Organizers of the annual Davos conference ranked the U.S. first in their ranking of the world’s most competitive economies for the first time in a decade Wednesday, saying the No. 1 spot reflects a new methodology and long-term factors more than recent policies of the Trump administration.
“It’s a country that is doing extremely well in terms of its labor market dynamism overall, but workers’ rights remain low.”
The World Economic Forum said its “Global Competitiveness Report” is based on nearly 100 separate factors in a dozen categories that have been reworked slightly to better reflect today’s rapidly changing, increasingly digitized world economy.
The U.S. is followed by Singapore, Germany, Switzerland and Japan in the top five spots among the 140 economies considered. In nearly 40 years of the group’s rankings on competitiveness, the U.S. previously earned top honors in 2008. Switzerland was No. 1 last year.
Nearly all of the top 30 performers are developed economies in Asia and Europe, along with Israel at 20, the United Arab Emirates at 27, China at 28 and Qatar at 30. Many African countries again lagged, and they have shown few signs of significant improvement, forum analysts said.
The authors tweaked the index this year to account in part for the effects of the 2008 financial crisis, changes in human capital and the “Fourth Industrial Revolution” — the forum’s buzzword for the digital revolution that is disrupting nearly every industry around the globe at a breakneck pace.
The main takeaway of this revised edition is that no single factor makes a country stand out, and each nation should find its route to developing and improving, the authors said.
“If anything, this report is saying there are no silver bullets,” Saadia Zahidi, the forum’s managing director in charge of economic and social agenda, said in an interview. “We used to say: ‘You have to compete on the basis of your low-skilled labor. You need to industrialize first then you need to bring in other aspects of growth and competitiveness.’ That model no longer exists, not in a world where you have cheaper capital and cheaper technology than ever before.”
Zahidi said that though the United States scored 85.6 out of 100, there was still room for improvement, and pointed to some “worrying signs.” While the U.S. fared well in areas for business dynamism, financial system and innovation, it did less well on areas such as security — like its high homicide rate for a developed country.
“It’s a country that is doing extremely well in terms of its labor market dynamism overall, but workers’ rights remain low,” Zahidi said. “Active labor market policies are also somewhat missing as compared to other advanced economies.”
She said some business sentiment expressed in surveys of executives might relate to Trump administration policies like its tax cuts. But she said, “The questions that we’re asking them are really about the long-term fundamentals of competitiveness. So I would say this is really about that longer term, and a little bit less about some of the short-term measures.”
The report makes a pitch for the importance of “openness” at a time of rising trade tensions and increasing protectionist or isolationist impulses in some parts of the globe — notably the West. It insists that social safety nets and investments in “human capital” do not necessarily come at the expense of economic growth.
The rankings, with 98 separate data points, offered bright spots as well as points of improvement for nearly every country: Germany was No. 1 in innovation, for example. China, which ranked No. 1 in terms of “market size” based on per-capita purchasing power parity, tallied poor marks in some areas — notably ranking a dead last 140th in “freedom of the press.”
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