The United States remains the world's most competitive economy
but risks plunging into economic recession just like Japan in the 1990s
due to structural weaknesses, a new study warned Thursday.
The US once again ranked number one in an annual competitiveness
survey by the Swiss-based Institute for Management Development (IMD),
but risks being toppled from its plinth with both Singapore and Hong
Kong close behind.
"Singapore is closing the gap with the US and 2008 might be the
turning point where the US falls from its leadership of top
competitors," the IMD said in a statement.
IMD economist Stephane Garelli said the US situation bears
hallmarks of Japan's position 20 years ago, just before it slid into a
decade of recession, and when the Lausanne-based institute carried out
its first competitiveness survey.
"The past crisis in Japan bears some resemblance with the present turmoil in the US," he said.
In 1989, "Japan's competitiveness seemed unassailable, with a
strong domination in economic dynamism, industrial efficiency and
innovation."
"Then all hell broke loose: the stock market went into reverse in
1989, land prices collapsed in 1992, credit cooperatives and regional
banks came under attack in 1994, large banks teetered on the edge of
bankruptcy in 1997 and a major credit crunch occurred in 1998."
"Does this ring a bell?" Garelli asked rhetorically.
The US economy has been badly hit by the sub-prime mortgage crisis
and the International Monetary Fund has forecast a "mild recession"
with annual growth at a paltry 0.5 percent for 2008.
However, Garelli said the comparison with Japan was not watertight,
noting that "because of its openness, resilience and entrepreneurship,
(it) always seems to find the means to reinvent itself in ways that
Japan (and much of Europe) often lacks."
Washington has also learned from Tokyo's mistakes in some respects,
particularly in supplying liquidity to embattled financial
institutions, he said.
"The Federal Reserve and the Treasury were thus quick to realise
the magnitude of the risk, and will continue to take drastic action."
Significant challenges remain, however: "the structural deficits in
the US (balance of trade, budget and, as a consequence, national debt)
have ultimately to be addressed, otherwise the dollar will remain
weak," Garelli warned.
"In the 20 years that we have ranked and analysed competitiveness,
we have learned one thing: no nation, however competitive, is immune to
a breakdown, especially when it stems from the financial sector."
Ten European countries featured among the 55 surveyed, including
Switzerland in 4th place, Luxembourg 5th, Sweden 9th, the Netherlands
10th, Norway 11th and Ireland 12th.
Britain, France and Italy, the European members of the G8 group of
key industrialised economies, languished in 21st, 25th and 46th place
respectively.
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