Last week, Harvard Business School released a Very Somber Report entitled, “Problems Unsolved and a Nation Divided” about the deteriorating state of U.S. competitiveness in the global economy. Professor Michael Porter, the godfather of the idea of competitiveness, was the lead author of the report. Its conclusions are pretty serious:
While a slow recovery is underway, fundamentally weak U.S. economic performance continues and is leaving many Americans behind. The federal government has made no meaningful progress on the critical policy steps to restore U.S. competitiveness in the last decade or more …
U.S. competitiveness has been eroding since well before the Great Recession. America’s economic challenges are structural, not cyclical. The weak recovery reflects the erosion of competitiveness, as well as the inability to take the steps necessary to address growing U.S. weaknesses.
Our failure to make progress reflects an unrealistic and ineffective national discourse on the reality of the challenges facing the U.S. economy and the steps needed to restore shared prosperity. Business has too often failed to play its part in recent decades, and a flawed U.S. political system has led to an absence of progress in government, especially in Washington.
This report was a success, in that it generated a fair amountof news coverage and commentary. The report also makes a trenchant point that one would not ordinarily find in an HBS report: the ways in which the U.S. system stacks the deck against American workers:
[L]arge companies can better cope with and often avoid America’s weaknesses. A tax inversion allows them to escape the convoluted U.S. corporate tax code, for example; offshore investments allow access to the world’s most skilled workforces and best transportation infrastructure; and large companies have the scale to navigate complex regulations.
Workers, in contrast, rely heavily on the human capital they bring to the workplace – human capital they draw from weak systems of K-12 education and workforce training. Lacking global mobility, workers and small businesses cannot escape the negative impacts of America’s political system, tax code, health care system, costly regulation, and crumbling infrastructure. In short, large companies benefit from America’s greatest strengths, while workers and small businesses are captives of the nation’s major weaknesses.
There are also some disturbing charts, like this one about how Harvard Business School (HBS) alums feel about the eroding U.S. business environment:
Here’s the thing, though: Interpreting the collective wisdom of HBS alums as a guide to the U.S. economy would be a really dumb move.
I say this because the U.S. Competitiveness Project has been using HBS alumni surveys since its inception five years ago. And I remember the findings of that 2011 surveybecause I wrote about them in “The System Worked.” Here’s what I said then:
U.S. business executives became extremely gloomy. In a 2011 survey, only 9 percent of Harvard Business School alumni thought the United States would outperform the other advanced industrialized states; 21 percent thought the U.S. would be an economic laggard. Two-thirds of respondents expected America to lose ground to Brazil, India, and China.
In the immortal word of Rick Perry: Oops.
It turns out 91 percent of HBS alums were pretty much wrong, as the U.S. economy has outperformed Japan, the euro-zone economies, and the other OECD nations quite handily during that timespan. The two-thirds who thought the U.S. would lag behind those BRICS economies were also pretty much wrong. When it comes to sustainable economic growth, Brazil is a mess, India is far more promising but still a mess, and even the general public has begun to recognize the trouble with the China model.
Porter’s study also relies on more objective data, and it’s not worthless. But HBS alums have been excessively gloomy about the state of the American economy for quite some time. That pessimism seems to be a constant rather than a variable. More intriguingly, that downbeat attitude about the U.S. economy is similar to the gloominess of the business school candidate currently running for president. So maybe those findings shouldn’t be relied upon so heavily. Longtime readers of Spoiler Alerts are well aware of what I think about Donald Trump’s economics acumen. Unfortunately, it appears that HBS alums are little better.