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• September 09, 2009

The global recession claims another victim - the United States is no longer the world's most competitive economy.

Switzerland, a beacon of relative stability during the past 18 months of worldwide economic turmoil, toppled the topsy-turvy U.S. from the No. 1 spot in the latest update of "The Global Competitiveness Report" from the World Economic Forum.

The WEF uses a wide range of metrics to measure competitiveness, which it defines as "the set of institutions, policies and factors that determine the level of productivity of a country" as a means to produce prosperity for its citizens.

The U.S. was panned in the report for too-close relationships between government regulators and the private sector, and for "the perception that the government spends its resources wastefully." Specifically mentioned were the massive additions to the federal deficit made by the Bush and Obama administrations, used to finance the Iraq war and economic stimulus.

Singapore ranked third, with Sweden, Denmark, Finland, Germany, Japan, Canada and The Netherlands rounding out the top 10.

At the other end of the list, corruption- and inflation-plagued Zimbabwe - a prime example of how not to run an economic or political system - somehow managed to move up one spot from the bottom. It was replaced by Burundi at No. 133.

The WEF said in its report that the three largest BRIC countries - Brazil, India and China - are among the few countries likely to improve their global competitiveness as a result of the recession. Some of the reasons: focus shift from export to domestic markets, greater efficiency by thinning out non-competitive producers, and more emphasis on improving education and other foundational issues.

Each of these three also have challenges. For China (ranked 29th in the WEF report), they include lack of technology and rigid labor markets. India (49th) has to deal with huge prosperity gaps between its thriving cities and its rural areas. Brazil (56th) also has inequality issues, along with upgrading its public and private institutions.

Russia, the fourth BRIC, is seen as one of the economies most likely to see negative ramifications from the recession. Its dependence on oil and natural gas exports expose it to more economic risk than the other BRIC components, which are far more diversified and have better financial markets. Weak property rights and government favoritism issues also hurt Russia (63rd, down 12 spots from a year earlier) in the rankings.

Emerging Europe on the whole saw its competitiveness fall as a result of the financial crisis after years of booming consumption paid for by borrowing from foreign banks.

All 492 pages of "The Global Competitiveness Report" for 2009-10 are available *here.

*This link goes to the World Economic Forum Web site. U.S. Global Investors does not endorse any information supplied by this website and is not responsible for any of its content. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

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