Fourth pillar: Health and primary education

Third pillar: Macroeconomy

Second pillar: Infrastructure

First pillar: Institutions

The importance of institutions is not restricted to the legal framework. Government attitudes toward markets and freedoms and the efficiency of its operations are also very important: excessive bureaucracy and red tape, overregulation, corruption, dishonesty in dealing with public contracts, lack of transparency and trustworthiness, or the political dependence of the judiciary system impose significant economic costs to businesses and slow down the process of economic development.

High-quality infrastructure reduces the effect of distance between regions, with the result of truly integrating the national market and connecting it to markets in other countries and regions.

Effective modes of transport for goods, people, and services—such as quality roads, railroads, ports, and air transport—enable entrepreneurs to get their goods to market in a secure and timely manner, and facilitate the movement of workers around the country to the most suitable jobs. Economies also depend on electricity supplies that are free of interruptions and shortages, to ensure that businesses and factories can work unimpeded. Finally, a solid and extensive telecommunications network allows for a rapid and free flow of information, which increases overall economic efficiency by helping to ensure that decisions made by economic actors take into account all available relevant information.

The stability of the macroeconomic environment is important for business and, therefore, is important for the overall competitiveness of a country. Firms cannot make informed decisions when the inflation rate is in the hundreds (typically as a result of public finances being out of control). The financial sector cannot function if the government runs gigantic deficits (especially if, as a result, it represses banks and forces them to lend it money at below-market interest rates). In sum, the economy cannot grow unless the macro environment is stable or favorable.

A healthy workforce is vital to a country’s competitiveness and productivity. Poor health leads to significant costs to business, as sick workers are often absent or operate at lower levels of efficiency. In addition to health, this pillar takes into account the quantity and quality of basic education received by the population. Basic education increases the efficiency of each individual worker, making the economy more productive. Furthermore, a workforce that has received little formal education can carry out only basic manual tasks and finds it much more difficult to adapt to more advanced production processes and techniques. Lack of basic education can therefore become a constraint on business development, with firms finding it difficult to move up the value chain by producing more sophisticated or value-intensive products.

Дата добавления: 2014-01-11