[Viewpoint] The numbers aren’t the whole story

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[Viewpoint] The numbers aren’t the whole story

Competition generally brings good results.

In sports, it leads to improved performance by the athletes, and in business, it translates into better products and services.

The fundamental difference between the success of the capitalist market economy and the failure of the socialist planned economy is the presence or absence of competition.

If there is no competition, there’s little motivation to produce one’s best. Who would strive to get ahead without incentive or compensation?

Competition lets participants know where they stand. Whether it’s a sports event or an entrance exam, any competition ranks those who enter from the first to the last. It hurts to receive a low ranking.

You may be able to ignore it, but you cannot erase it.

However, the ranking of a competition is not, and should not be, the stigma that determines future actions.

Competition is everywhere, all the time.

No one should get discouraged or become complacent because of one result.

Instead, that result, good or bad, should be taken as a reference for another competition in the future.

Just as individuals are ranked in competitions, countries are ranked by the national competitive index.

The World Economic Forum and Institute for Management Development issue a comprehensive national competitive index, while other organizations compare competitiveness in specific areas such as economic freedom, corruption and globalization.

Sovereign credit ratings by rating agencies can also be considered a national competitiveness index.

Recently, the Institute for Management Development published the 2010 World Competitiveness Yearbook, a report on 58 nations around the world.

Korea’s competitiveness ranking is up by four notches, to 23rd place.

It is a pleasant result, especially considering Korea’s deep-rooted rivalry with Japan, which dropped 10 places to 27th.

In the new rankings, the IMD placed Korea higher than Japan for the first time.

It doesn’t quite feel real, especially because the IMD does not make it clear in which respects Korea outshines Japan, or whether the higher ranking means Korea can win in the competition against Japan.

First of all, national competitiveness is not an outcome of some tangible competition, such as a national football or a baseball match.

The index is calculated by abstractly comparing national capacities based on the outcomes of economic activities.

Therefore, the national competitiveness index cannot be an absolute measure of a certain country’s competitiveness, and it may not even be an accurate reflection of it.

In fact, each agency’s process of computing the competitiveness index throws doubts on the credibility of the index.

For example, the Samsung Economic Institute points out in the 2008 report that the national competitiveness index had considerable problems: the subjective nature of the method of measurement, a biased survey group and illogical weights given to different factors.

Even more serious than the problems of the index itself is the risk that we may respond too sensitively to the ranking.

When the ranking goes up, the government takes the credit for improved competitiveness. But when the ranking is down, people fret about the declining national competitiveness.

As a matter of fact, the last administration had proclaimed the rise in the competitiveness ranking as one of its major accomplishments.

But when the ranking went down in the following year, it argued that the evaluation was flawed.

Our media is also responsible for the fuss, because nowhere but in Korea does the national competitiveness ranking get such media spotlight.

The national competitiveness index does not truly reflect competitiveness itself. It is only a reference. If a certain field is evaluated to be relatively vulnerable, we can work to improve it. Therefore, we don’t have to rejoice at or be discouraged by the evaluation from others any longer.

Fortunately, this government is displaying a lukewarm attitude toward the IMD competitiveness ranking, which is up for the second consecutive year.

We should not be swayed by the sovereign ratings of international rating agencies. The evaluation of the credit rating agencies shows flaws and problems.

As the chair country of the G-20 Summit meeting, Korea may take an initiative and propose a reform of the international credit rating agencies.

*The writer is an editorial writer of the JoongAng Ilbo.
Translation by the JoongAng Daily staff.

By Kim Jong-soo
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