The World Economic Forum published its most recent Financial Development Report. In the executive summary of the study, written by Nouriel Roubini and James Biodeau, fifty-five countries were graded on seven scales: institutional environment, business environment, financial stability, banking financial services, non-banking financial services, financial markets, and financial access.
The US would be at the top of the list presumably because of its massive capital markets and pools of money invested in the stock and fixed income markets. America’s credit foundations were shaken by the crisis of a year ago, but have at least partly recovered.
The surprise finding of the report is that the UK is now first among the world’s nations covered in the Forum’s survey. Australia was second, followed by the US, Singapore, Hong Kong, Canada, and Switzerland.
The report may not be a definitive study of which economies are most “friendly” to capital markets and capital formation, but if the document has any value it is that show US shortcomings in areas that may improve as the economy recover. The US rates very badly in “financial stability” and “financial access”, a measure of capital availability.
It is plain that the US markets are not stable. They have been whipsawed by massive bank losses, huge dislocations and loss of jobs, and corporate earnings that have driven a number of companies into insolvency. Capital availability has nearly been destroyed, at least compared to two years ago, by the unwillingness of financial institutions to give credit to medium and small business and to consumers.
World Economic Forum has long been without much relevance as a serious financial policy organization. Its annual meeting in Davos is not longer the collection of CEOs and world leaders that it once was. The Financial Development Report is based on only modest and subjective analysis. Its conclusion created a headline, but that is all.
Douglas A. McIntyre
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