U.S. Most Competitive (Again)

Some day the U.S. will not be number one - but that day is not today. Again this year, the U.S. is the most competitive nation on earth. The interesting thing is that other top countries are all small. The U.S. is exceptional in combining the nimbleness of the boutique countries with the scale economies of a big population, continental sized power. We can be proud.

Competitiveness is a forward looking measure. It says a lot about a country’s FUTURE power and prosperity. That accounts for the anomaly of China ranking higher than Germany. Something like living standard is based mostly on past performance. The average German lives a much more comfortable life than the average person in China, but Chinese long term prospects are improving relative to the German.

An interesting feature is a listing of the 50 major factors that can affect competitiveness, followed by a chart with risks plotted on a graph of time and impact. The biggest long term risk to world prosperity is the demographic challenge in Europe and Japan. Demographic trends in Korea, Japan and even China are surprisingly bleak. Remember the old adage that if you do not have any kids, chances are your kids won't either. It is no longer funny in most developed countries. There will be significantly fewer Japanese, Chinese, Korean and Europeans by the end of this century, so much for the population bomb. Americans are doing okay. America is also exceptional among developed countries that its population is above replacement level. Demography is still destiny at least to the extent that w/o people, you do not have a future. It will be a pity if many of the great societies of the world go extinct as living cultures and go quietly into that good night.

BTW - the country with the lowest competitiveness ranking is Venezuela. In classic caudillo fashion, little Hugo is mortgaging his country's future to buy the adoration of the great masses of descamisados. In the end they lose more than their shirts. Unfortunately, it is too familiar.

The world will be very different in 50 years. If current trends continue, the U.S. will still be a big power, economically, culturally & politically. It may be the only one of the leading powers (economically, politically & culturally) of 1950 to still be great in 2050. However, in a globalized world, I am not sure the definitions will make much sense anymore anyway.

Posted by Jack at May 10, 2007 8:39 PM
Comments
Comment #220050

The zenith before the fall, Jack, if we are not a whole lot more prudent and fiscally responsible than we have been these last 6 years.

But, I share your pride. It is still one of the greatest nations on earth to be born in, or to become a citizen in.

It would be so much of a relief if the American middle class could once again have confidence that their children will do at least as well as their parents. But, that prospect diminished quite a bit in the last 10 years.

Like Bernanke said: ‘The time to take action on the future entitlement crisis and revenue shortfall situation we face is 10 years ago.’

Living in the greatest nation without health insurance or only a a couple paychecks from poverty or losing one’s home, is little consolation. If anything, it makes awareness of America’s competitive status that much more painful.

Posted by: David R. Remer at May 10, 2007 9:16 PM
Comment #220051

David

We will address entitlements as soon as the Democrats, the AARP & the various lobbyists allow the debate.

I noticed Paul on the blue side published a list of Dem proposals that include private accounts for everybody. Maybe the time is approaching.

There is reason to be more optiministic than you are. Competitiveness is a forward looking measure. The problems anticipated in the future are already figured in.

Posted by: Jack at May 10, 2007 9:22 PM
Comment #220055

So is capitalism an economic model or what life boils down to?

To the point above and in previous posts, with 130 men for ever 100 women in China, I think they’ll give us a run for the money! Nothing speaks towards competition more than trying to win the heart of woman!

OK I am being overly simple, however, can you imagine the lengths to which Chinese men will go in order to distinguish themselves? I guess the question there is will the great Chinese experiement of combining capitalism with communism work in their favor?

Posted by: Honest at May 10, 2007 10:25 PM
Comment #220058

Jack
Oh come on.Hugo ain’t that bad. Nationalizeing the oil industry? We should have in the thirties ,when we had the chance. Giving a leg up to the poor? Oh shudder.The other day you were outraged that the twice elected president of Columnbia was dissed for connections to death squads. Chavez was also elected twice. Cut him some slack also.

Posted by: BillS at May 10, 2007 11:14 PM
Comment #220059

Honest

The free market is a tool. It creates wealth and options, but people choose from among them based on their values. The free market cannot decide values. It just produces more options than any other system.

In the long run, the free market is incompatible with the type of authoritarian government the Chinese have. At least I hope it is. Something will have to give. The Chinese, BTW, do not currently have a free market. They have an authoritarian system using some market mechanisms. The Chinese state does not adequately protect private property or contracts and it does not allow anything like free trade. Their system is essentially modified mercantilism. It is good at applying innovations of others, but so far has not been very innovative.

It would be a tragedy for the future of freedom if they manage to remain authoritarian AND harness the power of the market mechanisms. Other communists were never able to do it. It was a blessing that communists were such screw ups. An efficient communists would be bad.

Re the gender ratio, that is also the case in India. This is a very interesting situation. Never before in history have we faced such a situation. Wars often resulted in skewed sex ratios, but there were always more women than men during the childbearing years. What you have in China is almost a frontier ratio, but it will be nationwide. I do not think this grand experiment will end well.

