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The Global Competitiveness Report 2013-2014

When it comes to complex, dynamic systems there are certain criteria which determine a system's success.

What 'success' means depends on its nature, its internal operations, its interaction with the wider environment, and the specific challenges it faces, which in themselves are a function of what it does and what outside factors are able to exert an influence and to what degree. A fishpond deals with different issues compared to a forest, although there are no clear demarcation lines.

Human activity systems are similar as far as that overarching framework is concerned. "The 10 axioms of Life" and "The 10 axioms of Society" list the principle criteria.

The World Economic Forum has just released its Global Competitiveness Report 2013-2014, and what it says about a nation's competitiveness is especially pertinent to complex, dynamic systems (148 economies were surveyed).

One of the major functional components in such systems is the feedback loop, connecting both internal and external functional states with each other. This leads to a high degree of interdependence among the subsystems, so much so that each part should never be considered in isolation.

Here are six quotes from the Report that underline the significance of the phenomenon:

"Particularly important will be the ability of economies to create new value-added products, processes, and business models through innovation. Going forward, this means that the traditional distinction between countries being "developed" or "developing" will become less relevant and we will instead differentiate among countries based on whether they are "innovation rich" or "innovation poor." It is therefore vital that leaders from business, government, and civil society work collaboratively to create enabling environments to foster innovation and, in particular, to create appropriate educational systems." (p. xiii)

"This year's Report features a record number of 148 economies, and thus continues to be the most comprehensive assessment of its kind. It contains a detailed profile for each of the economies included in the study, as well as an extensive section of data tables with global rankings covering over 100 indicators." (p. xiii)

"THE 12 PILLARS OF COMPETITIVENESS - We define competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be reached by an economy. The productivity level also determines the rates of return obtained by investments in an economy, which in turn are the fundamental drivers of its growth rates. In other words, a more competitive economy is one that is likely to grow faster over time." (p. 4)

"Although we report the results of the 12 pillars of competitiveness separately, it is important to keep in mind that they are not independent: they tend to reinforce each other, and a weakness in one area often has a negative impact in others. For example, a strong innovation capacity (pillar 12) will be very difficult to achieve without a healthy, well-educated and trained workforce (pillars 4 and 5) that is adept at absorbing new technologies (pillar 9), and without sufficient financing (pillar 8) for R&D or an efficient goods market that makes it possible to take new innovations to market (pillar 6)." (p. 9)

"While all of the pillars described above will matter to a certain extent for all economies, it is clear that they will affect them in different ways: the best way for Cambodia to improve its competitiveness is not the same as the best way for France to do so." (p. 9)

"The relationship between demography and environmental/social sustainability is extremely intricate. Rapidly growing populations might be a source of environmental stress, leading to greenhouse gas emissions, high rates of soil erosion, and the extinction of species. If rapid population growth is not accompanied by environmental management, it can give rise to tensions between groups for the control of scarce resources and can therefore be a source of further social instability, creating a vicious circle."
(p. 60)

As can be seen, the authors emphasise the phenomenon's importance on several occasions and provide a set of tables featuring the ranking of countries in terms of the criteria used. A complex series of calculations is employed to correlate the results for the tables, one of the reasons being the respective position of countries along their evolutionary timelines.

The following diagram from the Report illustrates the main categories identified as being crucial to the overall competitiveness ranking (the "twelve pillars"):
Diagram of global competitiveness index
The "twelve pillars" making up the competitiveness index.

The first five places went to Switzerland, Singapore, Finland, Germany, and the United States, with Chad coming last. Australia is in 21st position.

Since many factors contribute to the final result there are 118 tables, ranking the 148 countries in terms of these particular factors. Below are excerpts from each, showing which came first, then Australia, and the last. Please refer to the Report's table headers for the precise meaning of the criteria.

