The economic view of growth is that increases in productivity lead to increased levels of economic prosperity. So, it follows that more competitive economies tend to be able to produce higher levels of income for their companies and citizens, not to mention higher returns on investment and hence increases in the national growth potential. The World Economic Forum’s ‘Global Competitiveness Report’ provides an analysis of many of the drivers that enable national economies to achieve sustained growth and long-term prosperity. It divides countries into three different stages, which are consistent with general economic development theory:
- Stage 1 ‘factor’-driven economies, where countries compete primarily on the use of unskilled labor and natural resources and companies compete on the basis of price as they buy and sell basic products or commodities.
- Stage 2 ‘efficiency’-driven economies, where growth is based on the development of more efficient production processes and increased product quality.
- Stage 3 ‘innovation’-driven economies, where companies compete by producing and delivering new and different products and services by using the most sophisticated processes.
So looking at the BRIC (Brazil, Russia, India, and China) countries, as of 2011, India is largely still in stage 1, while Brazil, China, and Russia are stage 2. Most of the developed world is in stage 3 for now, but, just as the performance of many European countries is starting to plateau, China’s competiveness is way ahead of other developing economies and it is moving fast toward becoming a stage 3 economy. Although just one point of view, many see that this type of grouping is helpful in understanding what levers, regulatory or industry led, can be applied to different economies.