U.S. is no longer most competitive economy in the world

U.S. economy The World Economic Forum’s global competitiveness report 2009/2010 said that Switzerland knocked the United States off the position as the world’s most competitive economy as the crash of the U.S. banking system left it more exposed to some long-standing weaknesses. Besides, the report showed that economies with a large focus on financial services such as the U.S., Britain or Iceland were the losers of the crisis.

For the first time since the introduction of the index in its current form in 2004, the U.S. as the world’s largest economy lost last year’s strong lead, slipping to number two. Furthermore, trust in Swiss banks also declined. But in the assessment of banks’ soundness, the Alpine country still ranked 44th, while U.S. banks fell to 108 right behind Tanzania and British banks to 126 in the ranking, now topped by Canada’s banks.

The WEF bases its assessment on a range of factors, key for any country to prosper. The index includes economic data such as growth but also health data or the number of internet users. The study also factors in a survey among business leaders, assessing for example the government’s efficiency or the flexibility of the labor market.

The WEF applauded Switzerland for its capacity to innovate, sophisticated business culture, effective public services, excellent infrastructure and well-functioning goods markets. The Swiss economy dipped into recession last year, too and had to bail out its largest bank UBS. But its economy is holding up better than many peers and most banks are relatively unscathed by the crisis, which drove U.S. banks into bankruptcy.

The WEF said the U.S. economy was still extremely productive but a number of escalating weaknesses were taking its toll, the WEF said. Concerns were growing about the government’s ability to maintain distance to the private sector and doubts rose about the quality of firms’ auditing and reporting standards.

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