Opinion Editorial | |
| Monday, May 4, 1998 | |
Why the U.S. Economy is the Most Competitive |
The Institute for Management Development (IMD) in Switzerland annually publishes a report on international competitiveness. The latest report shows the U.S. with the world's most competitive economy, almost 20 percent above its next closest competitor, Singapore . Some of the economic powerhouses of earlier years, such as Germany and Japan, were judged by IMD to be barely half as competitive as the U.S. The competitiveness report cited privatization, deregulation, flexibility in labor markets and massive investment in new technology as key reasons for the U.S.'s high rating. These factors, the report states, are especially important in today's open and hyper-competitive business environment, where attractiveness is more important than aggressiveness. According to IMD, there has been a major shift in what constitutes competitiveness. In years past, aggressive countries like Germany and Japan thrived on exports and foreign direct investment. However, those countries that are most competitive today rely on attractiveness, aimed at luring inward foreign investment and keeping local companies from massively investing abroad. "Thus governments strive for a policy of attractiveness and countries fiercely compete with one another to create the most appealing business environment," the report says. The costs of not being attractive homes for capital are enormous. Countries that impose excessive taxes, maintain weak currencies and interfere with markets are punished immediately by the international financial community. Capital will flow to where it is safe and gets the best return. And for many international investors that now means the U.S. The IMD report notes that the capitalized value of all the companies located in Silicon Valley in California now exceeds the total value of all companies on the French stock exchange (about $450 billion). And despite the fact that costs in Silicon Valley are among the highest anywhere, 11 new companies are established there every week, one goes public every five days, and 62 new millionaires are created every day. In other words, productivity. That is why the U.S. can compete with countries where wage levels are considerably lower. Indeed, according to the Bureau of Labor Statistics, unit labor costs (wages adjusted for productivity) have actually fallen by seven percent in the U.S. since 1992, while rising 10 percent in Germany and 14 percent in Japan. In other words, rising productivity here caused the cost of labor per unit of output to fall. The IMD report is only the latest evidence that the nature of the world economy is changing. And those that have not changed with are being left behind. Source: Bruce Bartlett (senior fellow, National Center for Policy Analysis), May 4, 1998. For IMDıs World Competitiveness Report http://www.imd.ch/wcy/wcy_online.html Home | Support Us | All Issues | Social Security Debate Central | Contact Us |