For those who are trying to get a handle on what is happening to the current global economy, the Global Competitiveness Index is not bad place to start.
Published by the World Economic Forum earlier this year, the 666 page report provides a detailed analysis of the factors that drive productivity, growth and human development in those 141 countries that account for 99 per cent of global economic output.
These factors include business dynamism, health, infrastructure innovation capability; labour market, macroeconomic stability and skills which, when put together, measure the competitiveness of each individual nation.
The world’s most competitive nation, which has leapfrogged over the USA from last year’s ranking, is the small island economy of Singapore although it still has work to do in terms of encouraging greater entrepreneurship and improving its skills base. In addition, the East Asia and the Pacific region is the most competitive in the world, followed by Europe and North America
Interestingly, all of the G20 advanced economies in the top ten (including the UK) have seen their performance decline since 2018.
Overall, the UK was ranked ninth in the World lower than European neighbours such as the Netherlands, Switzerland, Germany and Sweden but is first in the World for macroeconomic stability and eleventh for its highly educated workforce although it could do better in terms of developing its workforce by focusing on improving the employability of graduates, developing further digital skills and cultivating reskilling opportunities.
However, it is surprising that the UK is only 31st globally in terms of ICT adoption (and 79th in terms of use of high speed fibre internet) which demonstrates how much additional investment is needed if we are to compete with the best in the World.
At a global level, there are some important findings from the report that have considerable implications for all economies.
First of all, the evidence is clear that economic growth remains the most effective way to lift people out of poverty and improve their quality of life, especially in poorer countries where it is critical in education, health, nutrition and survival across populations.
Unfortunately, there is evidence that extreme poverty reduction is decreasing, global poverty is rising, hunger is increasing and nearly half of the world’s population is still struggling to meet basic needs.
For those of us living in the West, it is easy to forget that there needs to be a sustained effort by the richer economies to support the development process in poorer nations so that competitiveness and productivity can be improved and, with it, living standards raised.
The report also points out that after a lost decade in productivity, the global economy remains fragile and is ill-prepared for continuing shocks such as trade wars between the USA and China as well as the after effects of Brexit on leading European economies, especially the UK.
Indeed, with monetary policy having no more arrows in its quiver to stimulate growth - four of the world’s major central banks have already injected over $10 trillion between 2008 and 2017 – there is a growing consensus that investment-led stimuli may be the only action left to reboot growth in advanced economies.
Certainly, it will be interesting to see whether the forthcoming general election will see one or all of the major political parties focusing on investment in areas such as infrastructure, skills and R&D to ensure growth. In a UK economy that has underperformed for the last few years as austerity saw cuts in public expenditure, the encouragement of greater public and private investment in infrastructure, education and innovation would not only enhance productivity growth but also further support employment and broaden demand.
The report also suggests that there needs to be a drive towards greater decarbonisation in the economy through specific measures that incentivise investors into green sectors. It is a sobering fact that, despite the best efforts of some nations in developing efficient electric vehicles, growing installed capacity of solar and wind farms and energy-saving appliances, non-renewable resources still account for over 80 per cent of global energy consumption. Policies such as phasing out incentives for fossil fuels, incentives for green R&D and a more coherent approach to green public procurement could make a significant impact in addressing this.
Finally, another key challenge for all economies, especially developed nations, is to put technology and innovation at the forefront of economic policy whilst being fully aware of the adverse effect of technological changes on the workforce, particularly those in lower skilled jobs.
In that respect, the focus must be on an inclusion focused approach in developing a well-functioning labour market that protects workers rather than jobs through improving skills and the adaptability of employees.
Therefore, there remain key challenges to countries all over the World in improving their competitiveness and whilst the global economy is still slowing down, this report does highlight some of the key areas which policymakers should focus on in the future to achieve not only growth, but growth that is both sustainable and inclusive.