What Drives Competitiveness?


Swiss business school IMD just released its ranking of the world’s most competitive countries, based on four dimensions: economy, government efficiency, business efficiency and infrastructure. Which one is at the top of the list, and why?!@!

The first-place country in the World Competitiveness Yearbook is the United States, which also was tops in the individual economy and infrastructure categories. (Government efficiency was another matter, with an 18th place ranking for the U.S.) Coming in second was Singapore, with top-three finishes across all four dimensions. Hong Kong placed third on the strength of its low regulation of business and high levels of entrepreneurship.

I bring this up for a few reasons: First, with so much gloomy economic news dominating recent headlines, it’s interesting to see the United States in the top spot (though Singapore was very close behind). And no other country with a comparably large population came close. In fact, neither China nor India, the two countries often hyped as threatening the U.S.’s preeminent economic position, cracked the top 10. (They came in at 17 and 29, respectively, and each one actually dropped two places from last year’s ranking.)

This is not to promote any sort of nationalist sentiment among our American readers, or to dismiss the very real economic achievements of India or China. But it does provoke some thinking about what makes one nation, enterprise or individual more competitive than another.

Although they weren’t assessed on this dimension specifically, I would wager that one of the main reasons the United States is so competitive is due to the fact that U.S. institutions invest so heavily in developing people. While there are problems in this regard – inequity in the public school system, for instance – no other country on the list has the level of support for colleges and universities and corporate training that the United States does.

While one certainly can’t discount the importance of economic freedom (the key driver of competitiveness in Singapore and Hong Kong) and viable financial institutions (the competitive differentiator for Switzerland and Luxembourg, four and five on the list) in competitiveness, there is no doubt that workforce development plays a critical role as well. And as it is with countries, so too with enterprises.

Agree? Disagree? Let us know what you think in the comments section.