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Thursday, September 5, 2013

U.S. Global Competitive Stance-Improvements with Concerns


The Global Competitiveness Report 2013-2014 discusses some major shifts in the economy of both emerging nations and advanced countries. These changes have impacted the potential growth of developed nations and will require them to make structural changes, find value-added products, create new processes, develop business models, and drive innovation. The way in which countries are viewed from developing to developed will change to innovative poor and innovative rich. 

The authors of the report look at 148 countries and rank them on 100 criteria. Competitiveness is seen as 12 pillars based upon institutions, policies, and factors that influence prosperity and its ability to generate income. They are as follows:

Institutions: The quality of administrative and legal framework that can enhance or stifle growth based upon the quality of decision making and societal beliefs. 

Infrastructure: The development of infrastructure that enhances and connects economics for the movement of products and services. 

Macroeconomic Environment:  The high debt load and borrowing that limit the potential for growth through high interest rates and other cost challenges. It is recommended that the U.S. take urgent action on their debt loads in order to avoid an economic crisis in the future. 

Health and Primary Education: The health of the general population as well as the educational services they receive in youth will determine their competitiveness in the future. 

Higher Education and Training: Countries will need to move beyond simple process understanding to more complex global and theoretical understandings. 

Goods and Market Efficiency: Reducing those things that limit direct investment, movement of products, and opportunities for a competitive stance. 

Labor Market Efficiency: Ensuring that labor markets can adjust and change to the times without being stuck in rigid jobs that do not develop alternative skills. 

Financial Market Development: The development of efficient financial markets that put to the best use a nations resources. 

Technological Implementation: Nations must implement technology at increasing rates in order to become more efficient and effective. 

Market Size: Countries will need to continue to reduce trade barriers and improve upon trading partnerships to create economies of scale. 

Business Sophistication: The strength and sophistication of business models. Businesses will need to change their models to make themselves more effective. 

Innovation: Nations will need to develop both technical and non-technical innovations.
The report indicates that each of these falls into a category that encourages either the underlying factors to economic growth, efficiency of the system and the innovative nature of that system. As countries develop they move from factor driven to, efficient driven to innovation driven. Each stage is a complex change in the way in which people conduct business but also how they think about world markets. 

The U.S. moved from 7 in last year’s report to number 5 within the world economy in its overall competitiveness factors. They also rank 1 in efficiency factors indicating that U.S. businesses are constantly seeking ways to reduce expenses and find better uses of resources.  In terms of innovation and sophistication factors the U.S. ranks in the 6th spot meaning there is still work to do.

The U.S. has shown the ability to adapt to changing trends. For four years the nation has been declining but this year reversed its course. The deleveraging process in the banking industry has moved the nation from 31sth to 10th on this factor. Furthermore, there has been some improvement in the overall process of institutional factors and governance.  The upward momentum helps indicate that political and business interests are starting to see a path to mutual growth and development. 

There are some weaknesses the country is experiencing. There is a business lack of trust of politicians (50th), ability of government officials to maintain an objectionable arms-length relationship with the private sector (54th), perception that government spends its resources wastefully (76th), and the macroeconomic environment is weak (117th).  Much of the arguments appear to be centered on the business communities’ ability to compete in and develop under the economic and administrative framework. 

At present the top three concerns are tax regulations, tax rates, and inefficient government. To many in the international business community the U.S. has a high tax burden and complex tax system that pushes businesses to consider other markets. Likewise, those taxes that are being collected are not being put to progressive use with higher administrative and governmental costs. To further develop the economic market will mean that a simpler and more competitive tax structure should be developed as well as the encouragement of efficient government operations. 

The report also indicates that higher education is a catalyst to innovation rich countries that are likely to compete effectively on the market. To further develop the higher education system is an economic benefit to both workers and companies. Some emphasis on developing innovative solutions and bringing those to full bloom through commercial enterprises may be beneficial.  This includes the development of entrepreneurship and small cottage industry that help foster the larger business engine.

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