For the first time since the onset of the Great Recession, the United States has topped the World Economic Forum’s Global Competitiveness rankings. The U.S. scored 85.6 of a possible 100, followed by Singapore (83.5), Germany (82.8), Switzerland (82.6), Japan (82.5), Netherlands (82.4), Hong Kong SAR (82.3), the United Kingdom (82), Sweden (81.7) and Denmark (80.6). The World Economic Forum is a nonprofit foundation formed in 1971 to encourage public-private cooperation. It is a highly respected organization which is independent and impartial (I have worked with the Forum on several occasions), and a rigorous process is used to develop the annual rankings (which have been produced for the past four decades).
This year, the competitiveness index was redesigned to better incorporate the “Fourth Industrial Revolution.” Prior revolutions have used water and steam to mechanize production, electric power to enable mass production, and digital capability. The Fourth Revolution builds on the digitalization of the Third Revolution, but it is set apart by the pace of transformation and the depth and breadth of changes affecting virtually every aspect of the economy and society
In answer to these changes, the new rankings place more emphasis on factors such as human capital, agility, resilience, openness, and innovation. The ability to embrace change, from individuals to governments, is essential to prosperity going forward, and this year’s index better reflects such factors. Some 140 economies were measured against 98 indicators which were organized into 12 “pillars” or drivers of productivity, widely recognized as the essential determining factor in competitiveness and growth.
The U.S. ranked first for three of the 12 pillars (labor market, financial systems, and business dynamism—a reflection on the nation’s entrepreneurial culture) and second in two additional categories (market size and innovation capability). Most other rankings were relatively high, but there were exceptions. In health, for example, the U.S. ranked 46th due primarily to a lower life expectancy than many nations at 67.7 years.
There is always room for improvement, of course, and the rankings give us food for thought on that as well; any pillar on which the United States falls out of the top tier is certainly worth contemplation and potential remediation. In addition, it will be difficult (likely impossible) to continue to top the ranks if a full-scale trade war with China develops or we otherwise reduce our “openness” through policy actions.
Technology is changing everything, and countries that are not ready to adapt will struggle. The World Economic Forum’s analysis is a well-designed assessment of readiness for coming shifts and provides a strong indication that the United States is well positioned to be competitive going forward. Let’s just hope we keep it that way.
M. Ray Perryman is president and CEO of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.