KEY POINTS:
This month, New Zealand slipped three places on the latest Global Competitiveness Report - but don't be too worried.
The Global Competitiveness Report published by the World Economic Forum, the same crew that brings us the Davos circus every year, has become the ultimate league table for economic
policy-makers.
Last week, it decided the United States and Switzerland were the two best economies in the world while New Zealand slipped from 21st to 24th place.
With its detailed verdicts on how well or badly each nation is doing in the global rat race, it makes headlines around the world.
Finance ministers break open the champagne when their country does well. If they drop a few places, they run for cover as their political opponents sharpen the knives.
It's a bunch of nonsense.
The complexity of modern economic performance makes it impossible to produce a ranking that makes useful distinctions between, say, the first-best economy and the fifth-best.
More to the point, many of the judgments drawn up by the forum are so bizarre as to make the whole ranking meaningless at best, laughable at worst.
No one faults the publicity skills of the forum. Just as it has managed to turn Davos into a global media event - even if it mostly consists of toothpaste salesmen delivering re-heated platitudes about global poverty - so it has turned its competitiveness report into a definitive arbiter of success or failure.
It has stirred debate, caused chin-pulling, fomented tossing of brickbats. So as the United Kingdom dropped from second to ninth in the rankings this year, the Conservative Party jumped on the figures.
"We should be heading up the league table, not falling down it," shadow chancellor George Osborne told the Daily Telegraph. "Gordon Brown has been running the economy for the last decade and he needs to take the blame."
The trouble is that where Britain stands in this report is about as important as where it stands in the global table tennis rankings.
Just take a look at which nation ranks as the most competitive in the world. The US.
Perhaps someone should tap a currency trader on the shoulder and break the news. The US dollar is hitting lows against other major currencies. The country has a huge trade deficit, a collapsing property market and a financial system that looks shaky.
True, it still has huge strengths: dozens of world-beating companies, a skilled and entrepreneurial workforce, plus relatively low taxes. But the world's most competitive?
"It defies reason," said Peter Schiff, president of Darien, Connecticut-based Euro Pacific Capital and author of Crash Proof: How to Profit From the Coming Economic Collapse.
"They have all these esoteric measures of an economy, but they are not really measuring competitiveness."
How about Switzerland at No 2? Hello. Are we talking about the country sandwiched between France, Germany and Italy? The one where growth has been sluggish for a decade and where the Swiss franc this month touched record lows against the euro?
To be clear, the ranking is compiled according to gauges of innovation, flexible labour markets and the size of financial markets. It also takes in the results of a poll of 13,000 business people around the world.
"We used to have the exchange rate as one of the variables but we dropped it this year because the effects are unclear," said Thierry Geiger, a Geneva-based economist with the Global Competitiveness Network. "We have a macro-stability pillar and, on that, the US ranks 75th but it does well in the other categories."
Yet, the more you look at the list, the stranger it seems. The problem with the UK's ranking isn't that it has dropped to ninth; it's that it climbed as high as second in light of its crumbling infrastructure, rising taxes and enormous trade deficit.
And Sweden at No. 4? Excuse us while we stuff an Ikea duvet into our mouths to stop from laughing. When was the last time you heard of a company moving its headquarters to Stockholm?
Meanwhile, there is no place in the top 10 for China or India. Indeed, there doesn't seem to be any room for Slovakia, growing at 9.4 per cent, or Lithuania or Latvia, expanding more than 10 per cent.
It's amazing that anyone takes this list seriously.
There are three serious points to make:
* First, we need more than one way of ranking nations. The forum has a bias for social welfare, hence Sweden's high ranking. That's fine, but how about a calculation that puts more weight on tax rates and de-regulation?
* Second, we already have good league tables of competitiveness. They are called stock, bond and currency markets. They give a far more accurate reading than any group of economists or polls of businessmen. Those markets tell us that China and the emerging economies of Asia and Eastern Europe are becoming more competitive by the day.
* Third, we should probably learn to pay less attention to league tables. What counts is how much you reform your own economy.
And, if nothing else, the task of compiling competitiveness tables could itself use a bit more competition.
* Matthew Lynn is a Bloomberg News columnist
