The U.S. Remains #1 in Global Competitiveness

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The U.S. Remains #1 in Global Competitiveness

Even some of those who recognize that the near-term outlook is nowhere near catastrophic still believe the United States is already being eclipsed by other economies. In fact, it has become fashionable for pundits to proclaim that the U.S. is no longer the world's leading economic power.

But, if the U.S. isn't on top, then which country or countries have surpassed us? The answer: none of them.

The most objective — and comprehensive — analysis of the relative economic strength of the world's economies is contained in the annual report by the World Economic Forum (WEF). The WEF studies 113 factors that make up the competitiveness of a country. And, according to the WEF's Global Competitiveness Report 2007-2008,1 the U.S. ranks first in the world, ahead of 130 other nations. The co-directors of the report are Klaus Schwab of the WEF and Professor Michael Porter of the Harvard Business School.

What does the WEF mean by competitiveness? Schwab and Porter define it as "the set of institutions, policies, and factors that determine the level of productivity of a country."

Productivity is the key because the higher a country's level of productivity, the greater the prosperity it can deliver to its citizens, the better the rate of return investors can earn there, and the faster its economy can be expected to grow.

The countries in The Global Competitiveness Report are ranked according to 113 factors that are grouped into the "12 pillars of competitiveness." These 12 pillars are:

  1. Institutions
  2. Infrastructure
  3. Macroeconomy
  4. Health and primary education
  5. Higher education and training
  6. Goods market efficiency
  7. Labor market efficiency
  8. Financial market sophistication
  9. Technological readiness
  10. Market size
  11. Business sophistication
  12. Innovation

When all 12 pillars are considered, the U.S. economy ranks as the most competitive in the world. As the report points out, America is No. 1 in innovation, with high rankings for its research institutions, corporate spending on research and development, intellectual property protection, university enrollment, and cooperation between the business and academic sectors in research.

It is important to realize that, as crucial as innovation is to competitiveness, it only conveys an advantage when it is part of a healthy economic system...

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