Every country has an economy that is unique.
In some places, such as the United States or Germany, economies are able to produce many different goods and services that get exported around the world. These countries tend to house world-class businesses in sectors like financials, technology, consumer goods, and healthcare, with companies that produce highly specialized goods like automobiles, software, or pharmaceutical products. Ultimately, these are innovative economies that can roll with the punches, creating growth even when prospects are dim.
In other places, this level of sophistication is just not there. Innovation and knowledge are stunted or non-existent for most industries, and these countries may focus exclusively on one or two goods to pay the bills. Venezuela’s reliance on oil is an obvious example of this, but there are even many Western countries that miss the mark here as well.
Measuring Economic Complexity
In 2009, a team at Harvard formalized a measure of economic complexity that compared nations based on the sophistication of their economies. Now known as the Economic Complexity Index (ECI), the exact measurement is complicated, but it essentially uses data on two main things to uncover the underlying level of economic complexity:
1. Economic Diversity
Measures how many different products a country can produce.
2. Economic Ubiquity
Measures how many countries are able to make those products.
In other words: if a country produces only a few goods, that economy is not very complex. Further, if a country produces many different products, but they are all simple ones that can be replicated elsewhere, the economy is still not complex. See full details on the project here.
Ranking the Most Complex Economies
Here are the most complex economies in order, along with the changing rankings over time:
As you’ll notice, the most recent set of data is from 2015.
Topping the list are the economies of Japan (1st), Switzerland (2nd), Germany (3rd), and South Korea (4th). The United States sits in 9th place, and Canada is further down at 33rd.
Australia, which relies heavily on commodities, ranks notably low for Western countries in 73rd place, where it is sandwiched between Kazakhstan and the Dominican Republic.
Movers and Shakers
The most recent iteration of the index also highlighted some movers and shakers over the last 10 year period:
In particular, the crisis in Venezuela has had an effect on economic complexity, eroding any sophistication that existed.
Meanwhile, Cuba’s economy is also in the decline in terms of sophistication – and with major exports including raw sugar (27%), rolled tobacco (15%), nickel (12%), oil (11%), hard liquor (7%), and crustaceans (4%), it’s not hard to see why.
On the opposite side of the spectrum, the Philippines is the biggest mover upwards, ascending 28 spots.
Some African countries are also moving fast up the rankings: Botswana, Malawi, Uganda, and Cameroon each jumped over 20 spots.
What is a Commodity Super Cycle?
The prices of energy, agriculture, livestock and metals tell the story of human development. Learn about the commodity super cycle in this infographic.
Visualizing the Commodity Super Cycle
Since the beginning of the Industrial Revolution, the world has seen its population and the need for natural resources boom.
As more people and wealth translate into the demand for global goods, the prices of commodities—such as energy, agriculture, livestock, and metals—have often followed in sync.
This cycle, which tends to coincide with extended periods of industrialization and modernization, helps in telling a story of human development.
Why are Commodity Prices Cyclical?
Commodity prices go through extended periods during which prices are well above or below their long-term price trend. There are two types of swings in commodity prices: upswings and downswings.
Many economists believe that the upswing phase in super cycles results from a lag between unexpected, persistent, and positive trends to support commodity demand with slow-moving supply, such as the building of a new mine or planting a new crop. Eventually, as adequate supply becomes available and demand growth slows, the cycle enters a downswing phase.
While individual commodity groups have their own price patterns, when charted together they form extended periods of price trends known as “Commodity Super Cycles” where there is a recognizable pattern across major commodity groups.
How can a Commodity Super Cycle be Identified?
Commodity super cycles are different from immediate supply disruptions; high or low prices persist over time.
In our above chart, we used data from the Bank of Canada, who leveraged a statistical technique called an asymmetric band pass filter. This is a calculation that can identify the patterns or frequencies of events in sets of data.
Economists at the Bank of Canada employed this technique using their Commodity Price Index (BCPI) to search for evidence of super cycles. This is an index of the spot or transaction prices in U.S. dollars of 26 commodities produced in Canada and sold to world markets.
- Energy: Coal, Oil, Natural Gas
- Metals and Minerals: Gold, Silver, Nickel, Copper, Aluminum, Zinc, Potash, Lead, Iron
- Forestry: Pulp, Lumber, Newsprint
- Agriculture: Potatoes, Cattle, Hogs, Wheat, Barley, Canola, Corn
- Fisheries: Finfish, Shellfish
Using the band pass filter and the BCPI data, the chart indicates that there are four distinct commodity price super cycles since 1899.
