Business in America, Glass half empty
PROFITS may be at a record high, but American businessfolk are feeling glum. Some moan that their pipeline-postponing president, Barack Obama, doesn’t understand how business works. Others fret that America itself is becoming dysfunctional. Much of this pessimism is uncalled for, but it matters nonetheless.
A survey published on January 18th offers unsettling detail. Fully 71% of the businesspeople polled expected America’s competitiveness to decline over the next three years. (National competitiveness is a slippery concept: countries do not compete in the same way that firms do. But the businessfolk in question answered some clearer questions, too.) Some 45% said that American firms will find it harder to compete in the global economy. A startling 64% said that American firms will find it harder to pay high wages and benefits.
The survey is from Harvard Business School, which in October persuaded nearly 10,000 of its 78,000 alumni to complete a questionnaire. Two-thirds were based in America; the remainder were spread across 121 countries. Some 91% had worked during the past year (over half in manufacturing, finance or professional services). This being Harvard, more than a quarter described themselves as a chief executive, chairman, founder, owner or something equally exalted.
Intriguingly, the Harvard alumni were gloomy about where America is headed, rather than how it is now. Some 57% felt that today the business environment in America is somewhat or much better than the global average; only 15% said it was worse. But when asked to compare its prospects with those of other industrialised economies, only 9% felt that America was pulling ahead; some 21% said it was falling behind. A striking 66% expected America to lose ground to Brazil, India and China; only 8% thought it would pull away from them. Those in globally competitive sectors were gloomiest; those who ran hotels or utilities were more cheerful.
The Harvard alumni identified several areas in which America has an edge: its universities, its spirit of enterprise and innovation, its business clusters, its system of property rights, its capital markets and even the quality of its business managers (no comment). Its lead in some of these areas is increasing, they reckoned.
America’s most glaring weaknesses, they felt, were its political system (this was the number-one complaint by far), its schools, its insanely complex tax code, its macroeconomic policies, its regulations and its legal system. Often the gripe was not just that the rules are bad but that they are unpredictable. Each respondent was asked to make one suggestion to the government. Top of the list? Simplify the tax code, and reform immigration policies to make it easier to import talent.
Surveys like this matter because the pessimism they reveal is reflected in the decisions bosses make. In the year before the survey, one respondent in six had been personally involved in a decision about whether to do something in America or another country. Some had to choose whether or not to shift an operation offshore. Others, whether to bring one back to America. Others had to decide where to locate a new operation. Overall, abroad defeated America by two to one.
These decisions were not all about moving drudge work to countries with low wages. Many involved highly skilled tasks such as research and development. In the cases involving potential offshoring, firms opted to remain in America only 16% of the time. Still, there were 70 examples of firms moving activities to America from abroad. And offshoring brings benefits as well as problems.