What does the world’s leading authority on global competitiveness have to say about the economic and business outlook for 2013? Stay tuned.
In January at PCMA 2013 Convening Leaders, Stéphane Garelli, a professor at the top-ranked International Institute for Management Development (IMD) in Switzerland and a leading expert on global competitiveness, will present his view of what we can expect in the economic and business environment in 2013 and beyond.
When Convene talked to Garelli in mid-October, the United States was in the final weeks of a tight presidential race. That left a lot unknown - except, the professor noted, the fact that the results of the election “will impact everybody else” in the world.
Whatever the outcome, Garelli is uniquely qualified to interpret what changes in the global economy will mean and for whom. A former managing director of the World Economic Forum in Davos, Garelli is founder of IMD’s World Competitiveness Center and oversees the publication of the center’s World Competitiveness Yearbook, which annually ranks the competitiveness of 46 nations using more than 300 criteria.
Convene spoke with Garelli about the general nature of global competitiveness and the role that meetings play on the world’s economic stage.
What are some of the most common misperceptions about competitiveness?
One is to reduce competitiveness simply to economic performance - which could be GDP growth for a country or profits for a company - where you compare yourself today with yourself yesterday.
You may improve, but actually, competitiveness is where you compare yourself today with others today. That is benchmarking, which is far more important. It is a little bit like if you are running a 100-meter race and you go from 14 seconds to 12 seconds after a lot of work and you are very happy with yourself. But if you are running 100 meters at 12 seconds, you are still the last one at the Olympic Games. So this is what we have tried to tell people: Benchmark yourself with the others.
The second misconception [is equating] wealth with competitiveness. You can be wealthy because you have a lot of natural resources, but not competitive; this would be, for example, the case of Saudi Arabia. You can be also very wealthy because of past competitiveness, what your parents and grandparents have done in a country. This mainly applies to Europe - the United Kingdom and France are very wealthy countries because they used to be very competitive.
The contrary also exists. You have some countries which are very competitive and not wealthy. For example, Singapore is only 50 years old as a country and they are doing very well, but they do not have so much accumulated wealth.
The big difference when I started 30 years ago, when we were the pioneers in the field, is that economics was about budgets, trade, and interest rates, and no more. Today, when you are speaking about the economic development of a country, you are speaking also about the education system, the efficiency of government, and the quality of the infrastructure, technology, research, and science. And all of this we have integrated into the concept of competitiveness, in the same way that a company has also to manage its corporate culture. There is much more than just selling products.
I was surprised that the U.S. was ranked so highly - second behind Hong Kong - in the 2012 IMD World Competitiveness Yearbook.
I think that the reason is the following: If you are looking at the U.S., we are sometimes a little bit obsessed only by the budget situation. It is true there is a budget deficit. It’s true there is a problem in public finance, not only at the federal level, but also at the state level. California has a very big problem. Certain cities are not in good shape. But what we should never forget is, number one, the United States is by far the largest country in the world in terms of technology. By far.
If you are looking at all of the innovations which have shaken our world during the past 10 years, they were all born in the U.S., whether it is YouTube, the iPad, Wikipedia, the human genome - you name it, it all comes from the U.S.
Secondly, the business efficiency and business competitiveness of the U.S. is still unmatched. I think we see more entrepreneurs, more companies with innovation, etc., in the U.S. today. Now, it doesn’t mean you don’t have it elsewhere, but it happens in the U.S.
Number three, there is a formidable resource of knowledge, of competence, of education at the higher level. Secondary school is another story, but at the highest level, university is still outstanding. And finally, the United States is a large country with all types of natural resources. Land, agriculture, is number one in the world. And now you start to discover gas is everywhere.
So people have a little bit of a tendency to sell themselves a bit short.
Do there have to be winners and losers in order for nations to be competitive?
I think this is probably the problem with the term “competitiveness,” but we haven’t found anything better. It is much more a win-win situation, rather than a zero-sum game. It is a bit like trade. Everybody has an interest to trade with each other and everybody gains from trade, because you can trade different products that the others don’t have.
Competition is the same. You can be very good at certain things which the others do not have. I think you raise the general level of welfare in the world. Yes, we are competing with China, with India, with Brazil, with plenty of countries, but they become wealthier by competition and then we can sell more products to them. I think it is much more a win-win game rather than anything else.
What role do you think that conferences play toward increasing the competitiveness of industries and institutions?
I think that their crucial role is really to put people together in a situation where they are not in a negotiation setting and where they are not supposed to deliver a statement to the press at the end. I think that those two things are very important, because very often people meet, but they meet when they have a crisis. They meet when they negotiate something, and they meet when people expect them to have an outcome. I think that a really good conference is where you can have people together with a very open mindset with the ability to contact each other in a very natural way, and without being obliged to make a statement at the end or to produce a result. I think this defines a good conference for me.
You were managing director of the World Economic Forum (formerly the European Management Forum) from 1974 to 1987. How did you measure the conference’s success?
Well, it was the pioneering phase - which was even more interesting, I have to say, because it is when you try to create something like that where you see a lot of interesting things happening.
My feeling was that the reason for our success was, number one, the fact that we spent much more time and emphasis on the audience rather than on the people on the stage. We went from the assumption that if you have the right people in the audience, you will get the right people on the stage. So we have been, right from the beginning, extremely exclusive in who could attend and who could not attend. And I think it proved to be something very successful.
The second thing is that we have tried to keep an environment which was rather secluded; that’s why it was done in Davos and not in Paris or London or New York. It was tried once in New York - it was not a success. Once you are there [in Davos], it is a bit in the middle of nowhere, two-hoursand- a-half from the closest airport. You are really committed just to meet the others. And wherever you go, you meet other people and so it makes it very easy to communicate, to make acquaintances, and also to discuss ideas.
Do you think conferences are playing a greater role in terms of their impact on economic development?