Criterion
Best Country
Australia's Rank
Worst Country
Page Reference
Gross domestic product
United States
12
The Gambia
404
Population
China
46
Seychelles
405
GDP per capita
Luxembourg
5
Malawi
406
GDP as a share of world GDP
United States
18
Puerto Rico
407
Property rights
Finland
30
Venezuela
410
Intellectual property protection
Finland
21
Venezuela
411
Diversion of public funds
New Zealand
21
Venezuela
412
Public trust in politicians
Singapore
36
Lebanon
413
Irregular payments and bribes
New Zealand
20
Chad
414
Judicial independence
New Zealand
16
Venezuela
415
Favouritism in decisions of government officials
Singapore
27
Venezuela
416
Wastefulness of government spending
Qatar
56
Venezuela
417
Burden of government regulation
Singapore
128
Venezuela
418
Efficiency of legal framework in settling disputes
Singapore
30
Venezuela
419
Efficiency of legal framework in challenging regulations
Finland
30
Venezuela
420
Transparency of government policymaking
Singapore
51
Haiti
421
Business costs of terrorism
Slovenia
46
Egypt
422
Business costs of crime and violence
Qatar
37
Honduras
423
Organised crime
United Arab Emirates
27
Guatemala
424
Reliability of police services
Finland
16
Venezuela
425
Ethical behaviour of firms
New Zealand
19
Mauritania
426
Strength of auditing and reporting standards
South Africa
14
Myanmar
427
Efficacy of corporate boards
South Africa
7
Angola
428
Protection of minority shareholders' interests
South Africa
24
Chad
429
Strength of investor protection
New Zealand
57
Lao PDR
430
Quality of overall infrastructure
Switzerland
34
Angola
432
Quality of roads
United Arab Emirates
40
Moldova
433
Quality of railroad infrastructure
Japan
33
Nepal
434
Quality of port infrastructure
Netherlands
42
Kyrgyz Republic
435
Quality of air transport infrastructure
Singapore
30
Bosnia and Herzegovina
436
Available airline seat kilometers
United States
6
Lesotho
437
Quality of electricity supply
Hong Kong SAR
29
Lebanon
438
Mobile telephone subscriptions
Hong Kong SAR
82
Myanmar
439
Fixed telephone lines
Taiwan
16
Liberia
440
Government budget balance
Timor-Leste
75
Venezuela
442
Gross national savings
Timor-Leste
45
Guinea
443
Inflation
Ukraine
1
Iran
444
Government debt
Libya
34
Japan
445
Country credit rating
Norway
10
Zimbabwe
446
Business impact of malaria
Argentina
n/a
Angola
448
Malaria incidence
Turkey
n/a
Guinea
449
Business impact of tuberculosis
Norway
24
Swaziland
450
Tuberculosis incidence
Luxembourg
16
Swaziland
451
Business impact of HIV/AIDS
Bosnia and Herzegovina
33
Swaziland
452
HIV prevalence
Albania
45
Swaziland
453
Infant mortality
Hong Kong SAR
26
Sierra Leone
454
Life expectancy
Hong Kong SAR
9
Sierra Leone
455
Quality of primary education
Finland
22
Egypt
456
Primary education enrollment rate
Singapore
44
Liberia
457
Secondary education enrolment rate
Australia
1
Burkina Faso
460
Tertiary education enrollment rate
Republic of Korea
11
Malawi
461
Quality of the educational system
Switzerland
23
Libya
462
Quality of math and science education
Singapore
37
South Africa
463
Quality of management schools
Switzerland
29
Angola
464
Internet access in schools
Iceland
17
Chad
465
Local availability of specialised research and training services
Switzerland
23
Libya
466
Extent of staff training
Switzerland
30
Mauritania
467
Intensity of local competition
Japan
13
Angola
470
Extent of market dominance
Switzerland
36
Angola
471
Effectiveness of anti-monopoly policy
Finland
33
Angola
472
Effect of taxation on incentives to invest
Bahrain
80
Chad
473
Total tax rate
FYR Macedonia
109
Gambia
474
Number of procedures required to start a business
Canada
3
Venezuela
475
Time required to start a business
New Zealand
2
Suriname
476
Agricultural policy costs
New Zealand
20
Venezuela
477
Prevalence of trade barriers
Hong Kong SAR
25
Argentina
478
Trade tariffs
Hong Kong SAR
53
Iran
479
Prevalence of foreign ownership
Luxembourg
8
Iran
480
Business impact of rules on foreign direct investment (FDI)
Ireland
41
Venezuela
481
Burden of customs procedures
Singapore
16
Venezuela
482
Imports as a percentage of GDP
Hong Kong SAR
140
Brazil
483
Degree of customer orientation
Japan
36
Angola
484
Buyer sophistication
Japan
40
Guinea
485
Cooperation in labour-employer relations
Switzerland
103
South Africa
488
Flexibility of wage determination
Uganda
135
Uruguay
489
Hiring and firing practices
Hong Kong SAR
137
Venezuela
490
Redundancy costs
Denmark
49
Zimbabwe
491
Effect of taxation on incentives to work
Qatar
59
Italy
492
Pay and productivity
Hong Kong SAR
113
Uruguay
493
Reliance on professional management
New Zealand
11
Chad
494
Country capacity to retain talent
Qatar
37
Myanmar
495
Country capacity to attract talent
Switzerland
17
Venezuela
496
Female participation in labor force
Malawi
60
Algeria
497
Availability of financial services
Switzerland
21
Angola
500
Affordability of financial services
Hong Kong SAR
36
Libya
501
Financing through local equity market
Hong Kong SAR
8
Angola
502
Ease of access to loans
Qatar
28
Iran
503
Venture capital availability
Hong Kong SAR
19
Myanmar
504
Soundness of banks
Canada
9
Greece
505
Regulation of securities exchanges
South Africa
11
Angola
506
Legal rights index
Australia
1
Venezuela
507
Availability of latest technologies
Finland
23
Myanmar
510
Firm-level technology absorption
Sweden
14
Myanmar
511
FDI and technology transfer
Ireland
17
Libya
512
Internet users
Iceland
18
Timor-Leste
513
Fixed broadband Internet subscriptions
Switzerland
23
Sierra Leone
514
Internet bandwidth
Luxembourg
34
Haiti
515
Mobile broadband subscriptions
Singapore
6
Suriname
516
Domestic market size index
United States
17
Seychelles
518
Foreign market size index
China
32
Timor-Leste
519
GDP (PPP)
United States
18
Cape Verde
520
Exports as a percentage of GDP
Hong Kong SAR
133
Timor-Leste
521
Local supplier quantity
Japan
72
Venezuela
524
Local supplier quality
Switzerland
22
Angola
525
State of cluster development
Taiwan
37
Bosnia and Herzegovina
526
Nature of competitive advantage
Switzerland
34
Myanmar
527
Value chain breadth
Germany
105
Gabon
528
Control of international distribution
Qatar
55
Gabon
529
Production process sophistication
Japan
24
Burundi
530
Extent of marketing
United Kingdom
14
Burundi
531
Willingness to delegate authority
Denmark
15
Burkina Faso
532
Capacity for innovation
Switzerland
23
Burundi
534
Quality of scientific research institutions
Israel
8
Yemen
535
Company spending on R&D
Switzerland
30
Yemen
536
University-industry collaboration in R&D
Switzerland
15
Libya
537
Government procurement of advanced technology products
Qatar
57
Venezuela
538
Availability of scientists and engineers
Finland
34
Angola
539
PCT patent applications
Sweden
19
Zambia
540