Posted by: Jack at May 10, 2007 11:16 PM
Comment #220060

BillS

Re Hugo - He is like the guy who moves into a well furnished house. He finds lots of stuff there. He can give it away and for a while be a hero. But he does not have the capacity to create wealth. Venezuela is living off the wealth created in the past. With the high price of oil, the old investments are making big bucks, but there is no next generation of wealth creation.

You may have noticed my Peron reference. Argentina was once among the world’s richest countries. Authoritarian populist socialism made it into a basket case. It still has not recovered.

There are some things you just cannot have. It is not an option to create wealth if you redistribute it faster than you make it. Hugo can live off oil wealth, but he is destroying his capacity to create wealth in general. It will take a while for the machines to wear out and the good habits to die, but it will happen. By then Hugo will be gone and somebody else will get the blame.

BTW - I diss Hugo because he is an enemy of my country AND he is screwing up his own and we will get blamed. Otherwise, I don’t much care what he does. Uribe is a friend of ours and he is improving his country. If there is slack to be given, I know who should get it.

And Venezuela IS at the bottom of the list. I did not make that up. I would have commented on whichever country was worst. It happened to be Hugo’s and he is largely to blame.

Posted by: Jack at May 10, 2007 11:27 PM
Comment #220062

Jack, agreed we have not seen the like.

During a class on doing business in China there were several students vocalizing their concern with China’s human rights violations. They were stating their concern with how a country so large was moving towards capitalism when China has not embraced any real reform in terms of the social equation.

I’ll never forget what the professor said, and to your own point … there is no government model available to the Chines government that they can refer to as to how to manage, manage as a government, 1.4 billion people. Simple point, big impact. No government has attempted to create itself around such a large population at anytime in history. So we are watching a first.

One of the world’s oldest societies is trying to go capitalistic, while remaining communist, while have the worlds largest population.

I would have to agree, we can hope they don’t figure out some of our tricks.

Posted by: Honest at May 11, 2007 1:00 AM
Comment #220064

Again this year, the U.S. is the most competitive nation on earth.

We are not regarded as the most competitive natio on earth anymore, and the current government is largely to blame. The widely respected World Economic Forum lists the United States in 6th place in global competitiveness behind Switzerland, Finland, Sweden, Denmark, and Singapore. Historically, we have been first, but not since 2005.

Out of 125 countries we are 40th in health care and education and 69th in macroeconomy, lower than Vietnam. Contributing factors leading to our lower rating include being the world’s largest debtor, running a large budget gap, a current record deficit of 6.5% of gross domestic product, a high infant mortality rate, low life expectancy, and high prevalence of aids. We could have come in lower but the method heavily weights intangibles like innovation and gives less weight to basic requirements like fiscal responsibility.

Posted by: Max at May 11, 2007 2:28 AM
Comment #220067

Max

It depends on who is doing the counting and what criteria they use.

I always report on the World Economic Forum ranking too. They have similar countries near the top, although the actual top spot is sometimes different. You will, nevertheless notice, the same pattern. Other top counters are small. It is a cherry picking scenario. If we were to choose our best performing states, they would certainly beat most of the best performing countries.

The being large factor has a lot to do with some other measures. It is in this area that we are treated unfairly. We have the biggest national debt, but if you take into account the size of our economy, our Federal deficit is only a little more than 1% of GDP and has been dropping. This is very good, but here people use the raw figures. On the other hand, the U.S. is by far the most generous country in terms of foreign aid. We supply around 25% of all the foreign in the world. Here, however, critics use % of GDP.

America is a big country with lots of diversity, so you can find what you are looking for. Over the course of many years, the U.S has remained the world’s dominant economy. Often during this period pundits has predicted our imminent decline.

I wrote an article about how critical we are of our friends. I know I can always count on my fellow Americans to search through the statistics and find out ways to portray their country in the worst light.

Ask yourself this and give a true answer. If you were a reasonably intelligent 22 year old with an average education. In fact if you were the median person in the country, where do you think your prospects for a successful and healthy life would be the best? I think you could choose from among many of the top listed countries. The U.S. would (IS) certainly among them. I have been to many nice places in the world, but if I had to make a choice, there is no place I would choose over the U.S. if I had to promise to stay there for the rest of my life and earn my living in the local economy. We all know that this is true, no matter what any statistics say. That is why people make such an effort to get here, while few Americans would sneak out in the cargo hold of a plane. AND, BTW, the U.S. is always near the top in those statistical studies too.

Realism does not mean focusing only on the negative. It means looking at strengths and finding opportunities. There are lots of opportunities for anybody who looks.

Posted by: Jack at May 11, 2007 8:01 AM
Comment #220075

Jack, and Jack supporters on China, I think you are ethnocentrizing China. Would you say a Rhino is not as good as an elephant? Or, Buddhist not as good as a Australian Aboriginal wiseman? It is a classic case of apples and oranges.

