In October of 2011, the Harvard Business School cajoled nearly 10,000 of its 78,000 alumni to complete a questionnaire that was published on January 18, 2012.
The result? Harvard alum are clearly glum.
In fact, 71% of the Harvard graduates who are in business expect America’s competitiveness to decline over the next three years. An additional 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.
Two-thirds of the total respondents were based in America; the rest were spread across 121 countries. More than 25% described themselves as a chief executive, chairman, founder, or owner.
While 57% felt that the business environment in America is somewhat, or much bette,r than the global average, when asked to compare America’s prospects with other industrialized economies, only 9% felt that America was pulling ahead; while some 21% said it was falling behind with 66% expecting America to lose ground to Brazil, India and China.
America’s most glaring weaknesses in the eyes of Harvard alums – surprise, surprise – included its political system, followed by its educational system, an unwieldly tax code, and macroeconomic policies devoid of clear strategy.
The Economist noted that:
“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.”
Those are numbers to feel glum about.
Jeffrey,
Last February I was at a financial conference in Chicago where a prominent Harvard alumnus Glenn Hutchins (a director of NY Fed and vice-chair of the Brookings Institution) gave a stunning lunchtime presentation. As he spoke, one could viscerally sense why the jingle of cutlery and the buzz of 300 or so lunching men quickly died to a pin drop silence…
Built on a whole lot of hard stats (not some mushy surveys), the presentation essentially reaffirmed the things that George Soros said this winter and what “Dr. Doom” Nouriel Roubini kept saying all these years: that America is growing uncompetitive, that the American consumer is nearly broke, and that the current unemployment levels with the resulting economic and social stagnation will last at least a decade. “And there is nothing that the government can do about it” – Hutchins’ direct quote.
For some reason the organizers were making sure that the presentation wouldn’t be available to the press (they were chasing reporters away), but I couldn’t help but jot down a few things. My notes are somewhere in my computer, however, two bits of statistics I remember vividly:
1) Despite all the fiscal stimulus, Fed’s QE and tax cuts – a MASSIVE amount of extra money pumped into the economy – currently America produces fully one trillion dollar less in products, services and other “goods” than it produced before the crisis. So, with the real unemployment being around 13-15% (Hutchins’ figure), the idle capacity of the economy is huge, BUT –
2) Only 2% of new jobs that American employers are creating to replace millions of jobs that had vanished during the crisis are in industries that internationally competitive.
That latter bit means that 98% of the “new jobs” – basically all of them – are in the industries that cannot compete with German, Japanese, Brazilian, Chinese industries. (Btw, in 1989 I heard a similar statistic about the Soviet industrial competitiveness.) The more of such “job growth” America gets, the less competitive it becomes, possibly forcing companies to relocate the remaining competitive jobs elsewhere in the world.
There are some effective micro-economic approaches to counter this downward spiral (indeed, the government with its macro approach can’t do much here). However, I don’t see those approaches seriously explored anywhere. In your blog you, too, Jeffrey, touch on them only lightly and only once in a while, I’m not sure why.
Meanwhile, congratulations to us all: we’ve been promised at least a decade of stagnation if not depression, and the Harvard alumni will surely deliver. Those who can should take a working vacation in China or Thailand, away from depression.
Andrei Vorobiev
Lexington, KY
CorruptionManagement.com