The numbers behind the numbers

The World Economic Forum recently published its annual Global Competiveness Report. Our continual slide from first in 2008 to fifth worldwide has received some coverage by the press, but no one has written about the underlying causes for the drop or given any meaningful insight into who the WEF is and how the rankings are compiled. The mainstream press has completely missed the story.

The WEF describes itself as an independent international organization committed to “improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas.” The rankings contained in the 544-page Global Competiveness Report are based upon a weighted average of 12 “pillars,” or components of competiveness, with well over 100 sub-components. It defines competitiveness as “the set of institutions, policies, and factors that determine the level of productivity of a country. … [T]he level of productivity, in turn, sets the level of prosperity that can be earned by an economy.”

While all of this sounds very academic, the WEF’s insights are worth discussion. Here is an excerpt from the report’s summary of the United States’ showing, with the numbers in parentheses referring to our rank among 142 countries:

The business community continues to be critical toward public and private institutions (39th). In particular, its trust in politicians is not strong (50th), it remains concerned about the government’s ability to maintain arms-length relationships with the private sector (50th), and it considers that the government spends its resources relatively wastefully (66th). In comparison with last year, policymaking is assessed as less transparent (50th) and regulation as more burdensome (58th). A lack of macroeconomic stability continues to be the United States’ greatest area of weakness (90th). Over the past decade, the country has been running repeated fiscal deficits, leading to burgeoning levels of public indebtedness that are likely to weigh heavily on the country’s future growth.

Our standing as a manufacturing giant has been in question for some time, but these rankings make that reality clear: As a percentage of gross domestic product, we rank 134th in exports and 140th in imports. We don’t make a lot of products to export, and we import things we don’t make.

As I said previously, the mainstream press completely missed the story – and it’s a big one. This report is an indictment of our government’s continuing diminution of our level of prosperity, a diminution that has been accelerated dramatically by the current administration.

Our problems are systemic and require basic reform of government, including:

• A truly balanced budget — done without gimmicks such as off-balance-sheet financing of Fannie and Freddie
• An agreement regarding the role of government – specifically what functions the federal government should continue to perform and what should be eliminated
• An agreement regarding the size of government relative to gross national product – if we can agree on the size (e.g., 18 percent) separate from how much we should spend on what, then we can force politicians to prioritize
• Budgets that reflect the limits imposed on overall size and the agreed role of government in our lives
• Reduced regulation and limitations on what unelected officials in the Environmental Protection Agency and other agencies can do to us
• Tax reform that produces a system to finance the agreed role of government, without redistribution and subsidies for chosen “winners”
• The end of all price supports

Transparency naturally will improve when the public sees our elected senators and congressmen debate spending priorities within budgets that have a finite maximum that cannot be exceeded. Imagine that. No alternative to raise taxes. No alternative to just spend more.

This report needs to get maximum visibility. We have a “global” body stating the obvious truth, a truth that this administration and liberal politicians want to ignore: Government is killing the economy.

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