Politics is crippling the US economy, Harvard study says

According to an annual competitiveness survey, dysfunction within federal government is the single biggest barrier to economic progress in the United States. 

Eric Mosley works on the factory floor at RoMan Manufacturing, a Grand Rapids, Mich., firm that makes electrical transformers and welding equipment.

Despite somewhat encouraging news this week that the middle and lower-wage workers appeared to see relief in 2015 as the US median household income finally rose, most Americans are much worse off than they were two decades ago.

This is not the product of the natural dips and bumps that typically punctuate our economy. According to a study released Thursday by Harvard Business School, the biggest threat to US competitiveness is our crippled political system and the “unrealistic and ineffective national discourse on the reality of the challenges facing the U.S. economy,” study authors reported.

“A lot of people think that what’s going in is we had a bad recession and that we’re just recovering,” Michael Porter, a study author and co-chair of Harvard’s Competitiveness Project, which conducts an annual survey of US business leaders, tells CNBC. “What we find is that all the major data points that started moving in the wrong direction started in the late 90s and 2000s.”

These data points plot a picture that doesn’t bode well for small businesses and average American workers, whose pay and job opportunities are declining as they’re competing with workers around the globe.

“We used to have the most skilled workers in world; now we don’t,” Dr. Porter says.

According to thousands of Harvard alumni, MBA students and non-Harvard responders, the country’s biggest problem is a tax code that hasn’t been updated in decades, even as the world has become more globalized, digitized, and as closed-off economies have opened for business.

“Other countries have responded to these dramatic changes with significant changes to their tax systems, yet the US tax system has remained relatively ossified,” write the authors.  

Large corporations are flourishing, given that they can move operations to any country with a friendly tax environment and skilled workers. Small businesses with fewer than 500 employees, which used to be country’s most reliable job generators, are suffering. Since the 1980s, shows the report, the number of new businesses forming in America has tanked.

Not only are fewer forming, more are going out altogether. Since the Great Recession of 2008, the number of small businesses has further declined by more than 5 percent, the study points out, “unprecedented since data became available in 1977.”

A dearth of national investment in secondary education and infrastructure, the political system, and health care were identified as other major barriers to American competitiveness. At the right levels, the study's authors that, investment in those things should lead to equal prosperity for all.

Despite the gloomy picture, America still has strengths. Survey respondents identified strong higher education, entrepreneurship, communications infrastructure, innovation, and capital markets among them. But unless our political system – plagued by polarization that’s stalling progress – is reformed, the weaknesses will continue to outweigh the strengths, respondents said. The most supported reforms are to gerrymandering and campaign finance.

“The problems we have are fixable,” Porter tells CNBC. Whether they’re fixable by the next administration is hard to tell based on the promises of the presidential candidates, says Porter. “Their policies are so fragmented … that we really can’t understand what the strategy is.”

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Politics is crippling the US economy, Harvard study says
Read this article in
QR Code to Subscription page
Start your subscription today