The Avenue

The 2012 Long Game for the U.S. Economy is Competitiveness

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Tonight, President Obama will accept the Democratic Party nomination with a speech in which he will lay out the case for a second term. The context, of course, is the volatility of the past four years in the U.S. economy and the entire global economy, marked by deep recession and weak recoveries in the developed economies and cooling growth in emerging markets.

What about the long term? After all, the long-term game on jobs is competitiveness. The newly released Global Competitiveness Report 2012-2013 from the World Economic Forum gives an idea how the United States compares with other 144 countries on competitiveness and if the United States is more competitive now than in past years.

Who are the top countries when it comes to long-term competitiveness?

For the fourth consecutive year, Switzerland remains No 1, which partly explains why it attracts vast inflows of foreign money, especially in the wake of the Eurozone crisis. Singapore maintains its second place in the rankings, with other Asian countries performing strongly− Hong Kong (9th), Japan (10th) and Taiwan, China (13th). Among the BRIC countries, China tops the ranks (29th), even that it has been losing ground since last year.

The competitiveness index also helps explain the Eurozone’s on-going problems and Europe’s as a whole. Six out of the top 10 best performing countries are in Northern and Western Europe, while Southern Europe looks more like some of the Eastern European economies. For example, Greece ranks 96th among the 144 analyzed countries, a rank below Serbia. As the report reveals, there is a clear “competitiveness divide” within Europe that no debt deal will heal.

For the United States, the story from last year repeats itself. The United States lost another two spots in the competitiveness ranking, switching places with the Netherlands. There is a clear downward trend going on; the United States has been on the decline since the index was first released in 2005. As I explained in a previous piece, one of the main U.S. competitiveness problems is government effectiveness. In addition, the report explains that “trust in politicians is not strong (54th), perhaps not surprising in light of recent political disputes that threaten to push the country back into recession through automatic spending cuts.” The lack of macroeconomic stability does not help either. United States ranks among the worse in the world on this aspect− 111th within the 144 countries studied.

 Hopefully, President’s Obama speech tonight will deal with these issues. In the meantime, states and metro areas across the United States are not waiting on Washington, D.C. to improve their competitiveness. States and metropolitan areas are taking the lead in restructuring their economies, by bridging party lines and bringing companies and government together. As my colleague, Bruce Katz said,  “The genius of American federalism is that it diffuses power among different layers of government and across disparate sectors of society.[..] When the federal government becomes polarized and fails to act on critical issues of national importance, states and metros can step in to take on larger roles.”

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