Geo-Economics and Politics

How do you measure competitiveness?

The moon turns orange during a total lunar eclipse behind the CN Tower and the skyline during moonset in Toronto October 8, 2014. The eclipse is also known as a "blood moon" due to the coppery, reddish color the moon takes as it passes into Earth's shadow. The total eclipse is the second of four over a two-year period that began April 15 and concludes on Sept. 28, 2015. The so-called tetrad is unusual because the full eclipses are visible in all or parts of the United States, according to retired NASA astrophysicist Fred Espenak.   REUTERS/Mark Blinch (CANADA - Tags: SOCIETY ENVIRONMENT CITYSCAPE TPX IMAGES OF THE DAY) - GM1EAA81KI601

The Fourth Industrial Revolution is radically altering what it means to be competitive in 2018. Image: REUTERS/Mark Blinch

Emma Charlton
Senior Writer, Forum Agenda
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Competitiveness Framework

How do you measure competitiveness?

No, we’re not talking about sporting glory or clambering up the corporate ladder, we’re talking about economic competitiveness, or what sets a country up for success.

Those factors are evolving as new technologies bring sweeping change. In this way, the Fourth Industrial Revolution is radically altering what it means to be competitive in 2018, and it’s this that the World Economic Forum’s new Global Competitiveness Index 4.0 framework seeks to capture, with new calculations that assess how future-proof different economies are.

“It’s a complete overhaul of our previous methodologies,” Thierry Geiger, head of research and regional impact at the Forum said in an interview. “It’s not only in the frontier topics, like innovation or business dynamism, we also look at the factors that are the bedrock of society, like social capital and trust.”

 12 factors that drive competitiveness.
Image: Global Competitiveness Report 2018, World Economic Forum

Top of the list was the United States, with 85.6 points out of a potential 100. It was followed by Singapore, Germany, Switzerland and Japan.

As technology disrupts and redefines the way we work and live, the report measures the aspects that are most important for long-term growth, putting emphasis on less tangible factors that are becoming more important. Key drivers include how well a nation is braced for change and the adaptability and agility of all stakeholders, including the government.

“The index shines new light on some of the secrets behind the innovation capacity of certain countries,” Geiger said. “Why it is that there are only a few innovation powerhouses in the world and so many other countries are just unable to innovate and derive growth from innovation?”

Based on 12 drivers of productivity, or “pillars”, the framework emphasises factors that will become more significant as the Fourth Industrial Revolution gathers pace, including human capital, agility, resilience and innovation. The result is a composite that takes account of 98 individual indicators.

Economies’ scorecards take account of 98 individual indicators.
Image: Global Competitiveness Report 2018, World Economic Forum

“The US features in the top three in seven categories, including in innovation, business dynamism and entrepreneurial culture,” Geiger said. “The willingness to create something, the entrepreneurial spirit is strong there.”

Even so, not everything was positive for the US, with some signs of a weakening social fabric and worsening security situation, with the nation chalking up a homicide rate that’s five times the advanced economies’ average. It also lags behind in the Health pillar, with healthy life expectancy at 67.7 years, three years less than the average for advanced economies, and six years less than Singapore and Japan.

Image: Global Competitiveness Report 2018, World Economic Forum

“There is clearly room for improvement,” Geiger said. “The backlash against globalization and various forms of openness is detrimental to competitiveness.”

Have you read?

The report showed open economies are more innovative and have better-functioning markets. It also highlights how changes in technology should go hand-in-hand with social policies to help people cope with the changing world of work. The Nordic nations, the Netherlands and Germany were all highlighted as countries with a good level of competitiveness and also strong social support.

“Here, we are talking about redistribution, safety nets, retraining, reskilling policies embedded in the social safety net,” Geiger said. “All of these measures can help workers who have lost their jobs in dying industries and offer them a second chance in other sectors.”

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The views expressed in this article are those of the author alone and not the World Economic Forum.

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Geo-Economics and PoliticsEconomic Growth
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