US Returns To Top Of World Competitiveness Rankings

by Leroy Baker, Tax-News.com, New York

20 May 2011

The Swiss business school, IMD, has announced the rankings from its 2011 World Competitiveness Yearbook (WCY), which places the United States and Hong Kong as the most competitive countries.

The WCY places both the US and Hong Kong as slightly ahead of last year’s winner, Singapore. In 2010, the US ranked third, losing the top ranking for the first time in decades.

Also in the rankings, Sweden jumps to 4th place, while Germany shines and gains six places to 10th position due to buoyant exports and a more flexible labor market. Qatar (in 8th place), South Korea and Turkey continue their ascent in competitiveness. The recession highlighted the “resistant” Switzerland in 5th place and the “resilient” Taiwan in 6th. Only four of the ‘big’ economies are in the top 20.

“The world of competitiveness becomes more national. ‘World Competitiveness 2.0’ is thus characterized by a greater self-reliance of countries. It increasingly emphasizes re-industrialization, exports, and a more critical look at delocalization,” said IMD Professor Stéphane Garelli, Director of IMD’s World Competitiveness Center. “This trend is triggered by the rise in commodity and transport prices and higher labor costs in emerging economies. National champions are favored everywhere.”

IMD also released its first Government Efficiency gap results, which compares a country’s government and business efficiency to determine whether countries have “the government they deserve”.

According to the findings, the overall competitiveness of the US was “rescued” by its business efficiency. In more advanced economies (for example, Japan, Belgium, Ireland, US and Germany) the government lags behind business in efficiency. Switzerland is the exception. In emerging economies, Brazil and India are struggling, while Russia, South Africa, Chile, Estonia and Indonesia are ahead. A sound ‘balance’ between government and business efficiency can be found in Hong Kong, Singapore and Australia.

“Government spending has reached new highs since the recession: on average 47% of gross domestic product in the most advanced economies. Twelve European countries are already above the 50% threshold. The 23 biggest spenders are all European governments,” Garelli added.

However, he questioned how long can that can last. “In a new world of ‘state capitalism’, government efficiency will become a key determinant to competitiveness. Alas, the time lag between government reforms and economic imperatives keeps on increasing,” he said.

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