Comment on Economic Performance Rankings

Takahiro MIYAO (Professor, GLOCOM)

This comment originally appeared in the "Japan-U.S. Discussion Fourm" (http://lists.nbr.org/japanforum) on May 1, 2002: posted here with the author's permission.

Regarding the IMD ranking, there may be some fundamental question why a country in the 30th position, ranked below Malaysia and Korea, could possibly have a higher per capita GDP ($36,300) than that of the U.S. ($36,000) in 2000, using current exchange rates, where Korea's per capita GDP was only $9,800 and Malaysia's was only a fraction of that amount. Even if we use purchasing power parities to eliminate price differences between countries, Japan's per capita GDP ($25,600) is slightly higher than most of the European countries such as Germany ($24,900), France ($23,200), Italy ($24,500) and the U.K. ($23,900), where Korea's is only $17,700, according to "OECD in Figures 2001."

This is not to mention the facts that (1) Japan's total GDP is as large as that of those four European countries combined, (2) Japan is still the world's largest creditor nation with huge trade surplus, (3) the per capita value of accumulated financial assets (more than 10 times as large as its per capita GDP) is probably the highest in the world, and (4) there are so many globally competitive firms based in Japan, namely, Toyota, Honda, Sony, etc.

Then why such a low ranking for Japan? I think there may be at least two factors, that is, change and expectations. First, Japan's economy has not been growing as fast as it should in terms of GDP, and in fact it has been shrinking slightly in recent years. Since its change is virtually zero or even negative, that may have affected Japan's ranking (in other words, there may be some confusion in ranking regarding the level and change). Second, foreign observers as well as many of the Japanese themselves are disappointed and frustrated when their expectations for "reform" are not fulfilled as originally anticipated or promised. Such disappointment or frustration may have lowered Japan's ranking too much. Furthermore, those rankings only see individual "trees" (micro factors) selectively, but not the "forest" (macro pictures) as a whole.

In contrast, the U.S. ranking may be too high, as this week's Business Week (Asian Edition, May 6) features a special report on U.S. business, entitled, "How to fix corporate America: excessive pay, weak leadership, corrupt analysts, complacent boards, questionable accounting, enough already!"