U.S. Falls Behind Hong Kong, U.K. in Ranking of Capital Markets Due to Enron Collapse, Tech Bust
LOS ANGELES (AP) -- The collapse of Enron Corp. and the technology sector's bust helped knock the United States from the top spot in an annual ranking of worldwide capital markets, landing the country behind Hong Kong and the United Kingdom.
The United States placed third out of 98 countries in the openness and efficiency of those markets in the ranking released Tuesday by the Milken
Institute.
Access to capital is considered a key indicator of economic health because it determines whether entrepreneurs are able to get the money they need to create and grow new businesses that generate jobs.
The Santa Monica-based think tank used more than 50 measurements in its ranking, including tax rates, inflation, amount of government regulation and general economic conditions.
Access to money tightened in most areas of the world, with more than two-thirds of the countries scoring weaker results than a year earlier due largely to the recession that hit this country in March 2001.
"There isn't the money or the demand to build new businesses," said Susanne Trimbath, a research economist at the Milken Institute.
The United States has experienced a decrease in venture capital funding, initial public offerings and foreign investment because of the economic downturn, the survey said.
In addition, concerns about the U.S. accounting system after Enron and the failure of so many tech companies that went public in the last few years has tightened the flow of business funding, said Glenn Yago, director of capital studies at the Milken Institute.
Economic experts said the national economy has nevertheless proved remarkably strong under these pressures.
"That the U.S. should retain a position at the top of the ranking shows it has deep and resilient markets that can withstand profound shocks," said Walter Russell Mead, a senior fellow at the Council on Foreign Relations.
"We've had this great historic meltdown, and everything has kept rolling," he said.
One example of the U.S. financial system's flexibility is the orderly bankruptcy process that has preserved assets and jobs, Mead said.
In contrast, France has a bankruptcy system that fails to protect bond holders. Without a strong bond market, the country fell to 24th spot from 18th a year earlier, Trimbath said.
Hong Kong improved its ranking by decreasing the concentration of assets in its banks and by reducing the volatility of its financial markets, according to the survey.
Even though Hong Kong operates in the shadow of communist China, it's ranked apart from China because the international community still views its economy separately.
China ranked 35th in the survey, up from 42nd a year ago.
biz.yahoo.com |
