It’s competitiveness, stupid

July 19, 2012

America deserves better.

If only this year’s presidential candidates were as focused on global competitiveness as are America’s business leaders, the world’s most important economy and democracy would already have become the “Comeback Kid,” portrayed on this week’s Economist cover as a muscle-bound Uncle Sam.

We are witnessing the most expensive and one of the most negative presidential contests in U.S. history. Thus far it is serving little purpose aside from enriching  the advertising industry.

With global economic growth waning, the euro zone imploding and America approaching a fiscal cliff, President Barack Obama and Governor Mitt Romney remain on the low road of ad hominem attacks that badly serve Americans and the world.

The most crucial question for American centrists, who are likely to decide this November’s elections (and I count myself as a card-carrying member), is whether Obama or Romney can reverse the dangerous signs of eroding U.S. competitiveness and shore up the beginnings of an economic resurgence.

It is a question of historic significance.

Just as the best candidate during the four decades of the Cold War era was the one who most clearly understood how to tap America’s dynamism and stare down a very real Soviet threat (Ronald Reagan fit that bill), today’s most effective president will be the one who can best navigate a similarly extended period that is shaping up to be an era of global competition.

In this new age, great-power military conflict of the U.S.-Soviet variety is all but unthinkable, yet smaller rivalries proliferate where there are economic gains to be had. It is an age in which the battlefield has been transformed by communication technologies and the addition over the past two decades of a billion people to the global workforce in emerging nations. They are not only manufacturing shirts and toys but also, empowered by the Internet, competing against America’s highly skilled computer engineers, lab technicians and architects with their outsourced labor.

The good news is that America is uniquely qualified to do well in this less dangerous yet more complex era, given the scale of its market, its agile private sector, its youthful demographics (compared with other advanced economies) and the fact that, unlike Europe, it acted more quickly and decisively to address its financial rot and remake its banks. America leads the world in exploiting shale gas, and its export sector is thriving. The U.S. has a fighting chance to meet President Obama’s goal, stated in his 2011 State of the Union address, of doubling exports in five years. Exports to China alone have grown by 65 percent since 2007, making the country the third-largest American export market.

The bad news, captured Tuesday in Federal Reserve Chairman Ben Bernanke’s bleak testimony to the Senate Banking Committee and in this month’s IMF annual report on the U.S. economy, is that the threats to this potential rebound are immediate. IMF Managing Director Christine Lagarde called the U.S. economic recovery “tepid,” predicting the U.S. will have just 2 percent growth through the rest of the year. The downside risks that could reduce growth further include the euro zone crisis, the slowing growth of emerging markets and Washington’s political dysfunction.

Although the American business environment remains one of the world’s most attractive, a recent survey by Harvard Business School shows that 70 percent of its alumni expect American competitiveness to decline over the next three years. During 2011 alone, more than 1,700 respondents were personally involved in decisions about whether to place business activities in the U.S. or elsewhere, and in two-thirds of the cases they decided against the U.S.

The respondents pinpointed weaknesses that the candidates should be addressing, but are not. Among them: America’s cumbersome tax code, its failing elementary education, its overregulation, its aging infrastructure, its inadequate workforce skills and, yes, its political gridlock.

In analyzing the findings, Michael E. Porter and Jan W. Rivkin wrote:

Many see jobs as the goal, when in fact it is only through restoring American competitiveness that good jobs can be created and sustained. Many see income inequality as the central problem, when in fact inequality is the outcome of underlying problems in skills, opportunities and other fundamentals that must be addressed if inequality is to fall.

In his 2011 State of the Union address, President Obama dramatically spoke of “our generation’s Sputnik moment,” comparing the new global competitiveness challenge to what Dwight D. Eisenhower faced following the Soviet launch of the first orbiting satellite. The outcome was a national mobilization that resulted in the birth of NASA, the education of a new generation of engineers and, ultimately, victory in the space race.

The problem is that Obama and Romney now are acting more as politicians out to win the next turn of the news cycle rather than as statesmen providing a roadmap for this new era of global competition. The Obama campaign’s portrayal of Romney as a rapacious capitalist is as unhelpful as the Romney campaign’s attacks on Obama as a closet Marxist.

The American private sector is doing much to rise to the challenge. It’s time for the two men vying for the Oval Office to stop playing gotcha and provide leadership for this new generational challenge.

They may have to channel Eisenhower.

PHOTO: Prime Minister David Cameron of Britain (center L-R) , President Barack Obama, Chancellor Angela Merkel of Germany, José Manuel Barroso, president of the European Commission, and others, including French President François Hollande (seated R), watch the overtime shootout of the Chelsea vs. Bayern Munich Champions League final in the Laurel Cabin conference room during the G8 Summit at Camp David, Maryland, May 19, 2012. REUTERS/White House/ Pete Souza/POOL

21 comments

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I think the American presidecy has been significantly nullified. It is no more than a distraction away from the real problems our country faces, and thew real power structures that influence it.

Posted by tmc | Report as abusive

When I here competitiveness, all I really hear is wage cuts. What I think you mean is America needs to out-class the world by bringing to market the next wave of invention and technology. Unfortunately, given that cuts to scientific research are being cut everywhere (save big pharma and agribusiness), America is lagging both Europe and China on the cutting edge. What’s even more unfortunate is that neither the EU nor China has the capital to ‘be’ the cutting edge of the world – and so we stagnate and throwback religious type creep back to the fore. Dangerous times indeed.

As for the question of the presidency: if Obama wins, at best America get two years of status quo followed by two years of feel good small-time progressive pet projects. If Romney wins, then you get wholesale NEGATIVE changes to America and probably another large scale war, likely with Iran. So status quo of low growth and congressional stalemate? or hyperactive neo-conservative agenda of war and proliferation of upper-class wealth disparity? I’ll take status-quo over war and inequality any day.

Posted by CDN_Rebel | Report as abusive

Oops. in line 3 should read ‘given that *funds to…’ Hard to focus in the morning when you have a teething infant!

Posted by CDN_Rebel | Report as abusive

This is all ivory tower intellectualizing. You’re right, of course, we need to be competitive. But what about people who are jobless now? What do we do about that?

Posted by josefski | Report as abusive

it’s about purchasing power, stupid.

as more and more industries choose to become competitive, by introducing technological advancements………..more and more employees lose the chance to have a reasonable salary……..you know discretionary income………….the ability to become a customer that buys things.

machines don’t buy things.

there are not enough ‘owners’ to replace employees. investors cannot buy as much beer, as a country full of workers on pay day.

Posted by Robertla | Report as abusive

“…in fact inequality is the outcome of underlying problems in skills, opportunities and other fundamentals that must be addressed if inequality is to fall.”

That inequality is a vicious circle. The 1% go to the best schools, where they make their connections with other rich families who do business with each other. The 99% go to the State colleges, get a degree, and sit in cubicles for the rest of their lives – at best. “Skills” do not factor into this. “Other fundamentals” are the usual suspects – who you know, what connections your family has, and nepotism. If America won’t go back to manufacturing, with a strong unionized labor force making a middle class possible, we’ll be a nation of burger-flippers and Wall Street lampreys.

Posted by Quatermass | Report as abusive

The U.S. Chamber of Commerce and its politicians are not concerned with U.S. competitiveness. These are global companies. Borders are nothing more than a market distortion to them.

Raise import tariffs to their historic level of 20%. They’re currently at 1.3% and the U.S. Chamber of Commerce great experiment is failing. Incidentally, China still charges us 20%.

Posted by AlkalineState | Report as abusive

You cannot be competitive if:

1. your currency (dollar) is manipulated to simply be overpriced

2. your government taxes the poor to provide money to subsidize the export of jobs the poor have done and to subsidize the import of foreign labor

3. your government requires your employer to discriminate against you because of your sex and ethnicity

4. your government tolerates discrimination against its own citizens by foreigners on its own soil

5. your country dislikes intelligent people who are from the majority group

As long as any of these current policies remain in place, the USA will continue to decline, especially as a place of thought, discovery and innovation.

