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Art Read
09-08-2009, 09:25 AM
Thoughts?

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Swiss topple U.S. as most competitive economy: WEF

By Sven Egenter Tue Sep 8, 3:10 am ET
GENEVA (Reuters) Switzerland knocked the United States off the position as the world's most competitive economy as the crash of the U.S. banking system left it more exposed to some long-standing weaknesses, a report said on Tuesday.

The World Economic Forum's global competitiveness report 2009/2010 showed economies with a large focus on financial services such as the U.S., Britain or Iceland were the losers of the crisis.

The U.S. as the world's largest economy lost last year's strong lead, slipping to number two for the first time since the introduction of the index in its current form in 2004. "We have been expecting for some time that it may lose its top-position. There are a number of imbalances that have been building up," said Jennifer Blanke, Head of the WEF's Global Competitiveness Network. "There are problems on the financial market that we were not aware of before. These countries (like the U.S. and Britain) are getting penalized now," she said.

Trust in Swiss banks also declined. But in the assessment of banks' soundness, the Alpine country still ranked 44th. U.S. banks fell to 108 -- right behind Tanzania -- and British banks to 126 in the ranking, now topped by Canada's banks.

The WEF bases its assessment on a range of factors, key for any country to prosper. The index includes economic data such as growth but also health data or the number of internet users.
The study also factors in a survey among business leaders, assessing for example the government's efficiency or the flexibility of the labor market.

The WEF applauded Switzerland for its capacity to innovate, sophisticated business culture, effective public services, excellent infrastructure and well-functioning goods markets.
The Swiss economy dipped into recession last year, too and had to bail out its largest bank UBS. But its economy is holding up better than many peers and most banks are relatively unscathed by the crisis, which drove U.S. banks into bankruptcy.

The WEF said the U.S. economy was still extremely productive but a number of escalating weaknesses were taking its toll.
Concerns were growing about the government's ability to maintain distance to the private sector and doubts rose about the quality of firms' auditing and reporting standards, it said.

BRAZIL LEAPS
Leading emerging markets Brazil, India and China improved their competitiveness despite the crisis, the report showed. But Russia saw one of the steepest declines among the 133 countries assessed, falling back 12 places to 63, as worries about government efficiency and judicial independence rose, the WEF said.

After years of rapid improvement, which took it to place 29, China now had to tackle shortcomings in areas such as financial markets, technological readiness and education as it could no longer rely on cheap labor alone to generate growth.

India, ranked 49th, was in turn well positioned in complex fields such as innovation but had still to catch up on basics such as health or infrastructure, the WEF said.

Brazil leapt by 8 ranks to 56th, as measures to improve fiscal sustainability and to liberalize and open the economy showed effects, the report said.

Among the top-ten, Singapore moved up to third from fifth, swapping positions with Denmark, which fell behind fellow-Nordic country Sweden. Finland as 6th and Germany as 7th stayed put while Japan and Canada overtook the Netherlands.

The WEF study named African countries Zimbabwe and Burundi as the world's least competitive economies. In the case of Zimbabwe, the WEF noted the complete absence of property rights, corruption, basic government inefficiency as well as macroeconomic instability as fundamental flaws.

For the full report click on: www.weforum.org/gcr

Milo Christensen
09-08-2009, 10:29 AM
"There are problems on the financial market that we were not aware of before. These countries (like the U.S. and Britain) are getting penalized now," she said.



Really? It's too bad that such a highly respected economist as Obama's chief economic advisor, Larry Summers, had this reaction in 2005:


There was a telling moment in 2005, at a conference held to honor Greenspan’s tenure at the Fed. One brave attendee, Raghuram Rajan (of the University of Chicago, surprisingly), presented a paper warning that the financial system was taking on potentially dangerous levels of risk. He was mocked by almost all present — including, by the way, Larry Summers, who dismissed his warnings as “misguided.”

Krugman has an interesting, but hard for a non-economist to follow, long article in the NYT Magazine entitled "How Did Economists Get It So Wrong?" (http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?pagewanted=1&_r=1)

Apparently it's not really about voodo economics, but about voodoo economists.

Cuyahoga Chuck
09-08-2009, 04:42 PM
Switzerland is a good place to hide money. Either from the tax man or from the people the money was stolen from. Dictators and demogogs love parking their illgotten dough with Swiss banks. That is what makes them competitive in banking. They are also very good with watches, cow bells and skiing.

David G
09-09-2009, 01:23 AM
Milo - Good post.

The Krugman article is a more detailed breakdown of the concept I posted here back in Februry of 2008. Do you remember this one? I even mentioned you by name ;)

http://www.woodenboat.com/forum/showthread.php?p=1772742&highlight=great+depression#post1772742

In Summers defense, he was more right than most... overall. But he too bought into the New Keynsian paradigm to some degree, which led him to the idiocy you quoted.



