Competitiveness, part II

Steven Pearlstein has an interesting take on the new competitiveness rankings in No Longer No. 1, and No Wonder – washingtonpost.com. Pearlstein juxtaposes the WEF report with a recent NAM report:

One, the annual ranking from the World Economic Forum — the elite business organization that runs the annual winter schmooze-fest in Davos, Switzerland — finds that the United States has fallen from No. 1, a position it shared with Finland for most of a decade, to an unsettling sixth place.
And the National Association of Manufacturers, along with the Manufacturers Alliance, is scheduled to release an update of an earlier study today showing that the burdens of regulation, taxation, litigation and health care are even greater than they were in 2002, when the “cost gap” between U.S. companies and those of our largest trading partners was 22.4 percent.
The predictable response from the business community will be to use these studies to warn of impending economic ruin unless the government adopts the Republican agenda of less regulation, lower taxes, tort reform, and relieving companies of health-care and pension costs.
Don’t be fooled. These reports speak to the embarrassing failure of a decade of Republican rule in improving U.S. competitiveness. Business taxes, as a percentage of anything you want to measure, are at their lowest level in decades. The Bush White House has subjected new regulations to rigorous cost-benefit analysis. Several reforms make it less attractive for shareholders, workers and consumers to file frivolous lawsuits, but not necessarily for businesses. And in case you hadn’t noticed, businesses have already made tremendous strides in shifting health-care and pension costs to workers.
In fact, an alternative reading of the new reports suggests that the business community needs to do some serious thinking about competitiveness and economic policy.

Amen to that! I would also point out the juxtaposition of what the business community (or at least its Washington representatives) often talks about and what businesses are doing strategically. Most of business gets it — this new era is about innovation in business models and processes, not just new gadgets. It is about finding creative ways to meet customer needs – and helping customers discover new needs. Washington’s discussion is about the same old solutions.
Pearlstein also makes an interesting point about the new rankings:

Indeed, a reasonable inference from the World Economic Forum rankings is that the best way to compete is to adopt the Nordic model of high taxes, a generous social safety net and lightly regulated labor markets. Scandinavian government spending accounts for more than half the economy, as opposed to a third in the United States.

I don’t advocate that position — but you have to look carefully at what other countries are doing right. And one of the things that these countries are doing right is an emphasis on government programs to compliment private sector actions on innovation. While the Nordic countries are investing in innovation, the US is eliminating programs such as the Advance Technology Program.
Go figure.

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