October 20, 2018

ONE ECONOMY TO RULE THEM ALL:

What makes America the world's most competitive economy? (Oliver Cann, 10/16/18, World Economic Forum)
 
The first thing to note is that this is the first year that we have formally adopted a new methodology for measuring competiveness. It's a radical departure: around 66% of the indicators we use this year are new, covering areas such as businesses' openness to disruptive ideas, the level of digital skills among the population or how flat company hierarchies are. We made these changes as we believe that factors such as these will increasingly capture the essence of a nation's competitive strength in the future alongside the more traditional indicators such as good transport infrastructure and well-functioning markets.

The United States, as one of the world's great innovation powerhouses, is very well positioned in this new competitive landscape. It ranks first overall in the world in three of our twelve pillars; business dynamism, labour markets and financial system. It comes second in another two; innovation (behind Germany) and market size (behind China).

This is in contrast to the US' fortunes under the previous methodology; there, the last time it topped the Index was in 2008. An uncertain macroeconomic environment as a result of the financial crisis was only one of the factors holding the country back in the intervening years.

But even under the 'old' methodology, the US has been on an upward path for some years; to the point where last year it had pulled itself back to second in the rankings. This supports the thesis that many of the conditions that contribute towards competitiveness cannot simply be acquired or constructed overnight.

While 2018 marks the first time that we formally adopt our new model for competitiveness, we actually recast our 2017 data to see how countries' performance have varied from year to year. The US also came top of that, again suggesting that there are longer term forces behind its ascent to the summit of competitiveness and that this year's performance was no one-off.

Posted by at October 20, 2018 1:38 PM

  

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