The 10 Most Competitive Countries in the World

Source: Thinkstock

Competition —  it’s the basis of our entire economic system, and even the biological systems that rule life on Earth. Competition is the most fundamental element of the free market system, and where many innovations and new technologies see their genesis. Through creative destruction and other means, the free market is constantly evolving, all because of different companies, ideas, and entrepreneurs in cutthroat competition with one another.

On a macro scale, the level of competition within a given economy can provide some valuable insight into the overall health of a particular economic landscape. Metrics like business dynamism and the unemployment rate are also important indicators, but both of those ultimately boil down to the level of competition actually occurring within an economy.

After all, if new businesses aren’t sprouting up to take on the incumbent powers, all while creating new jobs and innovating, then the entire system is seeing a breakdown at its most fundamental level.

America has always prided itself on being home to an incredibly competitive and complex free market system. As one of the world’s most competitive countries, the U.S. has been the breeding ground for incredible new technologies for generations — like automobiles, fast food, and even big-box retailers.

But what about the rest of the world? How do countries around the world stack up in their levels of competitiveness? The 2015-2016 World Competitiveness Report from the World Economic Forum has helped shine some light onto that very question.

From the report, the World Economic Forum sets its definition for what it means by “competitive” as such: 

“We define competitiveness as the set of institutions, policies, and factors that determine the level of productivity of an economy, which in turn sets the level of prosperity that the country can earn.”

Using that as a starting point, 12 pillars of economies are defined, which include infrastructure, education, and market efficiency. By crunching the numbers and associated issues within each area of the economy for 144 different countries, the World Economic Forum was able to reach a single metric for each country, and thus was able to rank them accordingly.

With that in mind, which countries are the most competitive and why? Read on to see the ten most competitive economies in the world, out of 140 that were examined.

10. United Kingdom

Peter Macdiarmid/Getty Images

Peter Macdiarmid/Getty Images

A relatively small, yet resilient and economically powerful European nation, the United Kingdom is home to a robust and rather competitive economy. Boasting a GDP of more than $2.5 trillion, the U.K. and its 64 million citizens are doing quite well for themselves. The country is rather limited in its reach as far as production because of its limited physical attributes, and its biggest downfall in the metrics came from the macroeconomic environment, which takes into account things like inflation and government debt.

9. Sweden

Source: Thinkstock

The Swedes take the ninth spot on the list this year — one better than last year — bolstered by a growing and resilient economy that has prospered over the past few decades. Undoubtedly, the end of the Cold War at the end of the 1980s helped Sweden gain even more traction on the world stage, and now the country boasts a GDP of almost $558 billion. Not bad for a country with less than 10 million citizens. The biggest knock against Sweden is its market size, which is limited, considering the country’s small physical limitations and population. Across all other pillars, the country held up strongly.

8. Finland

Source: Thinkstock

Sometimes called a ‘Socialist paradise,” the Finns apparently rebuke that argument handily, especially when it comes to creating and maintaining strong businesses and an economy. Finland benefited enormously from the fall of the Soviet Union, as can be seen in the meteoric rise of the country’s GDP following 1985. Finland’s biggest knock comes from its small market size. With a population of only 5.5 million, the entire country has as many people as many larger North American metro areas. It does rank well, however, in health and education, as well as institutions.

7. Hong Kong

Philippe Lopez/AFP/Getty Images

Philippe Lopez/AFP/Getty Images

Hong Kong, which is separated from China as a whole by the World Economic Forum, is home to the world’s seventh most competitive economy. The political situation in Hong Kong is messy, and why it gets the “SAR” designation, which stands for special administrative region. A former British colony until the late 1990s, Hong Kong is as robust as they come. For all its strengths in terms of infrastructure, institutions, and financial market development, where Hong Kong really falls short is in the innovation category, as well as market size and, to some extent, business sophistication.

6. Japan

Kazuhiro Nogi/AFP/Getty Images

Kazuhiro Nogi/AFP/Getty Images

If there is one country that has truly embraced free market economics over the past decade or so, it’s Japan. This Pacific island nation has seen its cities explode with huge population centers, and Tokyo has become one of, if not the biggest human settlements the world has ever seen. The Japanese have a GDP of roughly $4.9 trillion and rank very strongly across almost all economic pillars, particularly in health and primary education, as well as market size. Japan does take a big hit, however, when it comes to macroeconomic environment. Infrastructure is another strong piece of the Japanese economy, which is also home to the world’s top-ranked rail system.

5. The Netherlands

Mark Dadswell/Getty Images

Mark Dadswell/Getty Images

The people of The Netherlands are proud to have a robust and active economy – the fifth-most competitive marketplace in the world, in fact (up three spots from last year). With a small and concentrated population of almost 17 million, along with a GDP of $800 billion, the Dutch hold up well in the rankings and are particularly strong in the infrastructure category. All those canals and bicycle lanes account for something in the eyes of the World Economic Forum, evidently. The Netherlands does take a hit for the country’s market size and macroeconomic environment, and a little bit for its financial market development, which encompasses factors such as venture capital and loan availability.

4. Germany

Source: Thinkstock

The Germans take competition very seriously. Germany also saw dramatic economic expansion following the collapse of the Soviet Union and the end of the Cold War, as the nation’s GDP has grown nearly 400% since the mid-1980s. Germany’s strongest economic pillars are health and primary education, infrastructure, and macroeconomic environment. Where they do suffer a bit is in labor market efficiency and goods market efficiency, and to a lesser extent, financial market development. Perhaps the nation’s strongest economic statistic is its very low level of inflation, which tops the world’s rankings.

3. The United States

Source: Thinkstock

Ah yes, the Fly Fifty. We know that America is famous for its bustling free market system, largely driven by the highly competitive markets contained in it. So what did the World Economic Forum think? Well, the U.S. ranked very well for its market size and education, as well as for primary health. Where did it suffer the most? The glaring knock was in the macroeconomic environment category, largely due to high levels of public debt and unbalanced government budgets.

2. Singapore

Marty Melville/AFP/Getty Images

The tiny city-state of Singapore — known for its harsh drug laws and civil penalties — is also home to an incredibly tough and competitive economic landscape. Singapore’s economy has really hit its stride in the past few years, following the financial crisis and subsequent recession, seeing its GDP rocket all the way up to $295 billion. Overall, Singapore had strong scores among the 12 pillars used to determine its ranking, particularly in health and primary education, infrastructure, and higher education. Naturally, the biggest ding against it was due to market size, and to smaller degrees, business sophistication and innovation. Still, like Hong Kong, Singapore is a small but robust Asian city that is one of the most competitive economies in the world.

1. Switzerland

Source: Thinkstock

The European nation of Switzerland takes the top spot as the world’s most competitive economy for the second year in a row, according to the World Economic Forum’s methodology. Much like the army knives the Swiss are so famous for, the country’s economy is also multifaceted. A population of a mere 8 million people produces a GDP of more than $650 billion, and really, the only negative aspect of the country’s economy is its small market size. Otherwise, it has high marks almost across the board. Switzerland’s strongest attributes lie within its education and healthcare systems, as well as its infrastructure and labor market. The Swiss may not make a lot of noise on the international economic scene, but they sure are competitive — and efficient.

Follow Sam on Twitter @SliceOfGinger

More from Money & Career Cheat Sheet: