U.S. ranks second in competitiveness

Switzerland still No. 1 as America moves up from third place

The U.S. is the second-most competitive economy in the world, its highest ranking in eight years, the World Economic Forum said Tuesday as the country’s innovation edge and business optimism bolstered its standing.

Switzerland retained its No. 1 ranking, according to the forum’s global competitiveness report for 2017-18. Rounding out the top 10 behind the U.S. among 137 countries are Singapore, the Netherlands, Germany, Hong Kong, Sweden, the United Kingdom, Ja- pan and Finland.

The U.S. moved up from third place last year. It lost its top status during the financial crisis and recession of 2007 to 2009 and fell as low as No. 7 in 2012-13 before steadily climbing the past few years.

Among the country’s biggest strengths are its ability to innovate, which relies on close collaboration between businesses and universities in research and development, says Daniel Gomez Gaviria, the forum’s head of competitiveness research and author of the report. Innovation has loomed as an increasingly more significant factor in the global economy in recent years, he says.

“The big strength of the U.S. is its innovation and business sophistication,” which refers to the efficient ways the country makes products and delivers them to customers, Gaviria says. The U.S. moved up to seventh and sixth places, respectively, in market efficiency and technological readiness, the report says.

The nation’s ranking was also lifted by the forum’s spring CEO survey, which appeared to reflect more optimism based on President Trump’s plans to cut taxes and regulations. Tax rates and tax regulations are still the two biggest problems identified by the CEOs.

But while the nation advanced in health and primary education (from 29 to 19) and in the strength of its institutions (from 27 to 20), it remains relatively weak in those categories. Institutions include areas such as the burden of government regulation, government corruption, public trust in politicians and corporate ethics. The U.S. also fell 12 spots to 83 in its macroeconomic environment. While the country still has the world’s most prosperous economy, it’s weighed down by

“The big strength of the U.S. is its innovation and business sophistication.” Daniel Gomez Gaviria, head of competitiveness research at the World Economic Forum and author of the report

the level of government debt and its credit rating, among other factors.

In its broader analysis of the global economy, the forum said that 10 years after the global financial crisis, capital requirements have helped make banks sturdier, but they haven’t fully recovered. There’s still too much private-sector debt, and the top global banks hold a disproportionate share of financial assets, with concentration “continuing to increase in the United States, China and some European countries.”

In the U.S. a “new wave of deregulation appears to be underway,” as the Trump administration and Republicans in Congress seek to dismantle major portions of the DoddFrank financial reform law.

Meanwhile, non-performing loans are rising in Asia. And as a result of high public debt and low interest rates, governments and central banks “have less flexibility to respond to crises than they did 10 years ago.”

And while innovation in emerging markets, particularly Asia, is rising, many consumers aren’t yet realizing the benefits, the study says. The report also encourages countries, especially those in Europe, to continue passing labor market reforms that make it easier to hire and fire workers, for example, which can boost the economy and lower unemployment.