IMD, the International Institute for Management Development, based in Lausanne, Switzerland, just announced the findings of its annual World Competitiveness Yearbook (WCY). The WCY is a ranking which measures how well countries manage their economic and human resources to increase their own prosperity, which the IMD has published since 1989.
Of the 59 economies ranked in 2012, Hong Kong, the United States, and Switzerland topped the list. Professor Stephane Garelli, director of IMD's World Competitiveness Center, said of the US's continued competitiveness in spite of recent problems, "No other nation can exercise such a strong "pull effect" on the world. Europe is burdened with austerity and fragmented political leadership and is hardly a credible substitute, while a South-South bloc of emerging markets is still a work in progress. In the end, if the US competes, the world succeeds!"
Among European nations, the most competitive are Switzerland, Sweden and Germany, which are bolstered by their export-oriented manufacturing and fiscal discipline. The Netherlands rose 3 spots from its 2011 ranking to 11th place overall. Meanwhile, Ireland, Iceland and Italy appear to be in better positions to improve their competitiveness than Spain, Portugal and Greece, which all dropped in ranking and apparently continue to scare investors.
Emerging economies appear to have been affected by turmoil elsewhere. China, India and Brazil all dropped in the rankings, while Russia climbed only one place. All Asian economies have declined apart from Hong Kong, Malaysia and Korea. Latin America also had a tough year, with every nation falling except Mexico.
One-third of the 329 criteria used to generate the rankings come from an exclusive IMD survey of more than 4.200 international executives. The survey reveals a growing skepticism in some of the 59 economies toward globalisation and the need for economic and social reforms (see the charts here). According to the executives, globalisation is still regarded by society as a positive development in Ireland, Chile, Scandinavia, the Netherlands, the UAE and many Asian economies. But attitudes are apparently much more negative in Greece, Russia, most of Eastern Europe, a growing part of Latin America, and are most negative in France.
Attitudes toward economic and social reforms are more positive in Ireland, emerging Asia, Qatar and the UAE, Switzerland and Sweden. The Netherlands is positive but somewhat more reluctant in this regard. Understanding of the need for reform is much weaker in Argentina, the Czech Republic, Spain, and least of all - again - in France. The US falls in the middle of the pack in its attitude towards globalisation as well as reforms, which perhaps reflects its polarized political climate.
"The recession has made the world economy more fragmented and diverse than ever, forcing companies to operate several parallel business models," said Professor Garelli. "Emerging economies are relying on domestic demand and national champion companies to insulate themselves from economic turmoil, while the "submerging" developed economies are turning to re-industrialisation. In both cases, economic nationalism is back and protectionism is tempting."