A few weeks ago I puzzled over the right’s persistent head case over the Swedes (link). Apparently somebody else who hasn’t been reading the script is the World Economic Forum, which places Sweden third in its Global Competitiveness Index [GCI, trailing Switzerland and Finland, but ahead of Denmark, Singapore and (envelope!) the United States (pdf here). Says the WEF:
The Scandinavian countries … share with Switzerland a broadly similar institutional and structural profile.The Nordic countries have better ranks on the macroeconomy pillar of the GCI, since they are all running budget surpluses and have lower levels of public indebtedness than Switzerland and, indeed, much of the rest of Europe. Finland and Sweden have the best institutions in the world (ranked 1 and 2, respectively) and occupy places in the top ten ranks in health and primary education.
Of the United States, the WEF says:
The United States … remains a world leader in a number of key categories assessed by the GCI, such as market efficiency, innovation, higher education and training, and business sophistication. However, growing imbalances have dented a number of macroeconomic indicators, and the levels of efficiency and transparency underpinning its public institutions do not match those of the most developed industrial countries.
[Emphasis added]
Elaborating, the report continues:
The United States remains in the leading position in competitiveness, ahead of Germany and Finland.The United States’ strength is greatest in the business environment, including domestic rivalry (rank 1 on “intensity of local competition” and “effectiveness of antitrust policy”), financial markets (rank 1 on “venture capital availability,” “local equity market access,” and “financial market sophistication”), and innovative capacity (rank 1 on “university/industry research collaboration,”“company R&D spending,”“local availability of specialized research and training services,” and “quality of scientific research institutions”).
And further:
The United States, the World’s center of technological innovation, with extremely well developed financial markets, produces secure, high-yielding financial assets that attract a reasonable share of global world savings and foreign official investment, equivalent to the current account deficit, which can thus be sustained for many years.What is unsustainable is the present growth of the US deficit as a share of GDP. Maintaining a constant share deficit may require some depreciation of the dollar and a reduction in the trade deficit. It will also require greater effort on the part of the United States to reduce fiscal imbalances. For Rogoff, the US deficit represents government borrowing and no longer supports high real investment. The United States is presently consuming 70 percent of the world’s net savings. Historically, current account deficits have tended to collapse at relatively low levels. A housing slump would slow the US economy, while
other countries are growing, reducing the US deficit. The overvalued dollar could drop up to 40 percent on a trade-weighted basis, reducing global output and precipitating a financial market crisis, soaring interest rates, with a concomitant severe impact on Europe and Japan. Budget deficits are ballooning, with rising costs for the elderly and for security. High government debt to GDP ratios and rising interest rates could precipitate emerging market debt crises and defaults.Accumulating global imbalances are now a substantial risk to the world economy, which only multilateral policy consultations could reduce.There has to be a massive appreciation in emerging Asia, and an immediate effort to balance the US budget.
The report adds that “The United States and Japan are notable as high-wage economies that still provide good value given their competitiveness.”
Let’s hope Sweden’s new center-right government doesn’t screw things up (uncalled-for snark: from what I read, the chances are that they will not).
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