The 2023 World Competitiveness Ranking, an annual list of the world’s most competitive economies, was recently published by the International Institute for Management Development (IMD).
It’s not good news for the American economy, or the United States in general, which dropped to number nine this year. The U.S. ranked third in IMD’s 2010 ranking and first in 2000.
Why has the U.S. fallen? What countries have jumped in front of the U.S., and what does this mean for our children and grandchildren?You will find more infographics at Statista
Denmark held first place this year after capturing the top spot last year. It wasn’t in the top ten in 2010 or 2000.
Ireland jumped to second place from eleventh place last year. Ireland was fifth in 2000 but wasn’t in the top ten in 2010.
Switzerland was seventh in 2000 and fourth in 2010, climbed to third last year and remained there this year.
Dan Mitchell is the President of the Center for Freedom and Prosperity and an economist. He notes, “The number of small economies — broadly defined as such by their GDP — in the top ten is striking.”
Statista reports: “The United States, with its federal system and slow-moving legislative process, explains the U.S. economy’s gradual decline from the top of IMD’s annual ranking.”
However, the U.S. had the same slow-moving federal system and legislative process when it was the top-rated economy every year from 1997 through 2009. Then the U.S. remained in the top three until 2017 and now sits in ninth place.
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So, what changed?
Judge Glock is a senior fellow at the Manhattan Institute. He says, “The main reason for the decline is the unprecedented explosion in government spending financed by deficits, which drains investment funds from the private sector and deters innovation and growth due to the fiscal overhang.”
During Covid, the federal government spent at an unprecedented peacetime pace. Glock adds, “Trump allowed spending to surge even during the 2017–19 period, and this allowed deficits to climb significantly.”
Dan Mitchell wrote an analysis of the 2020 IMD ranking. At the time, he wrote: “Let’s [take] a closer look at IMD’s (2020) estimates of what’s good and bad about the United States.
“We get very good (though declining in [2020’s rankings]) scores for economic performance and infrastructure (suggesting, by the way, that we don’t need a new boondoggle package from Washington).
“But we’re not quite as impressive when looking at business efficiency, and we’re mediocre when measuring government efficiency.”
He continued with his pre-election predictions.
“For what it’s worth, I’m not optimistic about America’s trajectory if Trump gets reelected.
“Biden, meanwhile, has a very statist policy agenda. So, if he gets elected, we have to cross our fingers that he doesn’t really believe in his Bernie-lite agenda.”
Didn’t Trump’s tax and regulatory policy do any good for the American economy, I asked?
Both Glock and Mitchell agree that the tax cuts were positive. It comes down to whether you believe that higher taxes discourage and lower taxes encourage behaviors or not. That is the principle behind the Laffer Curve, which I watch play out in real life, time after time, day after day.
It’s a subject for another time. If you’d like to read an excellent explanation of how Trump’s corporate taxes demonstrate the Laffer Curve at work, here’s a link to a column Dan Mitchell wrote on the topic.
Trump’s regulatory record is more of a mixed bag. “I give him credit, on net, for moving regulatory policy in the right direction. The good things he did regarding red tape outweighed the bad things,” concluded Mitchell.
In reality, regulations continued to grow under Trump, although at a slower pace than over the prior decade. The regulations killed were minor, although still annoying, burdensome, and costly. There were also no major regulatory changes. However, Mitchell also quotes a Council of Economic Advisers (CEA) estimate that “over the next five to ten years, the Trump administration’s deregulatory efforts will increase real annual incomes in the U.S. by $3,000,” which he acknowledges is worthy of skepticism and scrutiny.
Trump’s trade policies, particularly the trade war with China, were key factors that dropped the U.S. to third in 2020. Biden has continued the trade war. Relations with China have worsened, with no solution in sight between the two superpowers.
Under Biden, the tax code has become more complicated. Regulations and red tape have increased, which will reduce efficiency. Despite the rhetoric, the additional emphasis on DEI and climate legislation is unlikely to make the American economy more competitive.
The country that the Greatest Generation handed to the Baby Boomers allowed for the world’s highest standard of living and the greatest freedoms anywhere. Some will tell me that not everybody participated in those standards or liberties. Still, the fact remains that the United States has always been freer, and the American economy has provided more opportunities, than any other country. People worldwide continue to dream of coming here, as they have for hundreds of years. The question is whether the next generations will have as much freedom and enjoy the standard of living the past few generations have.
Andy Bloom is president of Andy Bloom Communications. He specializes in media training and political communications. He has programmed legendary stations including WIP, WPHT and WYSP/Philadelphia, KLSX, Los Angeles and WCCO Minneapolis. He was Vice President of Programming for Emmis International, Greater Media Inc. and Coleman Research. Andy also served as communications director for Rep. Michael R. Turner (R-Ohio). He can be reached by email at email@example.com or you can follow him on Twitter @AndyBloomCom.