WEF Global Competitiveness Report -- U.S. slips

September 27, 2006

This week, the World Economic Forum (WEF) released the Global Competitiveness Report. Switzerland captured the number one spot, while the U.S. slipped from number two to number six. Japan (7) and Germany (8) moved into the top ten, while Finland, Sweden, Denmark, and Singapore kept their same positions.

What it Means:
According to the WEF, a highly competitive country is one that has high productivity, and therefore high prosperity, return on investment and economic growth. There are three main factors that contribute to competitiveness:

• A country's fiscal, monetary and trade policies,
• How well its government works with business and the absence of corruption,
• How high its level of technology is, and its ability to innovate.

Based on these criteria, Switzerland ranks high because of its well developed infrastructure, scientific research, intellectual property protection and sophisticated business culture. The U.S. slipped to sixth because of concerns about its exorbitant defense and homeland security expenditures, high consumer debt and huge current account deficit. Japan and Germany moved into the top ten because of their excellent fiscal management and return to economic growth.

Action Steps:
This report is yet another support for what we have been saying all along: lower your allocation in U.S. funds, and increase your allocation in Euro-Pacific funds.

Source: World Economic Forum web page, CIA World Factbook