28 September 2006

Forum sees threat to U.S. economy

The U.S.’s huge budget is not good news, said the World Economic Forum.

The Wall Street Journal reported the institute’s annual study of global competitiveness said the U.S. economy is the sixth most competitive in the world, slipping from first place in last year’s ranking.

The competitiveness study ranks countries according to a range of criteria—including macroeconomic policies, market regulations, technological development, education systems, and public institutions—that the forum believes influence an economy’s level of productivity, and thereby its ability to sustain economic growth over many years. The ranking combines economic indicators with the findings from a survey of business executives.

Serial budget deficits in the U.S. have led to rising public debt, which means an increasing portion of government spending goes toward debt service. That means less money is available for spending on infrastructure, schools, or other investments that could boost productivity.

Heavy government borrowing, which means competing for money in financial markets with the private sector, also tends to drive up businesses’ borrowing costs.

Middling scores went to the fast-growing emerging economies of the world considered to be changing the economic balance of power: India ranks 43rd out of 125 countries in the survey, China ranks 54th, Russia 62nd, and Brazil 66th.

Country rankings 2006-2007

1. Switzerland
2. Finland
3. Sweden
4. Denmark
5. Singapore
6. U.S.
7. Japan
8. Germany
9. Netherlands
10. U.K.
11. Hong Kong
12. Norway
13. Taiwan
14. Iceland
15. Israel

Source: Global Competitiveness Report, World Economic Forum