Global economy at risk a decade on from financial crisis, says WEF
Tuesday 26 September 2017 23.01 BST
The 10th anniversary of the worst downturn since the Great Depression finds the global economy at risk of a fresh crisis and ill-prepared for the disruption likely from the robot age, the World Economic Forum has warned.
The body that organises the annual gathering of the global elite in Davos each January used its annual league table of competitiveness to stress that the failure to push through growth and productivity-friendly policies since the crash of 2007-08 had jeopardised chances of a sustained recovery.
WEF sources said recent Bank of England concerns about a potential consumer debt crisis were timely since there was evidence that the global banking system was less sound than before the financial crisis and that conditions were deteriorating in some parts of the world. Last month, the International Monetary Fund warned of a “dangerous” growth in China’s debt.
The WEF said there was also a need to combine labour market flexibility with enhanced rights for workers, with countries that had managed to do so enjoying higher employment and lower levels of inequality. Zero-hours contracts were a “sticking plaster” rather than a long-term solution, it added.
According to the 12 criteria used by the WEF, Switzerland retained its place as the world’s most competitive country in this year’s standings. The next four countries in the table were the US, Singapore, the Netherlands and Germany.
The UK slipped one place to eighth, although the WEF said the decline was due to a better performance from other countries rather than the impact of the Brexit vote. The UK’s overall competitiveness score was the highest since the WEF started using its current method of calculating competitiveness a decade ago.
The 12 categories looked at in the WEF report are institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation.
Britain’s weakest performance was in the macroeconomic environment where the persistence of a large budget deficit meant it ranked 68th in the world. In the other 11 areas, the UK was in the top 20, ranking fourth in technological readiness – the category highlighted by the WEF as essential if countries were to make the most of the new wave of innovation.
“Global competitiveness will be more and more defined by the innovative capacity of a country. Talents will become increasingly more important than capital and therefore the world is moving from the age of capitalism into the age of talentism. Countries preparing for the fourth industrial revolution and simultaneously strengthening their political, economic and social systems will be the winners in the competitive race of the future,” said Klaus Schwab, the founder and executive chairman of the WEF.
Further down the league table, there was little evidence that the pick-up in growth in the eurozone had boosted the competitiveness of the bigger economies or narrowed the region’s north-south divide. France dropped one place to 22, and there was little change in the rankings for Spain (34), Italy (43), or Greece (87).