President Obama on Competitiveness: Impacts on Business

The President’s State of the Union message spent a good deal of time on competitiveness, and rightfully so. So let’s talk about what business can expect from efforts to improve the nation’s competitiveness.

To begin, the nation does not really compete. Workers compete for jobs, consumers compete to buy stuff, businesses compete for sales and productive resources. The government, per se, does not engage in global economic competition.

That means you, as business leader, worker or consumer, are responsble for your own success or failure, at least as a first approximation.

The government can do some things, like provide a good business environment. The President said, “We have to make America the best place on Earth to do business.” That’s kind of true, in a vague kind of way. For some businesses, the country with the lowest wages and least environmental rules is the best place to do business, but I’m sure that’s not what he meant.

International comparisons, such as the Economic Freedom of the World reports, consistently show that the key to global economic success is property rights, rule of law, low inflation, use of the price system to allocate resources, etc. In general the United States is in decent shape here, but I’d like the to see the President give some thought to these issues.

A climate for innovation: just what the heck is that? The President said,

“We’re the nation that put cars in driveways and computers in offices; the nation of Edison and the Wright brothers; of Google and Facebook.  In America, innovation doesn’t just change our lives.  It is how we make our living.”

Great quote. Plenty of examples of people innovating without a government grant. The President also said,

“None of us can predict with certainty what the next big industry will be or where the new jobs will come from.  Thirty years ago, we couldn’t know that something called the Internet would lead to an economic revolution.”

Then he went on to cite a laundry list of the industries and technologies that he wants to promote. Here’s the business insight: Give more thought to which technology or industry you want to pursue than our political leaders do. They focus on the trendy and the obvious. Sometimes those things work out. But often the obvious turns sour, and the not-so-obvious blossoms. I suggest you ask yourself some of the key strategic planning questions mentioned in a previous post.

Education was the next topic under the heading of competitiveness, and indeed, given that our government provides most of the educational structure in this country, they could do a lot here to provide a productive workforce.  Could.  Don’t expect a bureaucracy to give you something that’s too much different from what it’s always given you. The status quo has the home field advantage in a very big way.

What can business do to get better workers? First, do a better job screening for “soft skills,” such as punctuality, cooperation, diligence, etc. If you can find a way to teach these skills to people who lack them, my hat is off to you. But I don’t expect that many of you business leaders can do that. So hire people with great soft skills.

Next, provide your own training. See who can learn on the job, offer them more training. Plenty of college degree requirements include plenty of fluff–just ask the former professor.

Finally, the President talked about infrastructure. Here’s the confusing part: good roads, for example, are valuable for business competitiveness. High taxes are bad for competitiveness. How do you have good roads without high taxes (aside from privatization)? Shift our focus from spending to bang-for-the-buck. The key is for government infrastructure projects to provide high value relative to their cost. Any politician who thinks the key is simply spending money is sadly mistaken. Money must be spent in a cost-effective way.

If you are a business leader thinking about your company’s future comptetiveness, my message is a little different from the President’s. I say, “You’re on your own. Find the need. Serve your customers well. Hire and train great workers, and treat them well. Don’t expect your government to provide competitiveness for you.”

www.businomics.com
“Dr. Bill Conerly is the consultant who connects the dots between the economy and business decisions. He holds a Ph.D. in economics from Duke University and was formerly Senior Vice President at First Interstate Bank.
Dr. Conerly is author of Businomics: From the Headlines to Your Bottomline—How to Profit in Any Economic Cycle (http://www.businomics.com/), which provides business leaders with a framework for understanding current economic news. He is co-author of Thinking Economics, a multi-media high school economics curriculum used in 24 states.”

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