Geneva: The United States topped world competitiveness rankings for the 15th straight year, but its economy is showing the same signs of weakness that sank booming Japan in the early 1990s, according to an annual survey released today.
Asian tigers Singapore and Hong Kong ranked just behind the U.S., as they did last year. Switzerland jumped two places to fourth, while Luxembourg rounded out the top five most competitive national economies, said the Lausanne, Switzerland-based, IMD business school, publisher of the World Competitiveness Yearbook.
U.S may slide from its No. 1 position next year
“The big question is whether the United States will be No. 1 after this year,” project director Stephane Garelli said, adding that the report was based on 2007 data that don’t not fully reflect all of the problems in U.S. financial markets. “Everyone is catching up very quickly, but so far the U.S. economy is showing a lot of resilience.”
The study lists 55 economies according to 331 criteria that measure how the nations create and maintain conditions favourable to businesses.
The U.S. position was cemented by its domestic economy, which is the world’s strongest, topping all others in its amount of investments, stock purchases and commercial service exports. It also ranks as the easiest place to secure venture capital for business development and dominates all other economies in key technology criteria such as computers in use, according to the report.
But Garelli warned that U.S. economic health is vulnerable because of its heavy reliance on the financial sector for corporate profits.
Japan had a similar story to tell
The 2008 report says there are parallels between now and two decades ago, when the business school first started to study competitiveness and “Japan’s competitiveness seemed unassailable, with a strong domination in economic dynamism, industrial efficiency and innovation.
“Then all hell broke loose,” it added. “The stock market went into reverse in 1989, land prices collapsed in 1992, credit cooperatives and regional banks came under attack in 1994, large banks teetered on the edge of bankruptcy in 1997, and a major credit crunch occurred in 1998. Does this ring a bell?”
While the report called the similarities “frightening,” Garelli said there are important differences between the Japan that stagnated for nearly a decade and the U.S. economy teetering on the brink of a recession now.
Japan’s decision-makers were bureaucrats or politicians who reacted too slowly. The U.S. administration, by contrast, is full of business and financial experts that know when things need to be shaken up.
“The U.S always seems to find the means to reinvent itself in ways that Japan and much of Europe often lacks,” he said.
Top ten competitive nations
Rounding out the top 10 most competitive nations were Denmark, Australia, Canada, Sweden and the Netherlands. Slovenia rose eight places to 32nd, a jump matched by Poland, which is now 44th.
Greece slipped the furthest, six places down to 42nd. China and India dropped two places in the report, to 17th and 29th, respectively while Russia fell four spots to 49th. Venezuela was ranked last for the third year in a row, immediately preceded by Ukraine, South Africa, Argentina and Indonesia.