from the serious economic crisis of the post-World War II period—one that has deeply transformed the global economy and highlighted the increasingly important role that emerging markets and developing economies play in the global economy.” The 2013-2014 Global Competitiveness Report focuses on the short-term patterns for 184 states, ranking them for the current year and extending general policy suggestions for each state to improve their competitiveness in the future.
This year, the report reflects the challenges that economic interdependence, social unrest, and unemployment pose for states. The Report shows that education is a main driver of competitiveness across countries, both supporting innovation and efficiency. In order to more completely discuss the World Economic Forum’s findings, we must consider the measures by which their results are formulated.
Part I
“We define competitiveness as the set of institutions, policies, and factors that determine the level of productivity in a country.” The Report begins by assessing the stage of development a state, giving weight to the unique context of each economy in development, dividing them between factor-driven, efficiency-driven, and innovation driven economies. Then, it assesses twelve “pillars” of competitiveness to determine the rankings.
The first pillar determines the quality of the institutions that legal systems and private corporations set up. Fair institutions, the Report states, have become incredibly important in recovering the global economy. Government corruption and excessive bureaucracy gravely impedes competitiveness.
The second pillar, infrastructure highlights the importance of providing infrastructure to connect regions, through transportation and communication.
The macroeconomic environment, the third pillar, details the harms that international debt can pose for a government's ability to provide infrastructure and services necessary to economic development and sustainability.
The fourth, fifth, and seventh pillars describe factors leading to an efficient workforce, from health and primary education to higher education and job-specific training, and their role. The labor market prospers when the workforce is healthy and educated, and individuals have the capacity to move freely between jobs.
The sixth pillar measures goods market efficiency; protectionist tariffs and laws hindering foreign direct investment are counterproductive to competitiveness, though they may seem to assist a states’ own businesses.
The eighth pillar of financial market development assesses importance of sound risk calculation in investment.
Technological readiness, the ninth pillar, is essential to the competitiveness of firms in a world where technology changes quickly.
The tenth pillar of market size is connected to this concept, wherein the larger market that an economy can draw, largely through technology; the more firms can exploit economies of scale. Similarly, business sophistication, the eleventh pillar, leads to higher efficiency in individual firms’ operations, captured through the country’s business networks.
In today’s world, the most important (and final) pillar is innovation. The Report claims that, “in the long run, standards of living can be largely enhanced by technological innovation. Technological breakthroughs have been at the basis of many of the productivity gains.” The factors that lead to competitiveness are all interconnected, and thus all contribute to the economy in integral ways. However, the final key to competitiveness is innovation. We will see how important this is in the top ten countries, which are all innovation driven economies.
Part II: The Top Ten
Within the top ten countries, there has been little movement over the past few years. Switzerland retains the number one spot, with marks for innovation and labor market efficiency. While it has top-notch scientific research institutions, it has a weak rate of 56.8 percent higher education enrollment in its population. The participation rate of women in the economy also lags behind other top countries.
Singapore comes in second for the third year in a row, with high performance in all pillars of competitiveness. Finland remains in third, with the best institutions in the world, in transparency and functionality. This institutional quality overcomes a weakening macroeconomic environment that many Eurozone economies have experienced.
Germany, the United States, and Hong Kong SAR have all moved up two places, to 4th, 5th, and 7th respectively. Germany’s infrastructure and its innovation has led it to prosper, but it must continue its upward trend of educational quality to really thrive. The United States’ slow improvement in banking sector stability has moved it forward, and its incredibly large domestic economy and top-notch higher educational systems continue to make it competitive. However, skepticism within the business community and doubt about politicians in government have slowed its progress. Further, macroeconomic weakness still plays a large part in decreasing the competitive edge the United States could have. Hong Kong has a strong performance across the board, with the best infrastructure in the world.
Sweden and the United Kingdom fell two places to 6th and 10th, respectively, and the Netherlands lost three places to land in 8th, again mainly due to the weakened macroeconomic environment and financial markets that is so prevalent in the euro-zone countries and United States. Japan, however moves up one place to 9th, even though its overall performance is mostly unchanged from last year.
