NCPA - National Center for Policy Analysis

World Economic Foundation Rates Growth Potential

May 21, 1997

The U.S. has the highest growth potential of any economy on earth, and ranks third in the "most competitive" category of the latest Global Competitiveness Report -- behind Singapore and Hong Kong. The report by the Geneva-based World Economic Foundation ranks 53 countries in terms of their business climates.

Competitiveness refers to countries' labor markets, fiscal policies, tax and regulatory regimes, and openness to trade and investment. Growth potential refers to the expected absolute increase in total output.

In the "most competitive" category:

  • The U.S. this year moved from fourth to third -- replacing New Zealand, which moved to the fifth spot.
  • Canada moved from eighth to fourth -- reflecting progress in reducing its budget deficit.
  • Sixth through tenth places were held by Switzerland, Britain, Taiwan, Malaysia and Norway -- with Britain moving up from 15th last year and Norway sagging to tenth from seventh place.
  • Least competitive was Russia, with the Ukraine, Zimbabwe, Poland and Vietnam only slightly ahead of it.

In the greatest growth potential category:

  • China came in second to the U.S., followed by India, Japan, Indonesia, Britain, Brazil and Mexico.
  • Russia again ranked 53rd, with even worse prospects than Italy, Ukraine, Iceland, Luxembourg and Hungary.

Britain's dramatic jump up the growth list was due to slashing top tax rates and reducing labor market regulation that inhibits employment growth.

Corruption, incompetent government, over-regulation and protectionism hold back many of the low-ranked countries.

The U.S. ranked first among all economies on management skills, second on access to technology and third on both infrastructure development and the efficiency of financial markets. It would have nosed out Hong Kong for second place in the overall rankings were it not for mediocre scores on taxation, bureaucracy and civil justice, the report said.

Source: Peter Passell, "Singapore Ranked the No. 1 Economy," New York Times, May 21, 1997.


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