The Competition State circa 2007

♠ Posted by Emmanuel in at 5/29/2007 12:21:00 AM
Just out is Swiss business school IMD's World Competitiveness Yearbook (WCY) 2007. It brings to mind exactly what Paul Krugman wrote about a few years back in "Competitiveness: A Dangerous Obsession." Here's a Krugman excerpt, though you can read the whole thing online:

After all, the rhetoric of competitiveness -- the view that, in the words of President Clinton, each nation is "like a big corporation competing in the global marketplace" -- has become pervasive among opinion leaders throughout the world. People who believe themselves to be sophisticated about the subject take it for granted that the economic problem facing any modern nation is essentially one of competing on world markets -- that the United States and Japan are competitors in the same sense that Coca-Cola competes with Pepsi -- and are unaware that anyone might seriously question that proposition. Every few months a new best-seller warns the American public of the dire consequences of losing the "race" for the 21st century.ffi A whole industry of councils on competitiveness, "geo-economists" and managed trade theorists has sprung up in Washington. Many of these people, having diagnosed America's economic problems in much the same terms as Delors did Europe's, are now in the highest reaches of the Clinton administration formulating economic and trade policy for the United States. So [former European Commission Chairman] Delors was using a language that was not only convenient but comfortable for him and a wide audience on both sides of the Atlantic.

Unfortunately, his diagnosis was deeply misleading as a guide to what ails Europe, and similar diagnoses in the United States are equally misleading. The idea that a country's economic fortunes are largely determined by its success on world markets is a hypothesis, not a necessary truth; and as a practical, empirical matter, that hypothesis is flatly wrong. That is, it is simply not the case that the world's leading nations are to any important degree in economic competition with each other, or that any of their major economic problems can be attributed to failures to compete on world markets. The growing obsession in most advanced nations with international competitiveness should be seen, not as a well-founded concern, but as a view held in the face of overwhelming contrary evidence. And yet it is clearly a view that people very much want to hold -- a desire to believe that is reflected in a remarkable tendency of those who preach the doctrine of competitiveness to support their case with careless, flawed arithmetic.

This brings me to the results of the 2007 derby. It's a win for the US, narrowly pipping Singapore to the finish line with Hong Kong coming in third. Singapore and Hong Kong swapped places this year. Here's an explanation of WCY methodology:



And here are a blurb and the results for WCY 2007:
World Competitiveness has never been as dynamic as this year! None of the 55 economies covered in the WCY is in recession (average growth is 5%).

The US is still number one but other nations are catching up quickly - Switzerland, The Netherlands, Sweden, China and Germany are on the way up. Looking at the past 10 years’ evolution of competitiveness performance, new competitive powers clearly emerge and will shake up future rankings. Who are they?

The IMD World Competitiveness Yearbook 2007 (WCY) analyses and ranks the ability of nations to create and maintain an environment that sustains the competitiveness of enterprises. Considered the worldwide reference point to world competitiveness, it has been published without interruption since 1989 and ranks 55 national economies using 323 crieria. The WCY is an indispensable tool for business leaders, government and academia.
(Click on image to view rankings. Note that numbers to the left of the countries are last year's rankings. The entire scoreboard file is available here.)