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U.S. Reclaims Post as Most Competitive Economy, But Trouble May Loom

Thanks to innovation and financial sector growth the U.S. is back on top, according to a new report, but other countries are catching up.
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The U.S. has clawed back from the recession and reclaimed its spot as the world's most competitive economy, but several other countries are catching up, according to a new report.

IMD's World Competitiveness Rankings, released Thursday, judge who's gaining and who's losing among 60 countries. The Unites States' recent success stemmed from a resurgent financial sector, ongoing technological innovation and a steady stream of successful companies. Switzerland, Hong Kong and Sweden rounded out the top 4. Last year, the U.S. was in the No. 2 spot.

The list's biggest winners--defined as economies that moved up five or more spots on the list since IMD first released competitiveness rankings in 1997--included China, Germany, Mexico, Switzerland, and Taiwan. The biggest losers, which dropped five or more spots, included Brazil, Greece, Ireland, Italy, Spain, and the United Kingdom.

The U.S.'s comeback and Europe's stagnation raise significant questions about the effectiveness of austerity measures like those undertaken in Europe, notes Stephanie Garelli, director of the IMD World Competitiveness Center, since growth is a prerequisite to competitiveness.

"In the end, the golden rules of competitiveness are simple: manufacture, diversify, export, invest in infrastructure, educate, support SMEs, enforce fiscal discipline, and above all maintain social cohesion," Garelli said in the report.

On this year's list, Asia showed the most growth in competitiveness, while Europe, most notably in the south, continued to lag. (Europe, in fact, has accounted for more than half of the index's "losers" since 1997.) The BRIC countries saw mixed fortunes, while Latin America saw a hopeful small boost in competitiveness.

"Generalizations are, however, misleading," said Garelli in a press release. "Europe’s competitiveness is declining, but Switzerland, Sweden, Germany and Norway are shining successes. Latin America is disappointing, but there are great global companies all over that region. Brazil, Russia, India, China and South Africa are immensely different in their competitiveness strategies and performance, but the BRICS remain lands of opportunities.”

China, ranked number 21 on the list, pulled on other countries in the region, prompting neighbors to redirect their exports from the U.S. and Europe to other emerging markets. In Japan, ranked 24th, the economic policies known as "Abenomics" were credited for the uptick in competitiveness.

Europe's most competitive nations, led by Switzerland (2) and Sweden (4), saw a boost thanks to export-oriented manufacturing, diversified economies, strong small and medium enterprises, and fiscal discipline. The UK and France, in contrast, have seen their dominant positions slip, and Italy, Spain, Portugal, and Greece most notably fell behind, the result of a failure to diversify industry or control public spending, according to the report.

Fortunes were mixed for BRIC countries, with China (21) and Russia (42) rising in the rankings, while India (40), Brazil (51), and South Africa (53) fell. Emerging economies, highly dependent on the global economic recovery, have been hindered by the slow road back.

Last updated: May 30, 2013

JULIE STRICKLAND | Staff Writer

Julie Strickland covers start-ups, small businesses, and entrepreneurial endeavors of all kinds for Inc. Her work has been published in Brooklyn Based and City Limits in New York, the Free Times in Columbia, SC, Real Travel Magazine in London, and Daegu Pockets in South Korea. She lives in New York City.




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