The United States fell from fourth to fifth place in global competitiveness, mostly due to its government debt, in the World Economic Forum's (WEF) annual report. This marks the third straight year it has declined.
To measure a nation's competitiveness levels, the report examines 12 primary factors including governmental institutions, education and job training, government debt and its ability to pay its debt, market efficiency, market size, and technological readiness and innovation.
The report states the reasons for the United States' decline were its lack of trust in politicians by business leaders, the government's unwillingness to remain neutral in the affairs of the private sector, wasteful government spending, a lack of transparency in the policy-making process, and burdensome regulations.
The biggest factor leading to the decline, however, is government debt.
“Over the past decade, the country has been running repeated fiscal deficits, leading to burgeoning levels of public indebtedness that are likely to weigh heavily on the country’s future growth,” the report states.
Among all G-7 economies, the United States ranked third in public debt as a percentage of GDP at 91.6 percent.
Among the United States' positive competitiveness attributes, the report cites the sheer size of the economy, “the largest in the world by far,” the university system and its ability to collaborate with businesses in research and development, the sophistication and innovation of U.S. companies, and flexible labor markets.
The report also said that the debate over raising the debt ceiling effected confidence in future economic growth worldwide.
“However, the middle of the year saw uncertainties regarding the future economic outlook re-emerge, as growth figures for many economies had to be adjusted downward and the political wrangling in the United States and Europe undermined confidence in the ability of governments to take the necessary steps to restore growth.”
The report happened to be released the day before President Obama is set to address Congress, and the nation, with a plan to create jobs and revive the economy. Early reports suggest he will propose $400 billion in new spending to be offset by spending cuts elsewhere in the budget.
Switzerland maintained first place in the rankings for the second straight year, followed by Singapore, Sweden and Finland.
Overall, the report shows stagnation among advanced industrialized economies that have become weighed down by public debt and inefficient governments, and improvement among many emerging markets. Singapore, for instance, is now ranked second and China, now at 26, has risen for the sixth straight year.
“We're seeing a convergence among emerging and advanced economies. The emerging markets are catching up and there is a convergence of scores with the advanced economies,” Jennifer Blanke, chief economist at the forum, told The Wall Street Journal in an interview.
The report mostly uses data collected by other international organizations, such as the United Nations, but also conducts its own survey of business leaders for the report.
The WEF is a Swiss non-profit organization formed in 1971 to improve global economic productivity. Its membership includes over 1,000 companies and businesses.
Best known for its annual meeting in Davos, Switzerland, the WEF, which is by invitation only, is well attended by global business and government leaders. This meeting is usually accompanied by protests from environmental groups who decry the “globalization” efforts of the WEF.
The United States' national debt is now over $14.7 trillion, with over $115 trillion in unfunded liabilities.