Michael Porter on US Competitiveness

Michael Porter, the go-to-guy for studying firms’ competitiveness, wrote an article for Business Week about the need for a strategic economic policy in the US to maintain its competitiveness.

I’m not going to write too much on this but I thought for a few reasons that this article was important enough to blog about because:

1) I’m sick and tired of people who cling to the “free markets above all” argument.  It’s simplistic, naive, and incomplete.  Successful economies require rule of law, good government policy, and competitive markets.  Take daytraders for example.  I have a feeling most are older, fiercely Republican, and grew up in the days of Reagan when Reaganomics was backed up by Cold War victory, stock market rallies, and unprecedented American prosperity.

Here’s some quotes:  “obama selling govt intervention as a source of change and it isnt”.  “self reliance is the way to freedom.  not through some government program.”  “since [Obama] hasnt run anything we dont know if he is a capitalist, he has never run a business”.

You can sense the depth of understanding of what the government is supposed to do.  Sensible policies are needed to enable business; we’ve certainly discovered this in our attempts to create Business-Enabling Environments (BEE) in developing nations.  Porter writes:

“Republicans keep repeating simplistic free-market thinking, even though the absence of all regulation makes no sense. Self-reliance is preached as if no transitional safety net is needed. Some Republicans even argue passionately that the country should have no strategy because that would be “industrial policy.” Yet the real issue is not picking industry winners and losers but improving the business environment for all American companies, something we cannot do without identifying our top priorities. Overall, Republicans seem to think business can thrive without healthy social conditions.”

Economic studies on income inequality have found that nations with higher Gini coefficients (more inequality) are less stable.  “Redistribution of wealth” is a scare-phrase used to invoke Marx and Lenin and socialism, if not communism.  But it seems to be a requirement (through whichever manner enables it) for a healthy society and economy.

I am now creating a list of articles and research pieces that show the necessity of government policy.  It seems unfathomable that I’d have to do this, but the debate has really become so dumbed down that anyone who says that an unfettered free market isn’t the way to go is now a socialist.

2) Porter talks about how our infrastructure does not allow security for competitiveness.  He touches upon social safety nets, which Robert Reich suggests should be nationalized (health care, etc.) so that it’s portable in an economy where we switch jobs so often (those gaps in between being termed “frictional unemployment”).  He touches upon education, which along with its relationship to government research funding and joint corporate research, is a massive enabler of long-term, sustainable innovation.  He also talks about weak regulation, which in my opinion has led to a free-for-all mercantilist exploitative mindset of “get rich or die tryin'”.

3) Porter also recognizes the peculiarities of the American system that discourage it from coming up with long-term strategies.  That he would propose methods that would encourage long-term strategic formation is interesting.  Right now the US seems like a chicken running around with its head cut off in most aspects of its policies, which is discouraging given that other countries, namely China, seem (at least on the surface) to have a sensible, risk-management-style long-term strategy to help guide them.

Anyway, a fantastic article.  It’s so refreshing to hear people like Porter, Andrew Bacevich, and others speak.  I can only hope that Obama will inspire this sort of thoughtfulness and erudition to run rampant throughout the United States.

[Finally, as a side note, if you are reading this on Facebook, please subscribe to my RSS feed at my blog, http://benturner.wordpress.com/]