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U.S. losing competitive edge

By Aaron Smith, staff writer


NEW YORK (CNNMoney.com) -- The United States continues to lose its edge in international competitiveness, according to a report released Thursday by the World Economic Forum.

The U.S. was overtaken by Sweden and Singapore, according to the Global Competitiveness Report for 2010-2011, partly because of the sluggish economy and political uncertainly that have weakened the private sector. Switzerland tops the list, with Sweden notching up to second place and Singapore moving up to third, knocking the U.S. down to fourth.

The U.S. has been incrementally moving down the ladder. In the prior release of the Global Competitiveness Report, the U.S. held second place. But even then, it had been knocked out of the top slot by Switzerland.

"Switzerland retains its first-place position, characterized by an excellent capacity for innovation and a very sophisticated business culture," read the report, co-authored by chief advisor Xavier Sala-i-Martin of Columbia University in New York.

The report pointed to the United States' innovative companies, supported by a strong university system, as a strong driver of business competition.

But the nation was hampered by some weaknesses that caused it to lose ground in the ranking. They included the decline of private institutions, particularly in the weakening of auditing and reporting standards as well as corporate ethics, the report said.

The report also said the United States is hamstrung by its distrust of politicians.

"The business community remains concerned about the government's ability to maintain arms-length relationships with the private sector and considers that the government spends its resources relatively wastefully," read the report.

Furthermore, the report said "a lack of macroeconomic stability continues to be the United States' greatest area of weakness." The study pointed to "repeated fiscal deficits leading to burgeoning levels of public indebtedness" and said "this has been exacerbated by significant stimulus spending."

The remaining countries in the top 10 list of international competitiveness were Germany, Japan, Finland, the Netherlands, Denmark and Canada.

The Scandinavian countries performed well as a group. In addition to Sweden, Finland and Denmark all landed in the top 10, while Norway placed 14th.

Germany and the United Kingdom also showed signs of improvement. Germany moved up two notches to place fifth and the U.K. climbed one notch to place 12th.

Even though the People's Republic of China lagged far behind the top 10, placing 27th on the list, it still managed to edge up two places. The report said that China "continues to lead the way among large developing economies."

The rankings were based on publicly available data and the Executive Opinion Survey of 13,500 businesses in 139 economies, which was conducted by the World Economic Forum. To top of page

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