Since the 2007-2009 Great Recession in the United States, many in the media, academia and business as well as the general public have expressed concern about America’s ability to compete in the global economy, particularly with rapidly emerging economies such as China. Among other challenges, the United States suffers from aging infrastructure, an educational system which is falling behind globally and persistent unemployment.

Cities formerly based on manufacturing, such as Detroit, have been in decline for the past several decades, suffering from falling property values and rising unemployment and poverty. Furthermore, the nation has seen ever-widening wealth inequality, which many have argued negatively impacts economic growth. Finally, sharp political division and deadlock has limited the implementation of effective policy to deal with these dilemmas.

A 2013 report published by Harvard Business School (HBS), “Competitiveness at a Cross Roads: Findings of Harvard Business School’s 2012 Survey on U.S. Competitiveness,” examines current perceptions and observations among business leaders and the general public, as well as potential policy solutions supported by these groups. The 2012 survey utilizes response data from 6,836 HBS alumni and 1,025 members of the public; it follows a similar study from the previous year, allowing comparisons over time.

The report’s findings include:

• The proportion of business leaders who expected U.S firms to become less globally competitive in the next three years dropped by 13 percentage points, from 71% in 2011 to 58% in 2012. Conversely, the proportion of business leaders who were optimistic about U.S. competitiveness over the next three years increased by 9 percentage points, from 16% in 2011 to 25% in 2012.
• The greatest declines in pessimism about future U.S. competitiveness were seen among: non-U.S. respondents; individuals in manufacturing firms; those in industries not exposed to international competition; and individuals with liberal ideology.
• Pessimism among liberals decreased by 19 percentage points between 2011 and 2012, while only declining 6 percentage points among conservatives over this same period.
• “The general public viewed America’s core strengths as not improving. Instead, many of these — including the quality of firm management, the context for entrepreneurship, and the vibrancy of capital markets — were seen as weaker and declining among the public than among business leaders.”
• Business leaders demonstrated more concern about the United States failing to keep pace with emerging economies such as China and India, while the general public were more “likely to believe that the U.S. business environment is falling behind other advanced economies as to feel that it is falling behind emerging economies.”
• The “general public was much less pessimistic about the future of U.S. competitiveness than were [U.S.] business leaders,” with only 43% expecting a decline in U.S. competitiveness over the next three years and 40% anticipating an improvement. Sixty-one percent of U.S. business leaders expect a decline in U.S. competitiveness during the next three years.
• Among various federal policy proposals to improve U.S. competitiveness, business leaders were strong supporters of “corporate tax reform, a sustainable federal budget, eased immigration for high-skill individuals, infrastructure investments, and streamlined regulations.”
• Of the various policy proposals to improve U.S. competitiveness, “corporate tax reform, high-skill immigration, and a sustainable federal budget” had strong support among both liberal and conservative business leaders.
• Despite strong support among business leaders, the promotion of immigration of highly skilled individuals was not supported by individuals in the general public.
• “Overall, corporate tax reform, a sustainable budget, infrastructure investments, responsible new energy extraction, and assertive action on international trade” were policies supported by both the general public and business leaders, whether liberal or conservative.
• The respondents were asked to evaluate 11 actions that firms are taking to enhance competitiveness; these include cluster initiatives, regional initiatives, internal training programs, apprenticeships, community college partnerships, local sourcing, supplier mentoring, research collaborative, startup incubators, reshoring, and business-wide advocacy.” The action firms were most likely to take was internal training, with 86% of respondents stating that their firm offered such training. Conversely, reshoring was the least common action among firms, with only 17% of respondents reporting “that their firms had brought back to the U.S. an activity preformed internationally.”
• According to the survey results, manufacturing firms engaged in the greatest amount of activities to improve U.S. competitiveness, followed by the education and healthcare sectors. Conversely, the financial services industry engaged in the least amount of activities that improve U.S. competitiveness, followed by the construction and real estate sectors.

The authors conclude that business can “do more to improve U.S. competitiveness while also contributing to their own success.” They suggest four steps to spur such action: promotion of “skills collaboratives that ensure a work-ready talent pool, [mounting a] national campaign to engage companies in mentoring high-potential American suppliers, [enhancing] the role that education and healthcare institutions… play in U.S. competitiveness, and creating a national Census of Business Actions to Enhance Competitiveness that provides an inventory of actions businesses are undertaking, region by region.”

For more insights in this area, see the World Economic Forum’s “Global Competitiveness Report.”

Tags: economy, financial crisis