To answer these questions, Harvard's Michael E. Porter, the Bishop William Lawrence University Professor, based at Harvard Business School, and two of his colleagues at the Institute for Strategy and Competitiveness (ISC), which Porter heads, have recently published the 2006 edition of the Business Competitiveness Index (BCI), part of the Global Competitiveness Report prepared in cooperation with the World Economic Forum (http://www.weforum.org/gcr ).
Initiated in 2001 and this year comprising 121 countries, the BCI ranks nations by their microeconomic competitiveness, identifies competitive strengths and weaknesses in terms of business environment and company operations and strategies, and assesses the sustainability of current levels of prosperity as measured by per capita GDP adjusted for purchasing power.
Based on these criteria, the
According to the study, coauthored by ISC scholars Christian Ketels and Mercedes Delgado, the high degree of US domestic rivalry brought about by intense local competition and facilitated by effective antitrust policy, plus accessible and sophisticated financial markets and a high capacity for innovation, are the key ingredients in the success of the
Porter and his colleagues found that the Chinese economy has faltered, falling to the middle of the pack at number 64. "
With a ranking of 27,
High-income countries that bettered their previous rankings the most include Hong Kong, with impressive improvements in management education, the efficacy of government boards, and local availability of process machinery; and Norway, which benefited from the increasing intensity of local competition, the availability of venture capital, and the efficiency of its legal framework.
On the other side of the ledger, among the high-income nations that fell in the rankings are
Among the middle-income nations whose rankings went up are
In the low-income category,
The BCI also analyzes the contextual factors of each country in the survey, focusing on the impact of political stability, location, and natural resource wealth. These factors, the authors point out, help to explain why the prosperity of nations can deviate from the level predicted by their competitiveness.
"True competitiveness," Porter and his coauthors write, "is measured by productivity. Productivity supports high wages, a strong currency, and attractive returns to capital - and with them a high standard of living. The world economy is not a zero-sum game. Many nations can improve their prosperity if they can improve productivity. The central challenge in economic development is how to create the conditions for rapid and sustained productivity growth." It's a process, they conclude, that's the proverbial marathon rather than a sprint.