Friday, November 2, 2007

Attractiveness of business environment set to decline

In past posts (World Index of Economic Freedom), we have underscored the effect of a country's legal and regulatory environment on its citizens' well being. Now the Economist reports that the United States' is set to decline:
The comparative attractiveness of America's business environment is set to decline over the next five years as a result of mounting financial and macroeconomic risks, increased protectionism, security concerns and strained international relations. The Economist Intelligence Unit's business environment rankings for 2008-12 show America falling to ninth position, the lowest the country has placed since the launch of the business environment rankings in 1997.
I wonder if this is a related to the Democrats' likely success in the next election? (Equality vs. incentives: US tax reform, Taking from top 1% to give to the top 2-25%, Antitrust priorities of the next administration?) Or it is a function of the Republicans' stewardship of the government?

1 comment:

  1. A couple of items pertain to America's gradual decline in these rankings. I think the threat from a likely dem takeover is a factor, but not the primary driver. I think the fact that both major parties have allowed serious protectionist wings to develop internally within their parties and that this internal protectionism isn't being challenged as vigorously as conditions warrant is part of the macro problem. As the media falsely plays up fears that America is losing its competitive advantage due to "outsourcing," politicians of both parties will rally to empty populist rhetoric that will have horrible long term ramifications in the name of short term gain. One only needs look at the ridiculous poison being spewed by John Edwards, or go back and examine how much traction Pat Buchanan and Ross Perot got back in the 90's rallying against NAFTA.

    To make a long story short, it appears as if America occasionally flirts with a protectionist populism and that trying to understand how serious the threat from this is rightly beginning to cause concern in some business circles.

    This also needs to be coupled with the rise of London, Dubai, Hong Kong and Shanghai as alternatives to New York.