Swiss Economy Most Competitive in the World

Swiss Economy Most Competitive in the World

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The economies of the world’s nations are ranked by the World Economic Forum (WEF) in terms of how competitive they are, releasing the results in a yearly Global Competitiveness Report. The Forum attempts to map out which of the world’s economies are most competitive and this year’s report contains more countries than ever before, offering data on 142 economies and thus remaining the most comprehensive document of its kind in the world.

But the report defines competitiveness in vague terminology.  Unfortunately, crisply definable figures like GDP or unemployment figures can’t give a clear idea of a concept like competitiveness. The report’s authors define competitiveness as ‘the set of institutions, policies, and factors that determine the level of productivity of a country’ and go on to explain that there are twelve ‘pillars of competitiveness:’ Institutions, Infrastructure, Macroeconomic Environment, Health and Primary Education, Higher Education and Training, Goods Market Efficiency, Labour Market Efficiency, Financial Market Development, Technological Readiness, Market Size, Business Sophistication, and Innovation.

While it’s obvious that complex, dynamic concepts require multiple inputs – the reasoning behind using the quality-of-life index rather than simple GDP/person type economic measurements in assessing how genuinely prosperous a nation is, for instance –  the report sometimes seems to fall into the trap of defining one nebulous concept in terms of another. The section explaining the Ninth Pillar, Technological Readiness, begins with the words, ‘in today’s globalized world,’ a phrase calculated to imply that the author has run out of things to say while there is still some paper left.  The odd fragment of waffle notwithstanding, the authors go on to make a serious attempt to define the way technological readiness contributes to an economy’s competitiveness. They stress the importance of ICT, referring to Manuel Trajtenberg’s concept of a ‘general purpose technology’ (like the steam engine) which comes to organize economic activity around itself.

The report works hard at being taken seriously, referencing scholarly works and crunching large amounts of data on economies grouped geographically, so that the Middle East and North Africa get a chapter to themselves. But what does any of this mean for Switzerland? Can we expect a world in which the dollar is replaced by the Franc, and everyone is seriously punctual in at least two languages?  Is Switzerland poised to replace the US as the world’s ringmaster?

The report itself explains that this is unlikely. For one thing, the Swiss economy remains tiny at the side of the US: its per capita GDP might be higher, at US$67,000 against the US’s US$47, 000, but that’s shared out among a much smaller population: 7.6 million Swiss aren’t going to out-produce 317 million Americans any time soon, no matter how good they get at it. The Swiss economy makes up 0.44% of the world’s total economic activity: disproportionate to population, maybe, but dwarfed by the 20% the US makes up.

Competitiveness is a measure of the quality rather than the size of an economy. The report aims to show which economies will perform better and offer nations the chance to learn from each other, as well as track general improvements in economic performance worldwide. So Switzerland’s ascension isn’t something for other nations to worry about straight away.

Of the top ten most competitive economies, six (or five if you don’t count the United Kingdom) were in Europe, and of the remainder three are Asian and the other is the United States.  High levels of prosperity are confined to the same areas of the globe as in previous reports, but gaps are narrowing and widening in unexpected areas. The possibility of the first sovereign defaults since the 1940s has contributed strongly to a widening between the chances of Europe’s member states: Greece languishes in 96th place. Meanwhile higher economic growth rates in Africa – an average of at least 5% with some nations putting in over 6% – mean that even nations that don’t make the podium are moving ahead faster than the advanced economies.