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Harvard economist never thought his new study would take him where it did

The political system is hindering economic development in America.

This was a key finding in Harvard Business School’s study on competitiveness. Professors, led by Michael Porter, found the political system was actually a key cause in hindering the economic development of the US.

“I’m an economist and the last thing I thought I would end up doing when I got into this project was to actually start deeply studying the political system,” Porter told Yahoo Finance. “But we’ve now concluded that’s where the root cause of where America is today. We have a lot of strengths. We are very dynamic. We have tremendous people. We have a lot of assets. We’re just stalled.”

Porter explains that while the US political system was once the envy of many nations, it has become increasingly a liability over the last two decades.

Political system as an obstacle

“Today, we believe that our political system is now the major obstacle to progress on the economy, especially at the federal level,” according to the report.

Legislation enacted by Congress has declined over the decades, with the number of laws unacted by the 112th and 113th Congresses at historic lows. And many bills are passed purely for political benefit and are never signed into law.

Source: Harvard Business School US Competitiveness Project
Source: Harvard Business School Competitiveness Project

Decline in trust for political leaders

Meanwhile, trust for political leaders has declined significantly over the George W. Bush and Barack Obama administrations, according to the report. In 1958, three out of four Americans trusted their government. Today less than one in five trust their governments to do the right thing, the report explained.

Source: Harvard Business School US Competitiveness Project
Source: Harvard Business School US Competitiveness Project


Lack of trust can also be seen among citizens. Based on 10 survey questions in the report measuring the political values of Republicans and Democrats, differences in political ideology have widened markedly over the last 20 years.

Source: Harvard Business School US Competitiveness Project
Source: Harvard Business School US Competitiveness Project

And given rising dissatisfaction with the major parties, Gallup’s party affiliation poll finds that Americans who identify themselves as Independents have now grown to account for the largest percentage of Americans (42%), versus Democrats (28%) or Republicans (28%). This reflects a declining confidence in parties, according to Porter. Favorability ratings have declined to below 40% for both parties for the first time since Gallup began collecting data in 1992.

The 2016 presidential election is leading more Americans to hold extreme views of the opposing party, according to the report, as American party members use words like “afraid,” “angry,” and “frustrated” to describe each other.

Building fear

Instead of building bridges and respect for other citizens’ viewpoints, the presidential candidates have too often appealed to Americans’ worst fears, according to the report.

Michael Porter and his team point out trade as a good example of this, where divisive rhetoric surrounding the “evils of trade” has confused the voting base.

Meanwhile, political rhetoric has also increased anti-business sentiment, according to the report. Eighty-two percent of Sanders’ supporters and 69% of Clinton supporters believe corporations make too much profit. Meanwhile, Republicans who support Trump are less prone than the average Republican to think corporate profits are fair.

“Given such political attacks on businesses, the ability to build consensus on sensible policies to address key economic weaknesses in America is set back,” Porter writes in the report.

“We’re just not moving,” Porter says.”It’s not that we’re bad. It’s not that we’re idiots. It’s just that we’re not moving. And when you get to the root causes of that, it– it actually comes down to the political process. We can’t agree to move ahead. We can’t compromise. And everything important in the economy involves compromise. There’s no one ideology that’s correct.”

As the report lays out, much of what happens in the US government has been more focused on scoring political points than on taking steps that will benefit the average citizen.

“While results for the citizens are next to nonexistent, the parties themselves and other actors involved in the political system are thriving in terms of funding, media coverage, and attention,” the report highlights.

For more on the study, please see below:

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Harvard study singles out a game-changing economic opportunity: TAX REFORM

There’s a silver lining behind the dark clouds hanging over US businesses

Harvard Business Dean tells us what this huge 5-year study is all about

Harvard Business Dean: The post-crisis monetary policy is ‘running out of runway’

How improved infrastructure could end America’s vicious cycle of poverty

Some companies have taken the next obvious step to filling jobs that sit vacant

There’s one piece of tax reform that would have a real impact with little resistance

America’s outdated education system isn’t producing the workers companies need

Revitalizing small businesses is key to drive America’s economic growth