World Economic Forum turns its forensic gaze on competition

An economy that has kept growing for 21 years and managed to boost income and generally improve the well-being of its people at the same time, must have something going for it.

Indeed, according to IMF data, Australia (nominal GDP: just over $US1.488 trillion) is within $US5 billion or so of overtaking Spain ($US1.493 trillion) as the world’s 12th largest economy, despite Spain having more than twice our population. Spain’s economy is contracting and could fall by upwards of 2% this year, while Australia’s grew by 3.7% in the year to June. Growth here could dip to 3% or a bit below if the global economy continues to sag, but even that would see our economy grow to about $US1.530 trillion this year.

So, you might think that Australia is doing something right, that our recipe for extended success and sustained economic improvement is worth something? Not if you look to the World Economic Forum (WEF), the same mob who bring you the Champagne-on-ice Davos élite gabfest every January.

In its latest competitiveness report, the forum has Australia at 20th, the same as in 2011 when it fell four places. Moreover, it tut-tutted about “the rigidity of [Australia’s] labour market”, among other things. Naturally, The Australian Financial Review and The Australian were all over it, and Joe Hockey inevitably used it to bag Labor.

What’s the basis for the report? Well, apart from a few areas based on hard economic data, the report relies on the forum’s executive opinion survey of 13,000 business executives. Sounds impressive, but when you factor in the number of countries involved, that averages out to about 90 executives a country. How are their responses weighted to ensure they accurately reflect local businesses? We don’t know — WEF didn’t respond to Crikey’s request for access to the survey.

But as we’ve seen repeatedly throughout the year, people’s views about the government tend to strongly colour their responses to pollsters on the economy. And it’s clear from the WEF data that Australian executives are no different. Two egregious examples will suffice.

In 2007, under the Howard government, Australian executives rated their customers eighth in the world on their “sophisticated analysis of performance attributes” when they shopped, with a score of 5.76. But in 2012, Australian executives rated their customers 33rd in the world, on 4.2. From urbane sophisticates to slack-jawed yokels in five short years and one change of government. Maybe it’s all that internet shopping.

And when asked “to what extent do government officials in your country show favoritism to well-connected firms and individuals when deciding upon policies and contracts?”, business executives under the Howard government pronounced themselves pleased, rating Australia 4.41, or 15th. Scroll forward several years and under a Labor government, and we’ve fallen to 24th with a score of 4.18. That score places us behind Saudi Arabia and several other oil sheikdoms, where the entire state is based on nepotism and favouritism.

Indeed, a recurring theme of the WEF report is its lavish praise for the oil sheikdoms. It coos over Saudia Arabia’s “solid institutional framework, efficient markets, and sophisticated businesses” and how Qatar’s “high levels of security are the cornerstones of the country’s very solid institutional framework”; Bahrain, which had to call in Saudi troops to brutally suppress an Arab Spring uprising, rates ahead of Australia in “trust in government”, and Qatar’s judiciary is rated as more independent than Australia’s (another area where executives thought Labor had dropped the ball), even though it is hand-picked by the kingdom’s ruling family.

In fact, Qatar comes first or second in a big range of criteria. Qatari executives have a very positive view of their government. But the catch is, many Qatari executives are the government, being relatives of the ruling Al Thani family. And the oil sheikhdoms do very well on workplace flexibility, too. Which isn’t hard to imagine since they rely on imported developing world labour subject to often brutal exploitation.

Of course, when asked to analyse themselves, business executives’ forensic gaze is replaced with rose-tinted glasses. Asked to assess how ethical companies in their own countries were, executives from 76% of countries rated themselves in the top half of the world.

Predictably, coverage here focused on IR. And, sadly, according to executives, it’s no Middle Eastern paradise of workplace flexibility. Local executives ranked Australia 123rd on wage fixing, 80th on links between pay and productivity and 120th on ease of hiring and firing. All of which is in a week that confirmed Australia’s labour productivity has surged in the past 12 months, growing at its fastest level in 10years.

The question absent from the report, though, is: out of all the countries that WEF ranked ahead of Australia, where would you like to be doing business right now?

Switzerland? It came first, of course — the WEF is based there. That’s where the country’s central bank has spent the last year intervening daily in forex markets to keep its currency low to protect its exports. Second placegetter Singapore? It’s on the verge of recession after contracting in the second quarter this year; employment has shrunk for 14 straight months, and inflation is 4%. Bronze medalist Finland? That’s heading for a recession too — its economy contracted more than 1% in the second quarter. Unemployment is more than 8%.

How about the UK, mired in a depression? The US, struggling to get beyond feeble growth? Japan, facing its third lost decade and continuing political paralysis? Or Hong Kong? It pegs its currency to the US dollar and has done so for years.

Or the Middle East? Ask Leighton Holdings, which lost hundreds of millions of dollars in a badly timed move into the Dubai market. Ask Australian real estate executives still in jail in Dubai, and of course those thousands of expatriates who fled the Gulf when the GFC hit and they lost their jobs, so fearful were they of being jailed under local Sharia law for being unable to repay their debts.

Yes, a slump in China could see Australian growth halt completely. But if that happens, you can be sure that all of those economies will be well ahead of us on the downward curve.

Nor does the report tackle two of the key problems Australia has: governments determined to prop up local business and resist structural change, and the poor quality of its business management, which was shielded by a weak currency for too long.

The only good thing about the report is the format — it’s the best, most accessible and user-friendly international report we’ve ever seen, and should be a template for every local and international comparative analysis.

Too bad the data isn’t worth the pixels it’s displayed on.