THE GLOBAL COMPETITIVENESS REPORT 2009-2010

The Global Competitiveness Report 2009-2010: Country Profile Highlights
The Top 10 ranked countries
Switzerland overtakes the United States this year as the world’s most competitive economy. This is explained by the fact that Switzerland’s performance has remained relatively stable, whereas the United States has seen a weakening across a number of areas. Switzerland’s economy continues to be characterized by an excellent capacity for innovation and a very sophisticated business culture, ranked 3rd for its business sophistication and 2nd for its innovation capacity. The country is characterized by high spending on R&D. Switzerland’s scientific research institutions are among the world’s best, and the strong collaboration between the academic and business sectors ensures that much of this research is translated into marketable products and processes, reinforced by strong intellectual property protection. This strong innovative capacity is captured by the high rate of patenting (148.27 per million inhabitants) in the country, for which Switzerland ranks 7th worldwide on a per capita basis. Switzerland’s public institutions are rated among the most effective and transparent in the world (7th), ensuring a level playing field and enhancing business confidence; these include an independent judiciary, a strong rule of law, and a highly accountable public sector. Competitiveness is also buttressed by excellent infrastructure (5th) and a well-functioning goods market (5th), as well as a labor market that is among the most efficient in the world (2nd, just behind Singapore). And Switzerland’s macroeconomic environment, although weakening somewhat since last year, continues to be assessed as stable compared in particular with the United States and many European neighbors (ranked 17th). On the other hand, the university enrollment rate of 47 percent continues to lag behind many other high-innovation countries, placing the country 46th on this indicator. Although gaps are currently being filled through immigration, efforts should be made to boost higher education attainment to ensure sufficient national talent. Financial markets have also weakened somewhat, reflecting in particular difficulties in the national banking sector. However, this has been muted compared with many other countries.
After several years at the top of the rankings, the United States falls one place and is ranked 2nd this year. The country continues to be endowed with many structural features that make its economy extremely productive and that place it on a strong footing to ride out business cycle shifts and economic shocks. However, a number of escalating weaknesses have taken their toll on the US ranking this year. The United States is home to highly sophisticated and innovative companies operating in very efficient factor markets. The country is also endowed with an excellent university system that collaborates strongly with the business sector in R&D. Combined with the scale opportunities afforded by the sheer size of its domestic economy—the largest in the world by far—these qualities continue to make the United States very competitive. Labor markets are ranked 3rd, characterized by the ease and affordability of hiring workers and significant wage flexibility. The country’s goods markets (12th) are also characterized by low levels of distortion within the context of a very competitive environment. Although the country is very competitive overall, there are some weaknesses in particular areas that have deepened since the last assessment. Some aspects of the institutional environment could be strengthened, with particular concerns on the part of the business community about the government’s ability to maintain arms-length relationships with the private sector (48th), and in the perception that the government spends its resources wastefully (68th).There is also increasing concern related to the functioning of private institutions, with a measurable weakening of the assessment of auditing and reporting standards (down from 20th last year to 39th this year), perhaps not unexpected in the context of recent turmoil and scandals within the financial sector in particular. More generally, given that the financial crisis originated in large part in the United States, it is hardly surprising that there has been a weakening of the assessment of its financial market sophistication, dropping from 9th last year to 20th overall this year in that pillar. The country’s greatest overall weakness continues to be related to its macroeconomic stability, where it ranks 93rd, down from 66th last year. The United States has built up large macroeconomic imbalances over recent years. Repeated fiscal deficits have led to burgeoning levels of public indebtedness, which are presently being exacerbated by significant stimulus spending....

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