The World Economic Forum (WEF) recently released, The Global Competitiveness Report for 2012-2013 which attempts to measure relative competitiveness among 144 nations that provides “insight into the drivers of their productivity and prosperity”
It is important to highlight that the competitive ranking have been defined by the WEF as
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 earned 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 sustain growth.
Here is the roster of the top 30 most competitive nations.
Notice that the WEF says the ranking is about productivity, and not about “cheap labor”.
If competitiveness is about the “cheap labor” then the Philippines and Africa will be on top of the list. Unfortunately mainstream demagoguery has obstinately been focused on this, so as to justify the inflationist-interventionists doctrines.
Also notice that the most competitive nations have been developed economies. The GCI rankings have been closely aligned with the list of most economically free nations (Heritage Foundation: 2012 Index of Economic Freedom).
It is important to note that the above rankings are comparative or relatively based. This implies that changes in standings may not necessarily translate to advancement or deterioration in domestic policies but about quantified comparative measures.
First the good news.
According to the report, the Philippines leapt from 75th to 65th
Yet despite the huge gains, which obviously will be construed and used by the mainstream and political forces to grab credit as “achievement” for the administration, the Philippines trails vastly behind the ASEAN peers.
Curiously Africa’s Rwanda has even been ahead.
The bad news is that despite the remarkable gains, the gap in the per capita GDP figures has been widening relative to our developing Asian peers.
This means that yes the Philippines has shown material progress but such gains has not been enough to cope up with the scale of advancement in the region.
Lastly, the reason for the lag in productivity has been about over politicization of the domestic economy which has been manifested through a bloated bureaucracy, lack of infrastructure (which has been politically determined—see below), tax and labor regulations and high tax rates.
Of course corruption has still been the biggest deterrent to business. But, in truth, corruption signifies as symptoms of interventionism expressed through arbitrary policies and regulations, the bureaucracy, welfare-warfare state and state determined allocation of resources.
The informal economy, which is also a symptom of interventionism, takes up a huge chunk of economic activities. This is a clear manifestation of the failures of interventionism and of the incumbent political institutions.
Ironically the salutary conditions of the shadow economy could be suggestive of the alternative positive aspects of corruption, where people pay bribe money to authorities in order to do productive endeavors. This in spite of the major negative attribution on the survey.
The burgeoning informal gold mining sector, which comes mostly in response to recently imposed higher taxes should serve as a wonderful anecdotal example.
Yet the media and the social desirability bias afflicted pop culture cheers about the Php 407 billion proposed infrastructure or so-called “investment” spending without the realization that productive money will be diverted to the pockets of cronies (who will get the contracts), bureaucrats (who will pick the winners) and politicians (which most likely will be the source of electoral finance for the upcoming 2013 national elections).
chart from US Global Investors
All these supposed stimulus will only translate to greater inequality (enrichment of the political class and of the politically connected enterprises), more debts, higher taxes (for the middle class and the politically unconnected), more PRICE inflation (which will be blamed on the private sector) and importantly adds to the ballooning bubble dynamics driven by current easy money policies.
These so-called public work policies are a chimera, as the great Professor Ludwig von Mises explained.
The fundamental error of the interventionists consists in the fact that they ignore the shortage of capital goods. In their eyes the depression is merely caused by a mysterious lack of the people's propensity both to consume and to invest. While the only real problem is to produce more and to consume less in order to increase the stock of capital goods available, the interventionists want to increase both consumption and investment. They want the government to embark upon projects which are unprofitable precisely because the factors of production needed for their execution must be withdrawn from other lines of employment in which they would fulfill wants the satisfaction of which the consumers consider more urgent. They do not realize that such public works must considerably intensify the real evil, the shortage of capital goods.
For media and the dumb downed (“madlang people”) electorate which sees this as good news hardly understands that effects of so-called government stimulus would be based on the illusions of statistics [mainstream economic statistics are based on Keynesian formula constructs] and not from real growth.
Thus, temporary good news will eventually become long term bad news.
However, despite such realities, the relatively better competitive standings today will likely continue to improve. Again, this is hardly because of internal ‘business friendly’ improvements but because of positional standings which will mostly be determined by the political responses to the unfolding crisis abroad.
Again the WEF’s GCI
The global economy faces a number of significant and interrelated challenges that could hamper a genuine upturn after an economic crisis half a decade long in much of the world, especially in the most advanced economies. The persisting financial difficulties in the periphery of the euro zone have led to a long-lasting and unresolved sovereign debt crisis that has now reached the boiling point. The possibility of Greece and perhaps other countries leaving the euro is now a distinct prospect, with potentially devastating consequences for the region and beyond. This development is coupled with the risk of a weak recovery in several other advanced economies outside of Europe—notably in the United States, where political gridlock on fiscal tightening could dampen the growth outlook. Furthermore, given the expected slowdown in economic growth in China, India, and other emerging markets, reinforced by a potential decline in global trade and volatile capital flows, it is not clear which regions can drive growth and employment creation in the short to medium term
The big picture gives us an objective dimension of the real developments rather than fall for trap to political demagoguery
Updated to add:
I was unaware when I wrote a few hours back that the competitiveness issue accounts for today's main headline story.
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