Tags: Competitiveness

In 2002, the World Economic Forum asked me to design an index to measure the economic competitiveness of nations. For about two years I worked with Elsa V. Artadi (then a graduate student at Harvard University) and members of the WEF (mainly Jennifer Blanke, who later became the director of the global competitiveness team) to create what is now called the GLOBAL COMPETITIVENESS INDEX or GCI.

Up until that point, the WEF had two complementary approaches to analyzing competitiveness. The first, called the Growth Competitiveness Index, had been developed by Jeffrey D. Sachs of Columbia University and John W. McArthur of The Earth Institute. The Sachs-McArthur index measured the aggregate or macroeconomic determinants of competitiveness.

The second index, labeled the Business Competitiveness Index (BCI), was developed by Michael Porter of Harvard University and was first introduced in 2000. In contrast to the Sachs-McArthur index, Porter´s index focused more on the microeconomics or business aspects of competitiveness.

For a number of years, business leaders and decision makers that wanted to understand the competiveness of nations through the World Economic Forum´s publications had to deal with two different measures.

We thought that separating the macroeconomic and microeconomic or business aspects of competitiveness was misleading because individual businesses operate in a macroeconomic environment and, in turn, macroeconomic decisions affect individual businesses. One of the goals of the GCI was, therefore, to merge the two approaches into a single, unified, and global index that captured both the national and business components of competitiveness at the same time.

Another goal we set for ourselves was usefulness: the GCI had to be a useful tool for policy and decision making. It was not enough to produce a colorful ranking of countries every year. We wanted to contribute to improve the state of the world and, to achieve that, we needed a tool that could be used to guide policy and business decisions.

With these two goals in mind, we worked for over two years to design the new GCI. The first beta version of the GCI was presented in the 2004-2005 report. And it became the official index of the World Economic Forum in the 2005-2006 issue of the Global Competitiveness Report. Since then, the GCI has become the most widely used index of competitiveness around the globe.

Click here to read the original 2004-2005 article

Click here to read my “Executive Summary”