Why a competitiveness benchmark when we do not understand the concept Terms of Trade
Our 88th position in the ranking of the latest Global Competitiveness report puts us somewhat below the halfway mark of 72. If one were to translate this ranking to a score from zero to 100 it means we scored 38.86% in the exam. It also means we flunked.
The Global Competitiveness report is compiled annually by the World Economic Forum. This year is was launched at the so-called meeting of the New Champions, held in Tianjin in China.
The report is a kind of comparative survey based on a set of 12 pillars deemed crucial to determine competitiveness, productivity, and economic prosperity. It covers 144 economies of the 257 or so functional economies in the world, so in itself it can be regarded as representing economic conditions for just over half of the world’s autonomous territories. It is an invaluable instrument to make broad comparisons, but as with most global surveys, it suffers from certain methodological impediments.
For instance, the United States is assessed as a single territory, but the European Union not. Many people may say this is an obvious definitional limitation but it does hint at the difficulty of meaningfully comparing territories, regimes and populations. The report however, also publishes per capita comparisons, ostensibly in an effort to make it more representative of actual existential conditions for those living in any particular jurisdiction.
In part, it is this breakdown to per capita level that enables long-time frontrunners like Switzerland and Singapore to maintain their very high rankings. But the USA still ranks in position number 3 and Japan at number 6, indicating that size does matter.
For the World Economic Forum, “competitiveness is defined 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.“
An extract sent to me this week by a friend shows we have improved by two positions. Last year we ranked 90th which would have given us a score of 37.5%, if it were an examination paper. Needless to say, we also also flunked then, but slightly worse.
It is interesting to note that in many of the fields we rank above the magical 72th position which I loosely define as 50%, in other words, halfway. Our institutional environment ranks 50th out of the 144 surveyed countries. I think that is a pretty respectable achievement. Under this pillar, the Global Competitiveness report mentions our well-protected property rights, an independent judiciary and a “fairly efficient government” of sorts.
Our transport infrastructure ranks at number 52 reflecting the well-known fact that per capita, and per square metre of land, we boast a relatively adequate transport backbone. Our highest single-field ranking is for financial markets at number 46. This fact has astonished many a visitor and an investor, until we point out we inherited it from South Africa. Then they understand the sophistication of our financial markets, but they also understand why exclusion and inequality are such burning hallmarks of local finance.
It is however our deplorable rankings in the social and societal categories that pulls us down to levels below a 50% score.
Believe it or not, despite the massive amounts of money absorbed from the National Budget by the votes for Health and Education, these two remain our glaring weaknesses in an institutional environment otherwise well managed and on par or exceeding regional standards. For health, we rank an extremely unhealthy 118th out of 144. We are almost down there right at the bottom with countries where health, or at least public health, is a dirty concept.
And although we have free primary education, our overall educational system only fetched a ranking of 119th out of 144. Now this is almost at the very bottom making me wonder what is happening to all those billions siphoned from the National Budget by health and education. It seems, purely from a return on investment point of view, that we are not getting a bang for our buck.
You may or may not deem the Global Competitiveness report as relevant but in a globalised world where meaningful comparisons are largely absent and where there are gaping data holes in many relatively big economies, having a well-researched benchmark should serve to help us form an unbiased view of our own progress in development.
Whether this will lead to policy adjustments, or “interventions” as the vogue concept claims, remains to be tested, perhaps in a future report closer to 2030.