The first cycle coincides with the industrialization of the United States in the late 19th century.
The second began with the onset of global rearmament before the Second World War in the 1930s.
The third began with the reindustrialization of Europe and Japan in the late 1950s and early 1960s.
- 1996 – Present:
The fourth began in the mid to late 1990s with the rapid industrialization of China
What Causes Commodity Cycles?
The rapid industrialization and growth of a nation or region are the main drivers of these commodity super cycles.
From the rapid industrialization of America emerging as a world power at the beginning of the 20th century, to the ascent of China at the beginning of the 21st century, these historical periods of growth and industrialization drive new demand for commodities.
Because there is often a lag in supply coming online, prices have nowhere to go but above long-term trend lines. Then, prices cannot subside until supply is overshot, or growth slows down.
Is This the Beginning of a New Super Cycle?
The evidence suggests that human industrialization drives commodity prices into cycles. However, past growth was asymmetric around the world with different countries taking the lion’s share of commodities at different times.
With more and more parts of the world experiencing growth simultaneously, demand for commodities is not isolated to a few nations.
Confined to Earth, we could possibly be entering an era where commodities could perpetually be scarce and valuable, breaking the cycles and giving power to nations with the greatest access to resources.
Each commodity has its own story, but together, they show the arc of human development.
The World’s Most Innovative Economies
What countries have the most innovative economies? This index uses seven equally-weighted variables, including R&D spending and patents, to rank countries.
The World’s 10 Most Innovative Economies
In the 21st century, innovation has become the heart and soul of economic policy. Developed and developing nations alike are in the race to leave industrialization behind, adapting instead to technology-focused, entrepreneurial societies.
Customized cancer treatment, faux meat products, and the smart home technologies are frequently positioned as ‘the next big thing’. But which countries are consistently innovating the most?
Today’s graphic comes from the seventh annual Bloomberg Innovation Index and highlights the 10 most innovative economies, and the seven metrics used to rank 2019’s top contenders.
Bloomberg calculated each country’s innovation score using seven equally-weighted metrics.
- R&D Spending
All research and development funding invested in an economy each year.
- Patent Activity
Number of domestic patents filed, total patent grants, patents per population, filings per GDP, and total grants awarded measured against the global total.
- Tertiary Efficiency
Total enrollment at post-secondary institutions, graduation levels, and number of science and engineering graduates.
- Manufacturing Value-added
Manufacturing output levels that contribute to exports and domestic economic growth.
Overall productivity levels of the working-age population.
- High-tech Density
Number of domestic high-tech public companies, measured against the number of domestic public companies and the global total of public high-tech companies.
- Researcher Concentration
Number of professionals currently engaged in research and development roles.
More than 200 countries were initially considered for Bloomberg’s Innovation Index. Any country reporting in less than six categories was automatically eliminated, leaving 95 countries remaining. Bloomberg publishes the results for the top 60 most innovative economies each year.
Notable Countries in the Top 60
The U.S. rejoined the top 10 after dropping to 11th in 2018 for low scores in education. Israel moved up five spots to 5th place, while Romania made the largest overall gain, jumping six spots to rank in the top 30.
|2019 Rank||Economy||Total Score||Change in Ranking|
|#1||🇰🇷 South Korea||87.38||0|
|#8||🇺🇸 United States||83.21||3|
Brazil rejoined the list at number 45, after not being included on the 2018 list. The United Arab Emirates made the list for the first time, marking the highest debut ever at number 46.
Tunisia and Ukraine were the two countries with the largest losses, which both fell out of the top 50 this year. To date, South Africa is the only Sub-Saharan nation to be ranked in the index.
Newcomers to the Innovation Index in 2019 are some of the largest emerging economies, such as India, Mexico, Vietnam, and Saudi Arabia.
Impact of Global Innovation
Innovation is complex─many factors play a role in the ideation, development, and commercialization of any new technology. And while innovation success can fuel economic growth, it is generally more accessible in high-income economies, where R&D funding is readily available.
“The battle for control of the global economy in the 21st century will be won and lost over control of innovative technologies.”
—Tom Orlik, Bloomberg Economics
The focus of an economy that prioritizes innovation, however, is not simply allocating resources for a group of people─it’s discovering new methods, models, and products that create a better quality of life for society.
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