How did the U.S. stay on top of the list this year?
The U.S. is an economy that is difficult to beat. It’s a big economy, it has a huge domestic market, it dominates the world in terms of innovation and infrastructure. It is the most overseas-oriented economy. It is the largest importing economy in the world and by volume it is the largest exporting economy, not in relative terms to GDP but in absolute terms. The more you expose yourself to international competition, the better your products and your services are. The U.S. is also top in terms of international investment .
Does the increasing gap between rich and poor in the U.S. affect its competitiveness?
When we talk about competitiveness, we don’t talk much about fairness. Fairness is more a moral issue. If you look at the top countries on our list, they are not the equal countries, with the exception of Sweden. The U.S., Switzerland, Hong Kong and Singapore are countries where income inequality tends to be high. If you look at our data, there is a U-shaped relationship when it comes to income inequality. Countries that are very competitive or not competitive at all tend to be very unequal. The two extremes are the U.S. and Venezuela. Both countries are quite unequal. The countries where economic inequality is quite low, rank high but they are certainly not on the top. There is a price to pay in order to promote or guarantee a certain level of equality and that comes at the expense of competitiveness.
What does this year’s list say about competitiveness in Europe?
Europe is back. Except for Italy and Greece. All the other countries in Europe improved in their ranking, from Germany to Portugal. But there is still a big divide between the northern countries and the south. It is difficult to have a European union where everybody pretends to be an exporting country. There are the successful economies that are exporters like Germany and the Netherlands or Norway. But the southern European economies cannot be export economies.
I’m Spanish so I’m speaking about my own country. Though a massive devaluation has lowered prices and allowed us to export more, that’s not sustainable in the long run. We still need to find a productive system that will create employment. Despite Spain improving six positions in the ranking, unemployment was high, at around 30% last year. At least that’s better than 2013 when it was 35%. If you look at GDP growth, investments abroad,foreign direct investments in Spain, those have improved significantly, but in employment numbers Spain ranks No. 59 out of 60 countries. It’s very similar for other southern European countries.
Russia improved, moving from No. 42 to No. 38. Is the economy really becoming more competitive?
One of the problems with our ranking is it doesn’t take into account everything that has happened in the last month, like the Ukraine crisis. The main area of improvement in the Russian economy had to do with the efficiency of the government, not only in the hard measures for public financing, but there was a slight improvement in total government debt. Russia has a very low ratio of debt to GDP; it’s only 13%. That’s only one tenth of the U.S. The improvement in the ranking this year was due to the perception that the government was becoming more efficient in promoting economic growth. I’m sure if we did the survey now, the impressions would be different.
I want to ask you about the other BRIC countries: Why did China fall from No. 21 to No. 23?
China is an example of an economy where competitiveness comes only from economic growth. The Chinese economy has grown massively in the last 10 year, but economic development is not happening at the same pace. Business legislation, transparency, corruption–all the economic institutions that allow a country to spread prosperity among its people–they are not there in China yet .If you look at the efficiency of the government, it’s No. 34. If you look at business efficiency, it’s No. 28 and in infrastructure it ranks No. 26. Its educational system is No. 39. Education is a primary institution that spreads prosperity among people, and China is not there yet.
Brazil also fell in the ranking, from No. 51 to No. 54. Why?
You have exactly the same situation in Brazil as in China.
India fell too, from No. 40 to No. 44.
In India the big problem is its infrastructure. It’s not just basic infrastructure like roads and ports. It’s also technological infrastructure like science, health, environment, education. India ranks No. 60 in education. It ranks No. 60 in health and environment. In total it’s ranked No. 57 in infrastructure. It has deteriorated by 3 positions relative to last year. Also the macroeconomic figures in India are not as strong as in China. I think the new prime minister is great news. I’ve been talking to Indian executives on our campus for the last two weeks and there is a very positive outlook. I imagine India will look very different in the coming years.
