Best Countries for Global Business

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By Barbara Kiviat, TIME

It's a centuries-old debate: how do some nations attain long-term economic growth and an ever higher standard of living while others don't? What determines whether people in your part of the planet live in McMansions, mobile homes or mud huts? In the 18th century, proto-economist Adam Smith pointed to the transformative effect of the division of labor. In the 19th, David Ricardo highlighted the benefits of trade. In the 20th, Harvard University's Michael Porter made the case for industry clusters. Geography, physical capital, technology, worker education--they've all taken a turn as the supposed silver bullet.

In that tradition, the World Economic Forum (WEF) each year handicaps the economic-development race. The Global Competitiveness Report tallies 113 factors that contribute to an economy's competitiveness--a buzzword that roughly boils down to how well a country is positioned to squeeze efficiency out of its businesses and attract companies and investment from abroad. Components of the resulting Global Competitiveness Index range from the quality of a nation's roads to the independence of its judiciary to the incidence of tuberculosis to how easy it is to hire an engineer. Parts of the index are culled from official data; many others are drawn from a survey of 11,000 international business executives. This year TIME partners with the WEF to bring you in-depth data on 37 key countries at time.com/globalbusiness

The Global Competitiveness Index is widely watched by countries that want to ferret out weak spots and by companies deciding where to invest. "We're taking the complexity of the world economy and simplifying it," says Jennifer Blanke, a senior economist at the WEF, "so that business and government can say, 'These are the obstacles going forward. What can we do to overcome them?'" In the overall ranking, the U.S. finishes first (same as last year) out of 131 countries, thanks in part to top scores in venture-capital availability (plentiful), domestic-market size (huge) and cost of firing workers (low). The index focuses on productivity, not its collateral effects. Next are Switzerland, Denmark (see page 68 for a look at why), Sweden, Germany, Finland, Singapore, Japan, the U.K. and the Netherlands--some fairly usual suspects. Further down are some more surprising comparisons (see list at left), such as South Korea at No. 11, up from 23rd place last year.

Part of the way countries stack up results from how the WEF weights a nation's scores according to its stage of development. A fundamentals-driven economy like Egypt or Bolivia is judged more on basic requirements such as the reliability of police services and electricity supply; an efficiency-driven economy like Brazil or Latvia is gauged more by measures such as Internet access in schools and strength of investor protection; and an innovation-driven economy like France or South Korea sees more weight put on more sophisticated issues such as company R&D spending and marketing.

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In the overall ranking, the U.S. finishes first (same as last year) out of 131 countries, thanks in part to top scores in venture-capital availability (plentiful), domestic-market size (huge) and cost of firing workers (low).

USA! USA! USA!