Competitiveness and austerity: the divorce?
The good performance of the US (1), Switzerland (2), Hong Kong (3), Sweden (4) and even Japan (24) – while the euro zone stagnates – calls austerity into question
May 29, 2013 – IMD, a top-ranked global business school based in Switzerland, today announced its 25th anniversary world competitiveness rankings. In addition to ranking 60 economies for 2013, the IMD World Competitiveness Center also looks at the winners and losers since its creation.
Professor Stéphane Garelli, director of the IMD World Competitiveness Center, said: „While the euro zone remains stalled, the robust comeback of the US to the top of the competitiveness rankings, and better news from Japan, have revived the austerity debate. Structural reforms are unavoidable, but growth remains a prerequisite for competitiveness. In addition, the harshness of austerity measures too often antagonizes the population. In the end, countries need to preserve social cohesion to deliver prosperity.“
Highlights of the 2013 ranking
The US has regained the No. 1 spot in 2013, thanks to a rebounding financial sector, an abundance of technological innovation and successful companies.
China (21) and Japan (24) are also increasing their competitiveness. In the case of Japan, Abenomics seems to be having an initial impact on the dynamism of the economy.
In Europe, the most competitive nations include Switzerland (2), Sweden (4) and Germany (9), whose success relies upon export-oriented manufacturing, diversified economies, strong small and medium enterprises (SMEs) and fiscal discipline. Like last year, the rest of Europe is heavily constrained by austerity programs that are delaying recovery and calling into question the timeliness of the measures proposed.
The BRICS economies have enjoyed mixed fortunes. China (21) and Russia (42) rose in the rankings, while India (40), Brazil (51) and South Africa (53) all fell. Emerging economies in general remain highly dependent on the global economic recovery, which seems to be delayed.
In Latin America, Mexico (32) has seen a small revival in its competitiveness that now needs to be confirmed over time and by the continuous implementation of structural reforms.
A 25th anniversary perspective on World Competitiveness
In 1989, the IMD World Competitiveness Yearbook had a split ranking. The most competitive advanced economies were Japan, Switzerland and the Netherlands. Among emerging markets, Singapore, Hong Kong and Malaysia led the way. Globalization had not yet kicked in. China, Russia and several other nations (some of which did not exist back then) were not included.
By 1997, the world of competitiveness had become increasingly global, and IMD first produced a unified ranking including both advanced and emerging economies. Here are the countries that have risen and fallen the most since then:
Winners since 1997 (+ 5 or more ranks):
China, Germany, Israel, Korea, Mexico, Poland, Sweden, Switzerland, Taiwan
Losers since 1997 (- 5 or more ranks):
Argentina, Brazil, Chile, Finland, France, Greece, Hungary, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Philippines, Portugal, South Africa, Spain, United Kingdom and Venezuela.
Winners:
– The US, Singapore and Canada, although not in the „winners“ list, have very stable and enduring competitiveness models that rely on long-term advantages such as technology, education and advanced infrastructure.
– In Europe, Switzerland, Sweden and Germany share the same recipe for success: exports, manufacturing, diversification, competitive SMEs and budget discipline.
– In Asia, China’s success has had a pull effect on the region’s competitiveness, prompting many Asian economies to redirect their exports from the US and Europe to other emerging markets. – Mexico and Poland are seeing a revival in competitiveness that will need to be confirmed over time.
Losers:
– Europe has lost ground and accounts for more than half of the „losers“ since 1997.
– The UK and France in particular are losing their dominant position and competitive clout, while The Netherlands, Luxembourg and Finland need to adapt their competitiveness models to a changing environment.
– In Southern Europe Italy, Spain, Portugal and Greece are all lagging behind. They did not diversify their industry enough or control public spending and are now facing austerity programs.
– The fate of Ireland and Iceland shows that competitiveness needs to be sustainable, and that uncontrolled fast expansion can also lead to disaster.
– Latin America has been disappointing, with larger economies such as Chile, Brazil, Argentina and Venezuela all losing ground and being challenged by the emerging competitiveness of Asian nations.
Professor Garelli added: „Generalizations are, however, misleading. True, Europe’s competitiveness is declining, but Switzerland, Sweden, Germany and Norway are shining successes. Latin America is disappointing, but there are great global companies all over that region. Brazil, Russia, India, China and South Africa are immensely different in their competitiveness strategies and performance, but the BRICS remain lands of opportunities.“
„In the end, the golden rules of competitiveness are simple: manufacture, diversify, export, invest in infrastructure, educate, support SMEs, enforce fiscal discipline, and above all maintain social cohesion,“ concluded Professor Garelli.
The IMD World Competitiveness Center is a part of IMD
IMD is a top-ranked business school. We are the experts in developing global leaders through high-impact executive education. Why IMD? We are 100% focused on real-world executive development. We offer Swiss excellence with a global perspective. And we have a flexible, customized and effective approach. Published since 1989, the World Competitiveness Yearbook is recognized as the leading annual report on the competitiveness of nations.