How did the U.S. stay on top of the list this year?
The U.S. is an economy that is difficult to beat. It’s a big economy, it has a huge domestic market, it dominates the world in terms of innovation and infrastructure. It is the most overseas-oriented economy. It is the largest importing economy in the world and by volume it is the largest exporting economy, not in relative terms to GDP but in absolute terms. The more you expose yourself to international competition, the better your products and your services are. The U.S. is also top in terms of international investment .
Does the increasing gap between rich and poor in the U.S. affect its competitiveness?
When we talk about competitiveness, we don’t talk much about fairness. Fairness is more a moral issue. If you look at the top countries on our list, they are not the equal countries, with the exception of Sweden. The U.S., Switzerland, Hong Kong and Singapore are countries where income inequality tends to be high. If you look at our data, there is a U-shaped relationship when it comes to income inequality. Countries that are very competitive or not competitive at all tend to be very unequal. The two extremes are the U.S. and Venezuela. Both countries are quite unequal. The countries where economic inequality is quite low, rank high but they are certainly not on the top. There is a price to pay in order to promote or guarantee a certain level of equality and that comes at the expense of competitiveness.
What does this year’s list say about competitiveness in Europe?
Europe is back. Except for Italy and Greece. All the other countries in Europe improved in their ranking, from Germany to Portugal. But there is still a big divide between the northern countries and the south. It is difficult to have a European union where everybody pretends to be an exporting country. There are the successful economies that are exporters like Germany and the Netherlands or Norway. But the southern European economies cannot be export economies.
I’m Spanish so I’m speaking about my own country. Though a massive devaluation has lowered prices and allowed us to export more, that’s not sustainable in the long run. We still need to find a productive system that will create employment. Despite Spain improving six positions in the ranking, unemployment was high, at around 30% last year. At least that’s better than 2013 when it was 35%. If you look at GDP growth, investments abroad,foreign direct investments in Spain, those have improved significantly, but in employment numbers Spain ranks No. 59 out of 60 countries. It’s very similar for other southern European countries.
Russia improved, moving from No. 42 to No. 38. Is the economy really becoming more competitive?
One of the problems with our ranking is it doesn’t take into account everything that has happened in the last month, like the Ukraine crisis. The main area of improvement in the Russian economy had to do with the efficiency of the government, not only in the hard measures for public financing, but there was a slight improvement in total government debt. Russia has a very low ratio of debt to GDP; it’s only 13%. That’s only one tenth of the U.S. The improvement in the ranking this year was due to the perception that the government was becoming more efficient in promoting economic growth. I’m sure if we did the survey now, the impressions would be different.
I want to ask you about the other BRIC countries: Why did China fall from No. 21 to No. 23?
China is an example of an economy where competitiveness comes only from economic growth. The Chinese economy has grown massively in the last 10 year, but economic development is not happening at the same pace. Business legislation, transparency, corruption–all the economic institutions that allow a country to spread prosperity among its people–they are not there in China yet .If you look at the efficiency of the government, it’s No. 34. If you look at business efficiency, it’s No. 28 and in infrastructure it ranks No. 26. Its educational system is No. 39. Education is a primary institution that spreads prosperity among people, and China is not there yet.
Brazil also fell in the ranking, from No. 51 to No. 54. Why?
You have exactly the same situation in Brazil as in China.
India fell too, from No. 40 to No. 44.
In India the big problem is its infrastructure. It’s not just basic infrastructure like roads and ports. It’s also technological infrastructure like science, health, environment, education. India ranks No. 60 in education. It ranks No. 60 in health and environment. In total it’s ranked No. 57 in infrastructure. It has deteriorated by 3 positions relative to last year. Also the macroeconomic figures in India are not as strong as in China. I think the new prime minister is great news. I’ve been talking to Indian executives on our campus for the last two weeks and there is a very positive outlook. I imagine India will look very different in the coming years.
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