USA TODAY International Edition
PORTER CALLS TRADE DEAL WATERSHED, SAYS ECONOMY LAGS QDo
Republicans and Democrats in Congress, and the presidential race, seem unable to reach consensus on anything, let alone on juicing modest U. S. economic growth. Harvard Business School Professor Michael Porter, a top expert on U. S. competitiveness and n
Q What do you think of the Trans- Pacific Partnership? Many businesses say it will boost exports while labor says it’ll ship jobs abroad. A: The trade deal is potentially a watershed. It’s going to level the playing field. It’s going to reduce distortions and barriers created by foreign countries. See, we are open. But they’re not. So this makes them much more open.
Q Your most recent survey of Harvard Business School alumni on U. S. competitiveness found some improvement: more expect it to rise in three years, and fewer say it will fall. Is that encouraging? A: Alumni are slightly less pessimistic than they have been. But a huge fraction of our alumni think that things are not getting better. The U. S. is facing a structural competitiveness problem that is leading to the weakest economy we have seen in generations.
Q Why is that?
A: There is a sharp divergence in economic performance. Lower and middle- income Americans are doing much more poorly than highly skilled and highly educated Americans. And large firms are succeeding and creating a lot of the jobs, whereas small businesses, which historically are
the job generators, are suffering.
Q What do you attribute the disparity to? A: Big business and high- skilled individuals are taking advantage of America’s strengths ( such as universities and capital markets). The average worker and small business is getting pounded by high corporate taxes, weak education, high health care costs, our infrastructure problems, regulations and the declining skill level of the average worker.
Q But your survey does show some improvement. A: We think it’s mostly because Europe is doing poorly and Japan is stagnant and India and Brazil are not growing. So people look at the rest of the world and say, “Gee, we must be doing better.” But we’re actually not.
Q What about all the reports of manufacturers coming back to the U. S. because wages here stabilized while Chinese wages went up? A: That was happening ( and still is to some extent), but guess what happened? The dollar got stronger. One of the reasons we were coming back is the dollar was weak. That accentuated the difference in wages we were seeing.
Q So we have high- skilled workers doing well but not enough middle- skill workers who are in demand and could be making a decent wage and comprising a new middle class? A: Middle skills you’ve got to have some training for but not a full college degree. That could be computer skills, the ability to repair machinery. Apple is a great metaphor. Apple does all of its research and development in America. It has all these brilliant people sitting in Silicon Valley. But until recently, Apple made nothing in America. Zero. And jobs accessible to a good, welltrained worker that knew welding or assembly, none of those jobs had stayed in America.
Q Should we cut wages to keep more jobs from moving overseas? A: Competitiveness is the ability of companies to compete while maintaining or improving the average standard of living. If you’re cutting wages to become more competitive, that’s not more competitive. It’s raising the skill of those workers so they can support that higher wage. That’s what America did for 50 years.
Q Why don’t we have the skilled workers? A: There’s a lot of evidence it starts with K- 12 but moves into corporate training, publicly funded training and the community college system. We once had the most skilled workers in the world, and now we don’t. we need more funding for K- 12 schools and community colleges? A: We have a very high spending per student. But we’re fighting over whether we should have national standards for education. We have to agree the fundamental goal of our education system is to produce young people with the knowledge and skills to succeed in the modern economy.
Q And cut the 35% corporate tax rate to 28%? A: Even lower probably. Mid 20s. And we could pay for that if we eliminated deductions. Q But Washington is largely paralyzed by gridlock. So what do you do? A: We need to get the business community engaged and not rely on Washington. The business community now overwhelmingly realizes that the lack of shared prosperity is a fundamental problem for the country.