It is to the credit of the Report's authors that factors were tested which enable the analyst to meaningfully compare and delineate from one type to another. For example, consider the entry "Hiring and firing practices" in the table above. Hong Kong received the highest score, Venezuela came last, and Australia's ranking is 137. A score of '7' stands for "extremely flexible" and '1' for "heavily impeded by regulations" (p. 490). In other words, high marks can be interpreted as low job security, and being at the bottom of the list means it is very hard for an employer to fire staff. Since Australia ranks 137th out of 148 and Venezuela came last, with the latter coming last in so many other areas as well (it has an overall ranking of 134 (p. 15)) the inference could be drawn that Australia's competitiveness is comparable to that of Venezuela's. Yet its 21st rank tells us this clearly not so.

Indicators referring to such factors as GDP per capita (Australia: 5), judicial independence (16), efficacy of corporate boards (7), inflation (1), secondary education enrolment rate (1), number of procedures required to start a business (3), soundness of banks (9), etc, speak of a relatively sound general infrastructure. That is to say, if an employer has difficulty dismissing someone, the chances are the employee might be given the chance to up skill. For that to happen the labour force needs to have the necessary potential which in the wider sense relies on educational standards and more personal options coming from a safer environment through greater stability. Since more training makes for a better work force still, the overall standard is raised: competitiveness improves.

On the other hand, a low-skilled work force will continue to be employed, the business suffers in a rigid environment and the options for improvement are stymied: competitiveness suffers.

Such feedback loops are a hallmark of complex, dynamic systems. Their subsystems are intricately linked so that a change in one is capable of affecting its functional neighbours, that is other modules which have a functional relationship with each other.

For that reason a tendency by some politicians to superficially modify a single circumstance - usually accompanied by spending considerable sums of tax payers' money - without considering its wider interdependency and possibly addressing some other instead - in the end far more effective one - leads not only to wastage but can make matters worse.

Most material on this website deals with the more fundamental, and hence general, aspects in the context of interacting functionalities which in their aggregate form determine the ultimate validity of their host system.

This Report represents the equivalent in the context of economic human activity systems and how they can be analysed according to their respective situatedness under the auspices of competitiveness.

On the global scale of humanity this is a most important characteristic defining us all. As such it points to the world of the future.

Reference:

P. Annoni, B. Bilbao-Osorio, J. Blanke, C. Browne, E. Campanella, R. Crotti, L. Dijkstra, M. Drzeniek Hanouz, T. Geiger, T. Gutknecht, C. Ko, X. Sala-i-Martín, C. Serin, The Global Competitiveness Report 2013-2014, World Economic Forum, Cologny/Geneva, 2013, accessed on internet 5 Sep 13.

6 Sep 2013


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