Council on Competitiveness Releases Competitiveness Index

The U.S. has stimulated export-led growth around the world while continuing to attract the largest share of foreign direct investment, according to a new Council on Competitiveness report, Competitiveness Index: Where America Stands. The total stock of foreign direct investment in the U.S. is now $1.6 trillion, about twice that of the next largest recipient and more than six times as much as China. Between 1986 and 2004, the U.S. received more annual flows of foreign direct investment than any other country in the world.



However, this expansion has been funded primarily through rapidly increasing foreign debt, coupled with high consumption and a return to federal budget deficits, the report cautions. Such imbalances should raise warning flags for the future of American competitiveness and global economic stability, which the study discusses in depth.



The report benchmarks two decades of U.S. economic data against emerging global economies. It confirms the U.S. has among the highest levels of productivity and standard of living, making it the most globally competitive among the world’s large economies.



With the tremendous economic growth the country has generated over the past two decades, nearly doubling gross domestic product since 1986, the U.S. remains the world’s largest economy. The U.S. had a 3.1 percent growth rate between 1986 and 2005, the report indicates. This growth rate outpaced that of other major economies, such as the European Union (2.4 percent) and Japan (2.1 percent).



Standard of living in the U.S. also remains the highest among major nations, the report states. Disposable incomes are up 37 percent and average household wealth is up 61 percent since 1986.



While the Competitiveness Index makes no specific recommendations, it highlights several key issues critical for America’s future competitiveness. Adequately educating the workforce is identified as a serious area of concern.



The report notes that 21st Century American prosperity depends on improved education as globalization alters the criteria for competitiveness. It cites data that show people with higher levels of education in the U.S. have seen rapid increases in income and wealth. Households headed by people with less than a college degree have seen their incomes fall on average over the past two decades.



Unlike in past decades, higher-order thinking and knowledge will trump industrial-age efficiency as traditional skills are becoming less relevant, the report concludes. The future also will require workers to be more adaptable because of the dynamic churn of jobs, companies and entire industries.