The Netherlands third among Europe’s most competitive economies
The Global Competitiveness Report 2018, recently published by the World Economic Forum (WEF), reveals that the Netherlands dropped to sixth place worldwide in this Global Competitiveness Index. This annual indicator of international competitiveness involved studies carried out in 140 countries. The Erasmus Centre for Business Innovation of Rotterdam School of Management, Erasmus University (RSM) is a partner institute of the WEF and collected data for the Netherlands.
The key findings of the report are:
1. The Netherlands was unable to retain its leading position in the European Union and now trails behind Switzerland and Germany.
While last year saw the Netherlands in 4th place, it has now been overtaken by Germany (3rd place) and Switzerland (4th place). Globally, the USA (1st place), Singapore (2nd place) and Japan (5th place) are more competitive. Professor Henk Volberda of RSM: “The Netherlands offers an excellent environment for competitiveness and innovation, a world-class infrastructure (4th place in the ranking), a healthy macroeconomic policy (1st place), an efficient government with strong institutions (4th place), and a well-educated workforce (6th place). But, compared to ‘super innovators’ like Germany, the USA and Switzerland, the Netherlands has lagged behind in the area of utilising ICT (19th place) and in the innovation capacity (9th place) of businesses and educational institutions.”
2. In addition to a conducive environment, the Netherlands has a very dynamic economy characterised by its openness and entrepreneurial spirit.
The Netherlands has outstanding institutions, especially when it comes to judicial independence, freedom of the press, open governance, protection of intellectual property, ethics and transparency. After the USA and Germany, the Netherlands has the most dynamic economy. This feature makes it relatively easy to establish or dissolve a company. There are more start-ups taking risks (7th position) and adopting disruptive technologies and new business models (9th position). Growth is also more and more realised by new innovative companies (scale-ups; 6th position).
3. The innovative capacity of the Dutch economy and investments in R&D lag behind in comparison to ‘super innovators’ like Germany and Switzerland.
The Netherlands performs well when it comes to producing academic publications (8th place) and knowledge sharing among businesses and with knowledge institutions (5th place). But the necessary R&D investments (19th place) are insufficient. There is also too little investment in the quality and reputation of research institutions (17th place), the diversity of the workforce is not used to its full potential (14th place), and the buyer sophistication to drive innovation is too weak.
4. The Netherlands has a well-educated workforce but difficulties in finding qualified personnel inhibit economic growth.
In the area of education and skills, the workforce occupies 6th place in the ranking. The Netherlands invests in human capital when it comes to graduates’ skills (3rd place), digital skills (4th place), workforce retraining (5th place), and critical thinking in education (7th place). But companies are finding it increasingly difficult to find well-educated personnel (15th place). The WEF expects that in 2022, half of the workforce will need new skills and knowledge.
5. The USA is in first place, with Singapore and Germany the runners-up. In the top 10, Japan (5th place) is the country showing the biggest rise in the rankings, while the United Kingdom exhibits the biggest drop, falling to 8th place.
The top 3 most competitive economies are the USA (1st place), Singapore (2nd place) and Germany (3rd place). The country rising the most in the top 10 is Japan (from 8th place to 5th) and the United Kingdom exhibited the biggest drop (from 6th to 8th).
6. Increasing protectionism (in the form of national regulations and higher trade tariffs) to protect domestic employment has a detrimental effect on knowledge sharing, innovation and the competitiveness of countries. In fact, these measures will lead to a decline in economic growth and an increase in economic disparity.
It seems that the limits of globalisation have been reached. While globalisation led to economic growth and reduced poverty in many countries (China, Vietnam), at the same time we see that there has been a strong increase in income disparity within countries. The USA has seen a very large increase in this disparity: the income of the top 1 per cent in the USA has increased by 20 per cent during the past 30 years, while the middle class has seen a significant drop in income. We see increased income disparity in emerging economies as well.
However, protectionism is not the solution for reducing this rise in income disparity. Open economies that fully participate in the global economy are the most competitive. Appropriate supporting policies such as progressive taxation, income redistribution, equal access to financial capital and an active labour market policy actually lead to a decline in income disparity in these competitive economies.
The top 10
6. The Netherlands
7. Hong Kong
8. United Kingdom
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