Bloomberg News

What Business Would Do to Restore U.S. Competitiveness

March 14, 2012

Our prior blog post posed the question, "Will Business Step Up or Step Out?" Will business leaders reconnect with their communities and do their part to restore U.S. competitiveness? Or will they move from location to location, in search of better short-term deals? In this post, we share some data that encourage us to believe that the great majority of business leaders are willing, even eager, to step up.

The U.S. Competitiveness Project at Harvard Business School, which we chair, asked the School's alumni to share their assessments of U.S. competitiveness in a survey last October. Nearly 10,000 responded. Like reconnaissance officers strategically placed on the front lines of global business, they told us what they see going on in and around the U.S. economy. The survey's findings (PDF), which we released in January, paint a troubling picture of the state and trajectory of U.S. competitiveness.

To find out what these business leaders would recommend to address the competitiveness challenge, we opened a National Suggestion Box at the end of the survey. We invited each respondent to make one specific suggestion to government officials to improve U.S. competitiveness and to identify one action that his or her firm could take to help its U.S. operations compete more effectively.

What do business leaders suggest to improve the long-term future of the American economy? Among the 4,425 suggestions for policymakers, we found a number of narrow pleas for preferential treatment. These were disappointing, but not particularly surprising. In the last few decades, the nature of the engagement of business with government has been dispiriting — driven heavily by the pursuit of special interests and a tendency to blame government for economic woes. Cut my taxes, some respondents said. Eliminate regulations affecting my business. Give us tariff protection to deal with "dumping" from abroad.

This approach has, if anything, contributed to the decline in American competitiveness. The convoluted tax system, for example, is not simply the product of dysfunctional politics. It has been shaped, and indeed distorted, by business leaders who have pleaded for special tax breaks and loopholes. Similarly, the erosion of America's skills base in recent decades is due in part to a tendency by some business leaders to migrate in search of low wages rather than invest deeply in the skills of local workers.

We were encouraged, however, that the great majority of the suggestions we received had a very different character: they asked not for special treatment or a better deal but for a more efficient, stronger U.S. business environment. For example, while taxes were the dominant category of suggestion, recommendations to simplify the tax code significantly outpolled requests to reduce effective tax rates. Of the 852 talent-related suggestions, just 87 called for reducing the power of organized labor, making layoffs easier, or reducing or eliminating the minimum wage. More than 300 called for immigration reform to welcome more high-skilled talent into the country, and a combined 339 called for improving K-12, vocational, STEM, and other education and training.

There were relatively few pleas for government to support parochial company interests. Just 51 called for tariffs or trade protection, for example. The great majority of business leaders understand that what is necessary is investments in the business environment and efforts to reach consensus on issues such as health care costs, balancing the budget, and tort reform. Regulate us, to be sure — respondents said — but regulate us more efficiently, and phase out regulations that do not pass cost-benefit scrutiny. What's more, many of the suggestions for government do not require more spending; simplifying the tax code and facilitating the entry of foreign talent simply require smarter policy, not more money.

We also asked respondents what their companies could do to help their U.S. operations compete more effectively. They submitted 1,747 actions, and again, some of these were disappointing: outsource; cut costs, wages, benefits, or headcount; lobby to get policy concessions.

But these more self-interested actions were the minority. More than three times as many responses focused on company actions to improve the fundamentals: improving training; hiring more skilled employees; investing in technology and R&D; growing exports or expanding to new markets; motivating the workforce and attracting top talent; increasing pay.

The entries in our National Suggestion Box reveal that the attitude of business is undergoing a sea change. CEOs are waking up to the idea that companies have a role to play in addressing weaknesses in the business environment — in the United States or elsewhere — and that business needs to invest in the "commons" to prosper, not just pursue its narrow self-interest. For our own part, we've been inspired by the many examples of companies that have undertaken efforts to improve the U.S. business environment. Through the U.S. Competitiveness Project's outreach effort, we hope to encourage and mobilize business to do even more.

This post is part of the HBR Insight Center on American Competitiveness.

MICHAEL E. PORTER AND JAN W. RIVKIN Michael E. Porter is the Bishop William Lawrence University Professor and Jan W. Rivkin is the Bruce V. Rauner Professor of Business Administration at Harvard Business School. They are the co-leads of the Harvard Business School's U.S. Competitiveness Project


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