Mr. Read - It's not surprising, and I suspect it'll be temporary. The U.S. economy is, once again, showing some signs of resurgence. However, the world is growing smaller, and the other regions are growing stronger. I suspect the U.S. dominance cannot last forever. And it will be quite short-lived if we allow ourselves to spend too much time at either end of the pendulum. Keep in mind that the more we dampen the extremes of the swing, the less the pendulum has to swing the other direction to keep things in balance.

Milo Christensen
09-09-2009, 06:49 AM
That was a good thread. Probably because I stayed out of it.

It's hard, as I mentioned, for me to read economists talking about all the subtle variations in economic theory. And even harder for me to write about it.

But it seems to me it wouldn't be very difficult to use historical data on bubbles, busts, and recoveries and come up with a grand unified economic theory of restraining bubbles, preventing busts, and enabling recoveries. The predictive power available in some of the macroeconomic theories seems to have been used by those economists who really understand it to enrich themselves and their employers.

Those who don't seem to truely understand appear to me to be merely academics who couldn't possibly agree on a unified theory because then, most of them would be unemployed.

In the meantime, I guess, different administrations will employ economists from the competing schools of thought that fit their political agenda, none of which seems to be effective.

Vince Brennan
09-09-2009, 06:55 AM
Hell, Milo! It's only one day old... still plenty of time for you to annoy MM! Don't count it out yet, else you'll be contributing to the decline of US Productivity!

Milo Christensen
09-09-2009, 07:04 AM
sorry, vince, no comprendo posto.

Tylerdurden
09-09-2009, 07:07 AM
I think the real point is how far we have fallen to be where we are now.

David G
09-09-2009, 11:27 AM
td,

I have to disagree. At least to some extent. The U.S. economy has dipped, for sure. But that dip - while profound - is within the normal range of the pendulum swing. It is entirely correctable with a reasonable string of correct policy prescriptions. I suspect the underlying phenomena that's worrying you (and many others) is the fact that we are becoming less and less unique in our level of economic dynamism. Our position - alone - at the top of the hill is becoming less secure. While that is not necessarily all bad, it will be disruptive, and possibly wrenching for a while.

One piece of stringing together some correct decisions is recognizing that recovery requires a certain level of Keynesian fiscal policy. It has gone so far out of fashion amongst economist over recent decades that it'll be tough. One of the reasons I dropped out of my economics doctoral program was that I couldn't get any support for the work I wanted to do. It all had to be about mathematics... computers... statistics... econometric modeling... time series analysis. All marvelously useful, in the right hands, applied to the correct problems, having sufficient data in hand or developable... and taken with a grain of salt. Economists, however, at least in that era, were so hypnotized by the power of statistical analysis, and the pure beauty of the math, that they were rushing to apply this tool to every issue. Reminded me of the old adage: If the only tool you have is a hammer, every problem starts to look like a nail. I'm afraid I didn't endear myself to my professors when I got fed up, and began referring to this fervor as Mathematical Masturbation.

I think both Keynes & Friedman would regard this recent generation of religiously neo-classical twits as nothing more than cheerleaders and apologists for laisse-faire economics. As we have recently learned again, l-f makes a fine servant, but a poor master.

What we need at this point is less ideology, and more pragmatism.

Tylerdurden
09-09-2009, 12:03 PM
td,

I have to disagree. At least to some extent. The U.S. economy has dipped, for sure. But that dip - while profound - is within the normal range of the pendulum swing. It is entirely correctable with a reasonable string of correct policy prescriptions. I suspect the underlying phenomena that's worrying you (and many others) is the fact that we are becoming less and less unique in our level of economic dynamism. Our position - alone - at the top of the hill is becoming less secure. While that is not necessarily all bad, it will be disruptive, and possibly wrenching for a while.

One piece of stringing together some correct decisions is recognizing that recovery requires a certain level of Keynesian fiscal policy. It has gone so far out of fashion amongst economist over recent decades that it'll be tough. One of the reasons I dropped out of my economics doctoral program was that I couldn't get any support for the work I wanted to do. It all had to be about mathematics... computers... statistics... econometric modeling... time series analysis. All marvelously useful, in the right hands, applied to the correct problems, having sufficient data in hand or developable... and taken with a grain of salt. Economists, however, at least in that era, were so hypnotized by the power of statistical analysis, and the pure beauty of the math, that they were rushing to apply this tool to every issue. Reminded me of the old adage: If the only tool you have is a hammer, every problem starts to look like a nail. I'm afraid I didn't endear myself to my professors when I got fed up, and began referring to this fervor as Mathematical Masturbation.

I think both Keynes & Friedman would regard this recent generation of religiously neo-classical twits as nothing more than cheerleaders and apologists for laisse-faire economics. As we have recently learned again, l-fmakes a fine servant, but a poor master.

What we need at this point is less ideology, and more pragmatism.

We have one poster who resembles that description to a tee.;)

I think if you were to step back and look at the long view say since the collapse of the steel industry in the 70's it is clear how far we have fallen. The moon rush of the sixties was the last gasp of our development. The course steered after was into oblivion.