Part III: Regional Variation
For North America, Europe, and Eurasia, the actions taken to avoid eurozone collapse and improve the macroeconomic environment seem to be slowly moving forward. Despite these constraints, these countries still feature in the top economies of the world. Some variations are notable, such as Greece in 91st places, though an improvement over previous years, still raises concerns about the macroeconomy of the eurozone.
Asia and the Pacific are also moving forward at a considerable rate, now with three countries in the top ten. Three new Asian countries (Bhutan, Lao, and Myanmar) were added to the Report this year, covering all ASEAN countries. Nearly all countries in this region have moved up consistently since 2006, showing considerable growth.
Of the BRICS, China leads, followed by South Africa, Brazil, India, and then Russia. The Report shows that this is due to China’s macroeconomic environment and improvements in institutional frameworks, while corruption and low ethical standards there still exist.
For Latin America and the Caribbean, its growth has been consistent over previous years, but slowed to 3 percent in 2012, and is projected to continue to only grow around 3 percent from 2013 to 2014. Due to political reforms and other infrastructure improvements, in this region, Mexico and Ecuador have made sincere strides of improvement. Meanwhile, Venezuela and Argentina have fallen deep into a macroeconomic crisis, dropping nearly ten places downward apiece. Sub-Saharan Africa continues to grow at a rate of 5 percent, outpacing the Latin American region. Only emerging Asian countries register higher overall growth.
In the Middle East and North Africa, economic turmoil has paralleled the social and political unrest that currently defines the region, with outliers of energy-rich countries like Qatar (coming in 13th place overall). Egypt, however, drops more than 10 places due to its still uneasy transition of power.
Overall, the global economy is still fragile, and all can improve factors of competitiveness. The top 10 countries display strong institutions and innovation, while developing countries have their own unique struggles and triumphs. The relationship between developed and emerging states is changing, as are their internal environments, which may be changing the direction of global competitiveness.
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Global Competitiveness Report: World Economic Forum
November 4, 2013
“At the time this [Global Competitiveness] Report is being released, the world economy continues to emerge slowly from the serious economic crisis of the post-World War II period—one that has deeply transformed the global economy and highlighted the increasingly important role that emerging markets and developing economies play in the global economy.” The 2013-2014 Global Competitiveness Report focuses on the short-term patterns for 184 states, ranking them for the current year and extending general policy suggestions for each state to improve their competitiveness in the future.
This year, the report reflects the challenges that economic interdependence, social unrest, and unemployment pose for states. The Report shows that education is a main driver of competitiveness across countries, both supporting innovation and efficiency. In order to more completely discuss the World Economic Forum’s findings, we must consider the measures by which their results are formulated.
Part I
“We define competitiveness as the set of institutions, policies, and factors that determine the level of productivity in a country.” The Report begins by assessing the stage of development a state, giving weight to the unique context of each economy in development, dividing them between factor-driven, efficiency-driven, and innovation driven economies. Then, it assesses twelve “pillars” of competitiveness to determine the rankings.
The first pillar determines the quality of the institutions that legal systems and private corporations set up. Fair institutions, the Report states, have become incredibly important in recovering the global economy. Government corruption and excessive bureaucracy gravely impedes competitiveness.
The second pillar, infrastructure highlights the importance of providing infrastructure to connect regions, through transportation and communication.
The macroeconomic environment, the third pillar, details the harms that international debt can pose for a government's ability to provide infrastructure and services necessary to economic development and sustainability.
The fourth, fifth, and seventh pillars describe factors leading to an efficient workforce, from health and primary education to higher education and job-specific training, and their role. The labor market prospers when the workforce is healthy and educated, and individuals have the capacity to move freely between jobs.
The sixth pillar measures goods market efficiency; protectionist tariffs and laws hindering foreign direct investment are counterproductive to competitiveness, though they may seem to assist a states’ own businesses.
The eighth pillar of financial market development assesses importance of sound risk calculation in investment.
Technological readiness, the ninth pillar, is essential to the competitiveness of firms in a world where technology changes quickly.
