US political system threatens economic competitiveness, study finds

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The dysfunctional US political system has become the biggest threat to its future economic competitiveness, according to a report by Harvard Business School.

Average annual growth rates of 1.6% in the current recovery lag behind those of any previous rebound since the 1940s, according to the study, saying the country’s economic performance peaked in the 1990s and has slowed. has since eroded.

While many studies have focused on the legacy of the financial crash to explain the country’s weak economic performance, report found that the challenges were of a longer-term structural nature. The main obstacles identified by companies were within the framework of federal government policy, among them tax code reform, regulation and US infrastructure.

According to the report released Wednesday evening, about 50% of Harvard Business School alumni surveyed in the study said they expected a further decline in American competitiveness over the next three years, compared to 30% who expect improvement. The business environment appears worse for small businesses than for large ones across the board, according to the report.

“Political dysfunction is the single greatest impediment to US competitiveness,” said Jan Rivkin, a professor in Harvard Business School’s Strategy Unit.

He said the finding was not intended to relieve businesses of having responsibilities, or state and local government, but added: ‘When you look at the things that are holding us back, a lot of them fall at the feet of the federal government. .”

The breakdown of political cooperation in Congress has made progress in key policy areas elusive in recent years, as evidenced by repeated clashes over the public debt ceiling and difficulties in agreeing on long-requested reforms to the code. country’s corporation tax hazard. “Existing political parties have done a pretty good job of locking down the paralysis,” Rivkin said.

According to the study, several policy changes that would have clear competitiveness benefits were feasible with good political will. Among them was an increase in infrastructure spending – something both Donald Trump, the Republican candidate, and Hillary Clinton of the Democrats are advocating, and which received the most support from business leaders according to the survey. .

In addition, politicians should focus on corporate tax reform, including a reduction in the headline rate and easing immigration barriers for highly skilled people. The silver lining identified in the report was that many of the obstacles to improving competitiveness could be overcome relatively easily.

“America can reform its tax code faster than other countries can develop a rich environment for entrepreneurship,” he noted.

The survey showed that a large majority of business school alumni believe that the political system hinders growth. Some 56% of Democrats felt that way, 82% of Republicans and 74% of independents, he said.

Mr. Rivkin added: “The American political system now threatens the American economy, and vice versa. We need a sober look at the strengths and weaknesses of the American economy, so that leaders in government, business, and other parts of society can work together on a national economic strategy for shared prosperity.


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