U.S. tops list of world’s most competitive countries

Getty Images

The World Economic Forum (the Davos folks) released its 2007/2008 Global Competitiveness Report today. The annual report is compiled by conducting surveys with 11,000 business leaders in 131 countries.

Here’s what you need to know about the new rankings and conclusions:

Still the one. The United States retains top place in the overall rankings. Despite the federal budget deficit and the subprime mortgage collapse, the country’s economic competitiveness is second to none. The keys to U.S. success? A flexible labor market, a huge domestic economy, and continual business innovation, all of which earn top marks. Also cited is the outstanding U.S. higher education system and its contributions to research and development. However, the United States also ranks 12th in the availability of scientists and engineers. If U.S. immigration policies fail to attract skilled labor, it may see future declines in this area, as argued by Yale’s Amy Chua in her recent FP Web exclusive.

Scandinavia rocks. Denmark, Sweden, and Finland take the third, fourth, and sixth spots, respectively, in the survey. Nordic macroeconomic stability, efficient institutions, and top-notch education systems make these countries shining examples of successful hybrid social-market economies. Despite big-time government spending in social services, these economies boast budget surpluses and low levels of public indebtedness. However, their success does not come without its consequences: High tax rates and regulations in Denmark were the chief complaints of over 50 percent of the business leaders surveyed.

La petite tyrannie de la paperasserie. France kept its #18 spot due to high marks for the country’s infrastructure (ranked second), sophistication of the business community, and advances in technical innovation. Sarkozy has some work to do, though, if he is to improve his country’s fortunes. Out of the 131 countries listed in the survey, France ranks 129th for labor market flexibility and 114th for red tape. The French president will be in for a particularly hard battle over labor reforms with the country’s powerful unions. Bonne chance, monsieur président—you’ll need it.

The Bolivarian revolution that wasn’t. Thanks to Hugo Chávez’s half-baked socialist vision, Venezuela slipped to number 98 in this year’s report. Venezuela ought to be profiting from record-high oil prices, yet Chávez’s government has instead run up worrying budget deficits. Fiscal ineptitude has driven inflation so high that the country now ranks 128th overall in that category. Government seizures of private property, institutional inefficiency, and interference in the economy have earned Venezuela dead-last rankings in all three categories. Even Chávez’s efforts to aid the poor are backfiring. In spite of increases in health and education spending, Venezuela’s rankings in both areas have fallen in the past year. The findings echo those of Francisco Rodriguez in his FP Web exclusive from earlier this year, “Why Chávez Wins“.

Enter the Kingdom. Saudi Arabia is included in this year’s report for the first time, entering at number 35 in the overall rankings. The Saudi economy is flying high thanks to the ever-increasing price of oil and healthy macroeconomic indicators. A relatively sophisticated business environment, surprisingly, has contributed to the country’s underreported economic successes, a notion explored this past June in an article by Jean-François Seznec and Afshin Molavi for ForeignPolicy.com. The country still has a way to go to better develop its human resources, though: Saudi Arabia checks in at number 69 on the health sub-pillar and a dismally low 78 percent of school-age children are enrolled in primary education.

Zimbabwe’s economic implosion. Not to be outdone by Chávez, President Robert Mugabe has also managed to further drive his country’s economy into the ground. Zimbabwe is third from last in this year’s report with an overall ranking of 129. The country also had the dubious honor of ranking fourth in FP‘s 2007 Failed States Index. Runaway inflation, corruption, nonexistent private-property protections, and years of fiscal mismanagement have turned what could have been one of Africa’s most promising states into an economic wasteland. Only Burundi, the poorest country ranked by the WEF, and woebegotten Chad rank lower than Mugabe’s Zimbabwe.

Herewith, the top ten:

1. United States
2. Switzerland
3. Denmark
4. Sweden
5. Germany
6. Finland
7. Singapore
8. Japan
9. United Kingdom
10. Netherlands 

And here are the countries bringing up the rear: 

1. Zambia (in 122nd place)
2. Ethiopia
3. Lesotho
4. Mauritania
5. Guyana
6. Timor-Leset
7. Mozambique
8. Zimbabwe
9. Burundi
10. Chad (dead last at 131st)

You can check out the full rankings here. (pdf)