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In Depth October 30, 2008, 5:00PM EST

Why America Needs an Economic Strategy

(page 4 of 4)

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Gianpaolo Pagni

The problem is not money—America spends a great deal on public education, just as we do on health care. The real problem is the structure of our education system. The states, for example, need to consolidate some of the 14,000 local school districts whose existence almost guarantees inefficiency and inequality of education across communities. Instead, government leaders haggle over incremental changes.

SAME OLD ARGUMENTS

We need a strategy supported by the majority to secure America's economic future. Yet Americans hear the same old divisive arguments. Republicans keep repeating simplistic free-market thinking, even though the absence of all regulation makes no sense. Self-reliance is preached as if no transitional safety net is needed. Some Republicans even argue passionately that the country should have no strategy because that would be "industrial policy." Yet the real issue is not picking industry winners and losers but improving the business environment for all American companies, something we cannot do without identifying our top priorities. Overall, Republicans seem to think business can thrive without healthy social conditions.

Democrats, meanwhile, keep talking as if they want to penalize investment and economic success. They defend unions obstructing change in areas like education, cling to cumbersome regulatory approaches, and resist ways to get litigation costs for business in line with other countries. Democrats equivocate on trade in an irreversibly global economy. They seem to think social progress can be achieved only at the expense of business.

To make America competitive, we have to get beyond this thinking. Political leaders, business leaders, and civil society must begin a respectful, fact-based dialogue about our challenges. We need to focus on competitive reality, not defending past policies.

A strategy would address each of the areas I have discussed. If we are honest with ourselves, we would admit the U.S. is not making real progress on any of them today. Efforts under way by both parties are largely canceling each other out. A strategy would direct our spending to priority investments that also put money into the economy, such as educational assistance and logistical infrastructure, rather than tax rebates. With a strategy, we would stop counterproductive and expensive practices such as farm subsidies and spending earmarks.

Is such strategic thinking possible, given America's political system? It happens in other countries—Denmark and South Korea are just two where I have participated in serious efforts by national leaders, both public and private, to come together and chart a long-term plan. This almost never occurs in the U.S., except around single issues.

We will need some new structures to govern strategically. I served on the last public-private President's Commission on Industrial Competitiveness—in 1983! This time we need one that is less politically motivated. Congress would benefit from a bipartisan joint planning group to coordinate an overall set of priorities. More up or down votes on comprehensive legislative programs are needed to allow a shift to a coherent set of policies and away from lots of separate bills.

The new Administration will have an historic opportunity to adopt a strategic approach to the U.S.'s economic future, something that would bring the parties together. America is at its best when it recognizes problems and accepts collective responsibility for dealing with them. All Americans should hope that the next President and Congress rise to the challenge.

Business Exchange related topics:
Globalization
US Economy
Economy and the Election
U.S. Competitiveness
Innovation Economics

Porter, the Bishop William Lawrence University Professor at Harvard Business School, is a leading authority on competitive strategy and the competitiveness of nations and regions. Professor Porter's work is recognized in governments, corporations, nonprofits, and academic circles around the world.

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