BOSTON—To explore one of the most important questions facing the U.S. economy – how we can achieve both economic growth and shared prosperity in our nation – Harvard Business School faculty brought together 73 CEOs, mayors, governors, labor leaders, university presidents, and policy experts last June. The convening resulted in a report released today that synthesizes research by the school’s U.S. Competiveness Project and the insights of the participating leaders.
The report urges business and public policy leaders to address systemic underinvestment in America’s “commons” – that is, the shared resources that countries and citizens rely on in order to be productive. Years of underinvestment in the commons have left many Americans undereducated, inadequately skilled, unsupported by strong infrastructure, and with poor access to entrepreneurial opportunity. Other factors –such as pressures from globalization and polarization in Washington–are also hurting our ability to grow and share prosperity, but underinvestment in the commons is one factor that leaders like those at the convening can address successfully.
“Achieving growth and shared prosperity is one of the most critical discussions we should be having as a nation, and it’s one that is growing in its urgency—including among those running for President,” said co-convener of the June gathering Karen G. Mills, a Senior Fellow at Harvard Business School and the former Administrator of the U.S. Small Business Administration. “Going beyond simply pointing out the problem, leaders at this convening were able to break down the ingredients of success: what is the role of government, of business, of education and others, and how can these leaders work together in a sustained way to strengthen our ability to win in the global market while also lifting the living standards of Americans.”
“What we heard at the convening was welcome news for those of us working on the U.S. Competiveness Project: leaders of all stripes understand that our best bet is for all sectors – including business, government, education, nonprofit, and labor – to work together to rebuild the commons,” said co-convener Jan W. Rivkin, Harvard Business School’s Bruce V. Rauner Professor of Business Administration and co-chair of the school’s U.S. Competitiveness Project. “This work has already begun in cities and regions across the country, and the business community can play a critical role in leading and sustaining these initiatives over the long-term.”
“The marketplace for middle skill labor is remarkably inefficient, plagued by bad information and poorly conceived metrics. The shortage of skilled workers represents a growing threat to competitiveness of many American industries. More importantly, the failure of our skills development system to equip aspiring workers with the skills companies require is a major factor in the stagnation in real wages,” said co-convener Joseph B. Fuller, a Professor of Management Practice at HBS and faculty member of the school’s U.S. Competitiveness Project. “We need to transition to an employer-led system, in which companies work far more closely with educators and policymakers to define skills requirements, develop relevant curriculum and provide job seekers with opportunities to learn through apprenticeships and internships.”
Advisors or attendees of the convening included:
Janet Napolitano, President, University of California; Mitch Daniels, President, Purdue University; Former Governor of Indiana; Deval Patrick, Managing Partner, Bain Capital; Former Governor of Massachusetts; John Engler, President, Business Roundtable; Former Governor of Michigan; Damon Silvers, Director of Policy and Special Counsel, AFL-CIO; Rosalind Brewer, President & CEO, Sam’s Club; Gail McGovern, President & CEO, American Red Cross; Gerald Chertavian, CEO, Year Up; Scott Cook, Founder & Chairman of the Executive Committee, Intuit Inc.; Mayor Betsy Hodges, Mayor, City of Minneapolis, MN; David Cote, Chairman & CEO, Honeywell; Roger Ferguson, President & CEO, TIAA-CREF; Diane Hessan, CEO, Startup Institute; Chairman, Communispace; Tracy Paladjian, CEO, Social Finance; Gururaj “Desh” Deshpande, President & Chairman, Sparta Group LLC; Chairman, Tejas Networks; Dr. Michael Lomax, President & CEO, United Negro College Fund; Mayor Ben McAdams, Mayor, Salt Lake County, UT; Harvard Business School’s Michael E. Porter, the Bishop William Lawrence University Professor and co-chair of the U.S. Competitiveness Project; and Harvard Business School’s Rosabeth Moss Kanter, the Ernest L. Arbuckle Professor of Business Administration.
The report highlights three key forces that have undermined growth and shared prosperity in America:
Globalization and technological progress: American workers are competing with increasingly skilled workers around the globe and against improving automation in the workplace.
Institutional changes: Changes in America’s political and economic institutions, such as polarization in Congress and the weakening of labor’s bargaining position, have made it increasingly difficult to make policy, programmatic, and resource allocation choices and changes necessary to respond to globalization and technological progress.
Underinvestment in the commons: With hobbled institutions and globally mobile firms, America has systematically underinvested in the commons.
It is probably unwise to attempt to reverse the trends in globalization and technological progress, and the gridlock in Congress is unlikely to loosen in the immediate future. However, rebuilding the commons is in reach and, in many cities, already underway. In examining initiatives that have succeeded on this front, the attendees at the June convening identified common components: They tend to be intensely local, typically focused at the metro level. They involve participants from multiple sectors, each with a stake in achieving an identified goal. And the business community plays a critical role in both leadership and resource allocation, often proving to be a long-term sustaining force behind the initiative.
The following four parts of the commons are important to both growth and shared prosperity and are promising areas of focus for new cross-sector collaborations:
the education system from preschool through high school;
a skilled workforce;
entrepreneurial ecosystems —that is, the policies, assets, and support structures that encourage new business formation and growth; and
transportation infrastructure including highways, bridges, ports, and public transportation systems.
Leaders in cities across the country have already begun acting to boost shared prosperity in their locales. In fact, many of the convening’s participants have personally led coalitions that strengthen the elements of the commons listed above.
Some examples of efforts currently underway include:
In Minneapolis-St. Paul, business and civic leaders have coalesced under the Itasca Project to confront crumbling infrastructure, gaps in skills training, and economic disparities.
In Columbus, Ohio, the CEO-led Columbus Partnership has channeled the resources and expertise of the local business community to promote economic development and, increasingly, help city agencies tackle thorny issues like education reform.
In North Carolina, Siemens Corporation is collaborating with Central Piedmont Community College to give students the training necessary to thrive at the company after graduation.
In Salt Lake County, Utah, the local government is expanding high-quality preschool programs in the area through a pay-for-success contract with local nonprofits, educators, and private investors.
In Massachusetts, a broad coalition of public officials, academics, leaders of local universities, investors, and entrepreneurs has coalesced around energizing Massachusetts’s life sciences sector.
The approaches laid out today address many of the concerns that Harvard Business School alumni highlighted in a recent survey. The concerns include rising income inequality, middle-class stagnation, rising poverty, and limited economic mobility. The surveyed business leaders report that these economic outcomes are not only social challenges but also problems for their businesses.
About the HBS U.S. Competitiveness Project
The U.S. Competitiveness Project is a research-led effort to understand and improve the competitiveness of the United States. The Project focuses especially on the roles that business leaders can and do play in promoting U.S. competitiveness. Current faculty research focuses on improving PK-12 education; closing the middle skills gap; building entrepreneurial ecosystems, and improving America’s aging infrastructure for moving people, goods, and information. For more information about Harvard Business School’s U.S. Competitiveness Project, please visit: www.hbs.edu/competitiveness and www.hbs.edu/competitiveness/survey/.