The Global Manufacturer

US Competitiveness: Harvard Survey Reveals the Path Forward

U.S. competitiveness is headed in the wrong direction. That’s the message from alumni of Harvard Business School who responded to the school’s recent survey on America’s competitiveness and what to do about it.

Some 58% of alumni business leaders said they expect U.S. competitiveness to decline over the next three years. That means less able to compete in the global economy, less able to pay workers good wages and benefits, or both.

Alumni who identified themselves as conservatives were more pessimistic than their liberal brethren. But as HBS Professor Jan Rivkin notes, “Even among the strongly liberal respondents in 2012, the majority (53%) expect U.S. competitiveness to be worse in three years. They see the boat as sinking more slowly, but still sinking.”

“All sides agree that the United States faces existential competitiveness challenges. All sides agree on the basic direction that federal policies need to take. Yet, until now, no progress has been made in Washington. This failure to act is severely damaging America’s competitiveness,” said Professor Michael Porter. “With the election behind us, the president and the new Congress must act now to restore the United States as a highly productive and efficient business location for firms and workers.”

What actions are needed? It turns out there is wide agreement among those surveyed, both conservative and liberal, about what should be done to get the country back on track. Here is the roadmap:

  • A compromise for a sustainable federal budget, corporate tax reform and easing of high-skill immigration got very strong support from both strongly liberal and strongly conservative business leaders. Approval percentages were in the high 80s or low 90s.
  • Responsible extraction of newly-accessible energy supplies and more aggressive pursuit of a level playing field in the international trading system received strong and comparable support from business leaders at both ends of the political spectrum, with approval percentages in the high 70s.
  • Greater infrastructure investment and selective streamlining of regulations got strong support from business leaders, but the strength of support differed somewhat between liberals and conservatives. Greater infrastructure investment received stronger support from liberal business leaders, while selective streamlining of regulations saw stronger approval from conservatives.

The Harvard survey also included 1,025 members of the general public. Of the seven policy directions above, all but high-skill immigration were supported by the majority of the general public.

More than 70% of the general public approved of corporate tax reform. “Our corporate tax code clearly needs to be modernized,” said Professor Mihir Desai. “Restructuring the corporate tax toward a broader base, a lower statutory rate, and a more competitive system of taxing foreign profits can benefit both American workers and shareholders.”

The survey also found wide support among business leaders and the general public for a federal budget compromise involving both revenue increases and spending cuts. “We need both if we want to get the budget on a sustainable path while preserving the investments in basic R&D, infrastructure, and education that underpin competitiveness,” said Professor Matt Weinzierl.

The survey found business leaders were already at work trying to improve the U.S. business environment. Among the steps with the most activity: internal training programs, regional initiatives to boost competitiveness, and research collaboratives. When asked about future steps, respondents expressed particular interest in partnerships with community colleges and vocational schools as well as apprenticeships to help train a new generation of workers.

“American institutions have tended to operate in silos,” said Professor Rosabeth Moss Kanter. “But to build business ecosystems that can compete in today’s global economy, America needs strong linkages across businesses, educational institutions, nonprofits, and the public sector.”

Nitin Nohria, dean of Harvard Business School, summed up the survey findings this way: “Historically, the United States has always risen to face the nation’s greatest challenges. Economically, we face such a challenge today. The message from business and labor to our political leaders is clear: we must make the word ‘compromise’ an honored word in American politics again. As we’ve found through our work on the U.S. Competitiveness Project, a diverse group of leaders stands ready to support Washington in this effort.”

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