US loses competitive edge

Large deficits and a weakened
financial system have made the United States less competitive in the global
economy, the World Economic Forum said in its annual review of the
competitiveness of countries.

The United States slipped from
second to fourth in the survey, behind Switzerland, Sweden and Singapore. It
had fallen from first place the year before.

The study includes statistical
measures as well as a survey of business owners to compare countries. In the
United States, the entrepreneurs cited access to credit and government
regulation among their chief concerns.

But it was government debt and the
country’s overall economic outlook that pushed the United States down in the
rankings, said Irene Mia, senior economist at the forum, a Geneva-based think
tank that sponsors the annual gathering of world leaders in Davos, Switzerland.

“The U.S. has very important
strengths, but macroeconomic stability was a problem beforehand and the crisis
exacerbated it,” Mia said.

Government debt affects a country’s
competitiveness by limiting its ability to respond to crises or make
infrastructure and other investments that could boost future productivity. It
may also lead to higher interest rates.

Along with broad statistics about
each of the 139 countries included, the survey examined areas such as the
strength of institutions and laws, the quality of infrastructure, public health
and education, and levels of technology and innovation.

The impact of the recent financial
crisis and recession had a deep influence on this year’s edition of the study,
with countries hit by recent shocks, such as Greece, Ireland and Spain, all
tumbling in the competitiveness rankings because of high debt and uncertainty
about future growth.

By contrast, several emerging
market economies jumped quickly in their competitiveness ratings, as
governments kept debt down and invested in infrastructure and institutional
reform.

Indonesia vaulted from 54th to 44th
place in the survey, and the World Economic Forum cited steady improvement in
the country’s schools as a prime reason. Vietnam went from 75th to 59th in the
rankings; the forum cited it for having one of the most efficient labour forces
in the world and investing comparatively large amounts in research and development.

China, at 27th, was among the most
competitive of the developing economies, benefitting particularly from a high
savings rate, rising research investment and improvements in school enrollment.

Chad is rated the least competitive
of the countries surveyed, while Nigeria and Pakistan experienced the largest
declines in competitiveness. The forum noted security problems in both
countries and cited the fact that Nigeria was now running an annual budget
deficit despite its oil wealth.

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