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Posted at 03:48 PM ET, 09/05/2012

U.S. slips in World Economic Forum’s competitiveness rankings

The United States slipped yet again in the World Economic Forum’s competitiveness rankings this year — months before voters head to the polls.

In a summary of the factors that contributed to the United States’ drop from fifth to seventh place, the authors cite a continued lack of trust in government leaders on the part of the business community as well as businesses’ continued criticism of the public and private sectors. As for the lack of trust in government leaders, the authors write that it is “perhaps not surprising in light of recent political disputes that threaten to push the country back into recession through automatic spending cuts.”

The authors also zing U.S. spending priorities, writing, “the government spends its resources relatively wastefully,” a pillar under which the U.S. ranks 76th. Meanwhile, they continue, “a lack of macroeconomic stability continues to be the country’s greatest area of weakness.”

But the Forum offers a silver lining on the nation’s gray competitiveness cloud. “On a more positive note,” the authors write, “measures of financial market development continue to indicate a recovery . . . thanks to the rapid intervention that forced the deleveraging of the banking system from its toxic assets following the financial crisis.”


World Economic Forum founder and executive chairman Klaus Schwab. (FABRICE COFFRINI - AFP/GETTY IMAGES)
While the Forum’s report does not call out politicians by name or make any sort of endorsement, America’s slide in the rankings comes roughly two months before voters head to the polls — bad news for sitting lawmakers as voters are repeatedly being asked, “Are you better off now than you were four years ago?

In the 2008-2009 report, the United States ranked first.

While the United States has seen a decline, Switzerland, which plays home to the Forum’s headquarters, tops the list yet again.

“The country’s most notable strengths are related to innovation and labor market efficiency,” write the report’s authors, “as well as the sophistication of its business sector, which is ranked 2nd.”

However, in his introduction to the report, World Economic Forum Executive Chairman Klaus Schwab outlines that, when it comes to which region will spearhead future growth, it’s increasingly becoming anybody’s ball. The continued economic uncertainty worldwide, writes Schwab, and the anticipated slowdown in emerging market growth mean that “it is not clear which regions can drive growth and employment creation in the short to medium term.”

Later in the report, authors reiterate this sentiment, chalking the continued downward trend to a failure of leadership.

“Arguably, this year’s deceleration to a large extent reflects the inability of leaders to address the many challenges that were already present last year,” write the report authors. “The political brinkmanship in the United States continues to affect the outlook for the world’s largest economy, while the sovereign debt crises and the danger of a banking system meltdown in peripheral euro zone countries remain unresolved.”

Then, there’s Asia.

While China has maintained its 13th-place ranking and India slipped from 56th to 59th place, countries such as Turkey, which rose from 59th last year to 43rd, and Kazakhstan (72nd to 51st place) have seen improvements.

In total, the Forum’s report — the most high-profile publication the organization publishes — ranks 144 economies, the largest group of countries the Forum has ranked to date. The rankings are based on an index created by the Forum that incorporates a series of metrics, including 12 “pillars of competitiveness” — among them institution, infrastructures and, last but not least, innovation.

What do you think: Is the U.S. less competitive? Let us know in the comments.

The author is a member of the World Economic Forum’s Global Shapers community.

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By  |  03:48 PM ET, 09/05/2012

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