The tenth pillar of market size is connected to this concept, wherein the larger market that an economy can draw, largely through technology; the more firms can exploit economies of scale. Similarly, business sophistication, the eleventh pillar, leads to higher efficiency in individual firms’ operations, captured through the country’s business networks.
In today’s world, the most important (and final) pillar is innovation. The Report claims that, “in the long run, standards of living can be largely enhanced by technological innovation. Technological breakthroughs have been at the basis of many of the productivity gains.” The factors that lead to competitiveness are all interconnected, and thus all contribute to the economy in integral ways. However, the final key to competitiveness is innovation. We will see how important this is in the top ten countries, which are all innovation driven economies.
Part II: The Top Ten
Within the top ten countries, there has been little movement over the past few years. Switzerland retains the number one spot, with marks for innovation and labor market efficiency. While it has top-notch scientific research institutions, it has a weak rate of 56.8 percent higher education enrollment in its population. The participation rate of women in the economy also lags behind other top countries.
Singapore comes in second for the third year in a row, with high performance in all pillars of competitiveness. Finland remains in third, with the best institutions in the world, in transparency and functionality. This institutional quality overcomes a weakening macroeconomic environment that many Eurozone economies have experienced.
Germany, the United States, and Hong Kong SAR have all moved up two places, to 4th, 5th, and 7th respectively. Germany’s infrastructure and its innovation has led it to prosper, but it must continue its upward trend of educational quality to really thrive. The United States’ slow improvement in banking sector stability has moved it forward, and its incredibly large domestic economy and top-notch higher educational systems continue to make it competitive. However, skepticism within the business community and doubt about politicians in government have slowed its progress. Further, macroeconomic weakness still plays a large part in decreasing the competitive edge the United States could have. Hong Kong has a strong performance across the board, with the best infrastructure in the world.
Sweden and the United Kingdom fell two places to 6th and 10th, respectively, and the Netherlands lost three places to land in 8th, again mainly due to the weakened macroeconomic environment and financial markets that is so prevalent in the euro-zone countries and United States. Japan, however moves up one place to 9th, even though its overall performance is mostly unchanged from last year.
Part III: Regional Variation
For North America, Europe, and Eurasia, the actions taken to avoid eurozone collapse and improve the macroeconomic environment seem to be slowly moving forward. Despite these constraints, these countries still feature in the top economies of the world. Some variations are notable, such as Greece in 91st places, though an improvement over previous years, still raises concerns about the macroeconomy of the eurozone.
Asia and the Pacific are also moving forward at a considerable rate, now with three countries in the top ten. Three new Asian countries (Bhutan, Lao, and Myanmar) were added to the Report this year, covering all ASEAN countries. Nearly all countries in this region have moved up consistently since 2006, showing considerable growth.
Of the BRICS, China leads, followed by South Africa, Brazil, India, and then Russia. The Report shows that this is due to China’s macroeconomic environment and improvements in institutional frameworks, while corruption and low ethical standards there still exist.
For Latin America and the Caribbean, its growth has been consistent over previous years, but slowed to 3 percent in 2012, and is projected to continue to only grow around 3 percent from 2013 to 2014. Due to political reforms and other infrastructure improvements, in this region, Mexico and Ecuador have made sincere strides of improvement. Meanwhile, Venezuela and Argentina have fallen deep into a macroeconomic crisis, dropping nearly ten places downward apiece. Sub-Saharan Africa continues to grow at a rate of 5 percent, outpacing the Latin American region. Only emerging Asian countries register higher overall growth.
In the Middle East and North Africa, economic turmoil has paralleled the social and political unrest that currently defines the region, with outliers of energy-rich countries like Qatar (coming in 13th place overall). Egypt, however, drops more than 10 places due to its still uneasy transition of power.
Overall, the global economy is still fragile, and all can improve factors of competitiveness. The top 10 countries display strong institutions and innovation, while developing countries have their own unique struggles and triumphs. The relationship between developed and emerging states is changing, as are their internal environments, which may be changing the direction of global competitiveness.