You can no more compare China to the U.S. standard as compare Jupiter to Mars expecting one to morph to the profile of the other. It is such a monstrous and arrogant mistake for Americans to expect, demand, and even try to force other nations into our mold (Iraq as a case in point).

China will in all probability succeed in keeping their marriage of a centralized semi-republic government structure with a growing mixed capitalist and socialist economy. The international market place dictates their need to continue toward a mixed economy. Their extremely long history and vast population dictate their government structure.

Unless and until the international marketplace and or their population density changes radically, their course into the future is set, and success is the aim and objective of nearly every Chinese in that venture.

Just as Republicans are very willing to sacrifice privacy and personal liberty for security in some ways, so too are the vast majority of Chinese willing to sacrifice some liberty and choice for increased prosperity for their children and a more secure and stable future.

A prime mover in China psychologically is Mao’s revolution and the Rape of Nanking. It permeates every decision the Chinese make, and provides tolerance and even respect toward their government as long as they believe their government is actively pursuing courses to insure neither of those events ever reoccurs.

Putting down the Tianneman Square ‘insurrection’ is actually viewed positively by most Chinese. It smacked of Mao’s revolution and the death, displacement, and immense grief and stress the revolution brought to the Chinese people.

They have no choice but to pursue success in keeping a centralized and somewhat repressive government (by their standards) working harmoniously with a mixed economy of capitalism and socialism, just as America has no choice but to pursue success in keeping an open and liberal government combined with a mixed socialist and capitalist economy.

As an American, I could not tolerate living under the Chinese system. But, if I had been born, as I was in 1950, in China, I would likely be a strong supporter of the Chinese government and economy while seeking changes within the system that exists for the benefit of my offspring. And the people’s Congress would afford me that opportunity to work for change. Just as Americans don’t engage in insurrection if they don’t get their way in Congress, neither will the Chinese if the reforms they seek in government are slow to come or don’t come at all.

As long as the Chinese people experience hope for the future, and witness a gradual increase in prosperity for their children’s lives, they will be content to seek redress of grievances through the system that allows that hope and economic progress for their children to flourish.

As some have indicated above, China has very good prospects for succeeding on their chosen course, and in their manner. What that portends for America as a nation and her people who have committed themselves to a future of world engagement remains to be seen, but, Americans should be prepared for some status shifting as China overtakes the U.S. the latter half of this new century in many ways.

China is poised at the beginning of an era where seemingly unlimited potential lies before them, very much as the U.S. was at the close of WWII. They have vast human and land resources, incredibly fast growing educational system, a huge potential for success in the global marketplace, and being a relatively poor nation per capita still, immense potential for prosperity experienced by their people over the next several generations.

It would not, in my opinion, be a mistake for the U.S. to align itself as China’s key ally in developing and creating the kind of technologies that will help them overcome many of the great technological and industrial hurdles they face with such a burgeoning economy. The U.S. could profit handsomely in exports by taking such a position. It too would go a very long way toward maintaining and increasing political stability and cooperation between the two superpowers as well as the future unfolds.

I think it is a mistake beyond measure for America to view, treat, and design for an adversarial competitive relationship with China. First because we would lose in nearly every arena except militarily; and possibly even there as well if it came to war in which case both nations and the world at large would lose.

On this topic, I cannot allow the opportunity to pass to recognize that for all that Richard Nixon was not and failed to be, he was a genius and absolute visionary in his view of the future of China and American relations. And I am so very thankful to Pres. Nixon for my daughter’s and her children’s sake, for that part of his legacy.

Posted by: David R. Remer at May 11, 2007 11:12 AM
Comment #220114

David

We are working with China & we should continue to do so. We cannot solve the CO2 problem w/o the Chinese on board.

I do find it scary that they have managed what I thought was not possible: a market economy and a authoritarian state.

I will write some more re.

Posted by: Jack at May 11, 2007 8:08 PM
Comment #220169

Jack, China’s economy is far from being full market based economy. There are only sectors of their economy which are market based, and some of those are causing them real headaches in terms of the absence of regulatory and quality controls. Someone mentioned bad catfish exports as one example.

Posted by: David R. Remer at May 12, 2007 4:01 PM
Comment #220184

David

The Cultural Revolution was not market based. Those 20-30 million who died as a result of that and the great leap forward may be comforted that they died for communism, but we cannot ask.

Posted by: Jack at May 12, 2007 8:44 PM
Comment #220409

Jack,

We are working with China & we should continue to do so. We cannot solve the CO2 problem w/o the Chinese on board.

We cannot solve the CO2 problem w/o the most contributors on the board, period. That will be soon US and China. Not necessarily in that order, though.

Posted by: Philippe Houdoin at May 15, 2007 10:59 AM
Comment #220461

Jack said: “The Cultural Revolution was not market based.”

I haven’t a clue what you are talking about. Of course the Cultural Revolution of Mao was not market based. Where are you coming from?

Posted by: David R. Remer at May 15, 2007 7:51 PM
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