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U.S. Competitiveness: The “Gathering Storm” Part 2

Warning: This blog post, second in the series looking at America's competitiveness, doesn't get any sunnier.  Gathering storm, indeed.

Earlier last month the World Economic Forum (WEF) released its annual Global Competitiveness Report.  This year, we are the fourth most competitive country in the world, behind Switzerland, Sweden, and Singapore.  Last year we were second.

Fourth place doesn't sound so bad, you say?  Oh, it gets worse.

Look at the table below comparing the United States' competitiveness scores with China's.  That's where it gets really scary.  Now, I'm not picking on China just because it's the thing to do.  I think that China should be our leading benchmark simply because it is the only economy in the world today with the size and might to rival the U.S. (no offense to Switzerland, Sweden, and Singapore).

 

US

China

Overall, 2010

4

27

Overall, 2009

2

29

Basic requirements

32

30

Institutions

40

49

Infrastructure

15

50

Macroeconomic environment

87

4

Health and primary education ­

42

37

Efficiency enhancers

3

29

Higher education and training

9

60

Goods market efficiency

26

43

Labor market efficiency

4

38

Financial market development

31

57

Technological readiness

17

78

Market size

1

2

Innovation and sophistication factors

4

31

Business sophistication

8

41

Innovation

1

26

 

A few points to highlight from the WEF competitiveness report:

  • Between last year's report and this year's, China's ranking has improved two spots; the U.S.' has fallen by two.
  • It's not a typo (I checked, rechecked, and triple-checked): China actually has a higher score than the U.S. on basic requirements. 
  • On macroeconomic environment China is the fourth-most competitive; the U.S. is 87th.  Now, that may be temporary - the result of an uncharacteristically bad economy in the U.S. and a still-booming-through-transition economy in China.  But still.
  • On health and primary education, the U.S. ranks 5 slots behind China.  That's right; the U.S., with a per capita income nearly 7 times bigger than China's, ranks lower on what I think are the most basic measures of competitiveness.  If we aren't healthy and well-educated at the most basic level, can we really continue to be the most innovative?
  • So yes, the U.S. still ranks higher (in some cases much higher) on measures of sophistication and innovation.  But with basic requirements scores as pitiful as we put up, that can't last long.

I hope I don't sound like a broken record.  Or like the boy who cried wolf.  But I am really, really concerned about America's future.  I think that we are now at a very crucial moment in time - we still have the opportunity to reverse the decline in our competitiveness, but opportunity's window is closing quickly. 

Robert Samuelson wrote an excellent piece a number of years ago on the reasons why America is great.  He argues that "America's economic strengths lie in qualities that are hard to distill into simple statistics."  So, he says, it's not about education (in K-12, we have always fallen behind) or ultra-low rates of saving.  Instead, it's about the quintessential American entrepreneurial spirit.

I would love to agree with Samuelson, but I don't know if I can.  I don't think we can afford to take America's wealth-producing capacity for granted just because it's been around for a century.  We cannot look at Google, or Apple, or Microsoft, or Intel and say, "See, America still produces great companies" - the leaders of many of those great companies have said, quite bluntly (and bravely, I think) that they will take their companies to other countries if they have to, to find the kind of talented workers they need to fulfill their ultimate obligation: delivering profits to shareholders.

At the end of the day, the kind of multinational corporations that drive the global economy don't pay allegiance to any country.  They go where the talent is.  Will it continue to be in America?  The trends don't look so good.  But it's not too late. 

Yet.


Written on Wednesday, 17 November 2010 13:32 by Gary Yaquinto

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