Posted by usagadfly | Report as abusive

The problem is that most Americans think American multinational corporations seek to help America. If they did, they would go broke in the multinational jungle.

In fact, corporate charters of the largest American-based corporations dictate that they do NOT undertake actions that benefit America. Rather they are chartered to do whatever legal acts best bring profits to their shareholders — America be damned.

AlkalineState goes to the heart of the problem, and I quote him:

“The U.S. Chamber of Commerce and its politicians are not concerned with U.S. competitiveness. These are global companies. Borders are nothing more than a market distortion to them.”

“Raise import tariffs to their historic level of 20%. They’re currently at 1.3% and the U.S. Chamber of Commerce great experiment is failing. Incidentally, China still charges us 20%.”

Well said, AlkalineState.

Posted by AdamSmith | Report as abusive

“Raise import tariffs to their historic level of 20%”…absolutely nutty

Posted by jambrytay | Report as abusive

The quick answer is that romney will be better for the economy. u-bam-a is a total FAILURE with the ECONOMY.

A competitive economy would help to solve a lot of problems. Running around trying to shore up every problem with not work.

If those who are anti-business have their way, more business will leave the United States; then where will the nation be? Less tax revenue, fewer jobs, etc

The facts no one wants to read.

Learn to think for yourself.

Censorship is evil.

Posted by ALLSOLUTIONS | Report as abusive

Jambrytay, throughout most of U.S. history, import tariffs here have ranged from 15 – 45%.

Starting after WWII, they have been dropping steadily.

This has cut the revenue we used to get from tariffs (as provided for in the Constitution), and it has placed more pressure on domestic income tax payers to make up the difference. This while the jobs move overseas under the destructive low tariff scheme. So given this, what is ‘nutty’ about getting the tariffs back up to where they were? Your comments offer no alternative or explanation.

China needs us as customers more than we need them as suppliers. We can move factories to Malaysia. They can’t find 320 million rich customers in Malaysia to replace us. We are in a position to be charging for access to our markets and we should be doing it. No?

Posted by AlkalineState | Report as abusive

Sorry, you’re right. Let’s provoke a full blown trade war with the Chinese just so we can muscle our way into crappy industries (ex. electronics manufacturing) with terrible to non-existent margins where players are forced to compete on price. Very wise.

Posted by jambrytay | Report as abusive

Your going to have to incentivize me. Why should I work hard for the profits of cruel rulers who deem me no more than a commodity to be moved like a game board piece. Freedom? Opportunity? What the hell are you talking about? Competitiveness? Sounds like a gullibility check. Hey Pete, if they buy this, we have our candidate slaves. He He, it’s great getting fools to work for your wealth isn’t it.

Posted by brotherkenny4 | Report as abusive

tax offshore outsourcing.. :)

Posted by robb1 | Report as abusive

Robb1-

People are funny.  With their spending, they push companies to provide goods and services cheaper, faster, 24×7, etc.  Companies respond in a variety of ways, outsourcing being one, and then people complain about greedy companies outsourcing jobs. 

Posted by jambrytay | Report as abusive

At least the Advertising industry is enjoying the fruits of the Citizens United v. Federal Election Commission deregulation ruling of the US Supreme court. However, it is true that nobody else is winning in any of the political debates either between Romney or Obama or any other candidate. The issues are not being discussed as the tea partiers have already made up their minds. Unfortunately tea partiers seem to think that compromise is a sign of weakness. And since the Republican party is willing to roll over to keep these extremists in the fold, nothing is likely to ever get done again regardless of which party wins in November.

