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Report – An Economy Doing Half its Job

“In 2013–14, Harvard Business School (HBS) conducted its third alumni survey on U.S. competitiveness. Our report on the findings focuses on a troubling divergence in the American economy: large and midsize firms have rallied strongly from the Great Recession, and highly skilled individuals are prospering. But middle- and working-class citizens are struggling, as are small businesses. We argue that such a divergence is unsustainable, explore its root causes, and examine actions that might mitigate it. We ask in particular, how can we create a U.S. economy in which firms both thrive in global competition and lift the living standards of the average American? Four patterns that shed light on this question emerged from survey respondents’ assessments of the U.S. business environment:
•In gauging the future of U.S. competitiveness, the survey respondents were pessimistic on balance. By a ratio of three to two, those who foresaw a decline in U.S. competitiveness in the next three years outnumbered those who predicted an improvement. Reflecting the divergence described above, respondents were much more hopeful about the future competitive success of America’s firms than they were about the future pay of America’s workers.
•Though pessimistic overall, respondents were less negative about the future of U.S. competitiveness than they were in prior surveys. This trend seems to reflect the cyclical rebound of the U.S. economy. Accordingly, respondents were more favorable this year in their assessments of every element of the U.S. business environment. Respondents saw relatively small gains, however, in areas that pose some of the nation’s toughest challenges, including America’s tax code, its K–12 education system, its political system, and its regulations.
•Overall, respondents saw weaknesses in those aspects of the U.S. business environment that drive the prospects of middle- and working-class citizens—for instance, the education system, the quality of workplace skills, and the effectiveness of the political system. And they saw strengths in aspects that influence company success, such as the quality of management, the vibrancy of capital markets, and firm access to innovation. This dichotomy is likely at the root of the divergence described above. Compared to the typical respondent, alumni working in small businesses had more negative (or less positive) views of virtually every aspect of the U.S. business environment. This finding echoes growing evidence from other sources that small businesses are disadvantaged in America…”

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