Global Indexes - What do they tell us?

These days the World Economic Forum released its Global Competitiveness Report. The big news is that USA is no longer number 1 and this privileged position has been taken by ... Switzerland.

Let's take, first of all a look to the first positions. After all rankings are built for that for knowing who are the winners and who are the losers ....

Global Competitiveness Index 2009-2010
Switzerland	1	5.60
United States	2	5.59
Singapore	3	5.55
Sweden	4	5.51
Denmark	5	5.46
Finland	6	5.43
Germany	7	5.37
Japan	8	5.37
Canada	9	5.33
Netherlands	10	5.32
Hong Kong SAR	11	5.22
Taiwan, China	12	5.20
United Kingdom	13	5.19
Norway	14	5.17
Australia	15	5.15
France	16	5.13
Austria	17	5.13
Belgium	18	5.09
Korea, Rep.	19	5.00
New Zealand	20	4.98
Luxembourg	21	4.96
Qatar	22	4.95
United Arab Emirates	23	4.92
Malaysia	24	4.87
Ireland	25	4.84
Iceland	26	4.80
Israel	27	4.80
Saudi Arabia	28	4.75
China	29	4.74
Chile	30	4.70
Czech Republic	31	4.67
Brunei Darussalam	32	4.64
Spain	33	4.59

The index is built on the base of 12 pillars:

Global Competitiveness Index 2009-2010
Basic Requirements
	1. Institutions (25%)
	2. Infrastructure (25%)
	3. Macroeconomic stability (25%)
	4. Health and primary education (25%)
Efficiency Enhancers
	5. Higher Education and Training (17%)
	6. Goods and Market efficiency (17%)
	7. Labor Market efficiency (17%)
	8. Financial Market Sophistication (17%)
	9. Technological readiness (17%)
	10. Market Size (17%)
Innovation and Sophistication Factors
	11. Business Sophistication (50%)
	12. Innovation (50%)

What is wrong with this view is that for a particular country pillars don't weight the same. Indeed if some countries can still rely on price differentials of availability of cheap labor in order to compensate for other parts of the index, developed countries mostly cannot.

Therefore, for these countries we should pay special attention to what is becoming a key element left to them in this competition, the one that can establish winners and losers, regardless of price.

Yes, we are talking about innovation. And yes, there, where matters for developed countries, USA is still number 1.

However, we can go a little bit deeper. Let's take the case of Taiwan.

In the Global Competitiveness Index, Taiwan is number 12, but in Innovation and Sophistication factors subindex, is number 8 and in the Innovation index (a subindex of the previous one) is number 6.

Of course, there are countries with just the opposite track record. For example one that I know very closely: Spain, number 33 in the Global Index, down to 35 in the Innovation and Sophistication Index and further down to 40 in the Innovation subindex.

The same day, we got the news that the Spanish government wants to slash the R&D budget for a full 37% because of the crises - really bad news with this track record.

But, as my friend Ulises Cortes says, 37% of very little is ... very little. So in absolute terms it doesn't change the picture that much.

Innovation and Sophistication Factors			Innovation
United States	1	5.71	United States	1	5.77
Japan	2	5.70	Switzerland	2	5.56
Switzerland	3	5.68	Finland	3	5.53
Sweden	4	5.53	Japan	4	5.51
Germany	5	5.47	Sweden	5	5.39
Finland	6	5.47	Taiwan, China	6	5.28
Denmark	7	5.28	Germany	7	5.11
Taiwan, China	8	5.25	Singapore	8	5.09
Netherlands	9	5.17	Israel	9	5.06
Singapore	10	5.15	Denmark	10	5.04
Austria	11	5.00	Korea, Rep.	11	4.84
Canada	12	4.96	Canada	12	4.80
Belgium	13	4.95	Netherlands	13	4.79
United Kingdom	14	4.92	Belgium	14	4.62
France	15	4.90	United Kingdom	15	4.60
Korea, Rep.	16	4.88	Iceland	16	4.55
Israel	17	4.87	Norway	17	4.53
Norway	18	4.83	France	18	4.50
Iceland	19	4.70	Austria	19	4.46
Ireland	20	4.63	Australia	20	4.43
Australia	21	4.61	Luxembourg	21	4.31
Luxembourg	22	4.58	Ireland	22	4.29
Hong Kong SAR	23	4.53	New Zealand	23	4.10
Malaysia	24	4.43	Malaysia	24	4.06
United Arab Emirates	25	4.41	Czech Republic	25	4.01
Czech Republic	26	4.40	China	26	3.93
New Zealand	27	4.37	United Arab Emirates	27	3.87
India	28	4.24	Hong Kong SAR	28	3.86
China	29	4.23	Slovenia	29	3.83
Slovenia	30	4.23	India	30	3.73
Puerto Rico	31	4.21	Puerto Rico	31	3.70
Cyprus	32	4.18	Saudi Arabia	32	3.70
Saudi Arabia	33	4.15	Portugal	33	3.69
Italy	34	4.15	Costa Rica	34	3.68
Spain	35	4.14	Cyprus	35	3.68
Qatar	36	4.10	Qatar	36	3.65
Costa Rica	37	4.08	Estonia	37	3.64
Brazil	38	4.08	Tunisia	38	3.64
South Africa	39	4.05	Indonesia	39	3.57
Indonesia	40	4.03	Spain	40	3.55