The United States is a competitive location to the extent that firms operating in the U.S. are able to compete successfully in the global economy while supporting high and rising living standards for the average American. Changes in the U.S. that help firms compete but undermine living standards, such as lower wages or a cheaper dollar, do not boost U.S. competitiveness by our definition. Whether a nation is competitive hinges on its long-run productivity—that is, the value of goods and services produced per unit of human, capital, and natural resources.
Seen through this lens, America is suffering not only from a deep cyclical downturn but also from underlying structural threats to its long-term competitiveness. The authors cite evidence of structural problems in trends that predate the recent recession. These concerns also reflect the findings of a survey of nearly 10,000 HBS alumni, the vast majority (71%) of whom foresee a decline in U.S. competitiveness in coming years. The authors trace out the most significant dynamics leading to the competitiveness problem that looms before the United States. Although the U.S. retains profound competitive strengths—for instance, in higher education and entrepreneurship—those strengths are increasingly threatened by weaknesses in areas such as the tax code, basic education, macroeconomic policies, and regulation. Steps to reverse the loss will require a new focus by government and business leaders.