So, if you are a centrist, you’re going to have to do a little research on the likely behavior of each of the candidates. Try and determine the policies of each candidate and guess at which will produce the best economic results. Obama’s policies have not been great but the US is doing better than Europe– except for Germany where their socialist policies are backed up with a strong educational system. So my money is on the candidate who’s going to educate our children.

The countries that are catching up to the US are those with the most effective and far sighted education systems paid for by their respective Governments. And I’m just not sure how deregulation and smaller government are going to help us on that front.

Posted by LEEDAP | Report as abusive

If we import more then we export we noncompetitive by definition. Free trade has a history of not working for a long period for most high wage nations that tried it.

Solutions are export subsidies, tax on no-export industry investment. Reforms of public education. Going back to free state universities for citizens (now most charge tut ions that many students cannot or will not meet) it can be supported by taxes on unearned income lie estate taxes, gift taxes and real-estate taxes.

Posted by Samrch | Report as abusive

A reminder that Romney is not presently a governor. Identify him as former governor, ex-governor, if you like else he’s Mr. Romney.

Posted by Philoking | Report as abusive

I, too, encounter anecdotal evidence of business activities being located overseas, primarily Asia, but the common theme is a very simple one: “That’s where the action is.”

What has been obscured is that 25 years ago we in the West and particularly America made a “Grand Bargain” over globalization. We changed our relationship to the world. We agreed to let billions of people living in very poor countries compete in our markets. We took cheap goods in return for an implicit commitment to shoulder large trade deficits and the concomitant public/private debt those deficits demand.

We negligently thought that the rest of the world would simply “catch up”, right the imbalance, and we would all be one big happy market together. We never seriously considered that it might take a couple generations for this to happen. We never seriously asked what it would mean for billions of people to try to live like 300 million Americans do, or did.

One likely answer is that we will all converge on a standard of living much higher than what used to characterize the co-called “Third World”, but substantially lower than what Americans have come to expect. We will be productive out of necessity, but that productivity will be organized by far fewer managers using all the tools of technology, and consequently we will also be very “efficient”, meaning most of us will deliver that productivity while taking less and less of the resulting wealth.

In some circles this view is heresy, but that only adds to its likeliness as an outcome.

The best and the brightest will see the handwriting on the wall, and plot their course accordingly.

Posted by TheCageNovel | Report as abusive

It´s the social psychology, stupid!

A country, just like an individual or a team can not become competitive unless they have self belief.

Unfortunately US society self-belief has been destroyed by a collection of hiper articulate hipercritics via books, movies, comedy, social agitation, etc., relentlessly for the las 40-60 years. Mainly they have destroyed they have managed to make mainly the majority of Anglos and Northern Europeans and other Europeans and even from other cultures who decided to assimilate the traditional American values and beliefs that America, while not perfect, was a worthy noble country, whose religious beliefs were worthy, whose institutions, large corporations, etc., were run by honest intelligent people.

The hipercritics have managed to put the imperfections in center stage sweeping aside almost everything that created and sustained the country. The end result is the US has been behaving collectivelly as a flawed society.

This has set off a spiral or moral degeneration and decay that will only stop when the US totally collapses or somehow the shamed and humiliated majority of all cultures and races decides it has had enough. It will not be pretty.

It is not clear to me if the hipercritics did and still do so because they want to perfect the US, in this case we have an example of bright yet stupid people, or they simply consider the US is not a worthy society because the hipercritics do not share the values of the majority and consider them dumb, backward, not worthy. If they are so smart they should go and set up the model society they pursue somewhere else, by themselves. However I am afraid the talent to criticize does not have much to do with the talent to build a prosperous, free, moral society like the US was.

When the whole thing collapses and or the hipercritics are persecuted their prophecy would have been fullfilled; they were “right” all along. It will never cross their minds they were the termites they brought the house down over themselves.

So, US lack of competitiveness is not the disease and certainly not the pathogen, it is just the symptom. Obama or Romney, Romney or Obama it makes no difference, the decay will continue…, for now.

Posted by varlos | Report as abusive

[...] It’s competitiveness, stupid [...]