After losing the top spot to Switzerland last year in the World Economic Forum's Global Competitiveness Report, the U.S. no longer even ranks among the top three.
While Switzerland kept its top ranking in this year's report, the U.S. fell two places to fourth position, overtaken by Sweden, which moved up two spots to second place, and Singapore, which remained in third place. Rounding out the top five is Germany, which kept its ranking.
The World Economic Forum defines competitiveness as the "set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity ... sets the sustainable level of prosperity that can be earned by an economy." The index used to evaluate national competitiveness measures 12 variables: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation.
The U.S. has "many structural features that make its economy extremely productive" such as its university system, business sector R&D, sophistication and innovation, as well as its sheer size. But "a number of escalating weaknesses have lowered the US ranking over the past two years." The report notes the "macroeconomic imbalances that have been building up over time," as well as the "weakening of the United States' public and private institutions," and the "lingering concerns about the state of its financial markets."
Globally, economic activity in developed economies has remained sluggish with persistent unemployment and weak demand, the report notes. And there are other concerns such as sovereign debt sustainability in Europe and financial markets' stability. "The present situation emphasizes the importance of mapping out clear exit strategies to get economies back on a steady footing. Yet charting out such a process remains elusive in many countries for fear of a 'double dip' as well as for political considerations."
Meanwhile, most developing economies fared relatively well, with countries such as Brazil, China, and India expected to grow at rates of between 5.5% and 10% in 2010. "Indeed, the world increasingly looks to the developing world as the major engine of the global economy," the report notes. China, moved up two spots to rank 27, and continues to lead the way among large developing economies.
U.S. Falls Again in Competitiveness Rankings