‘We squandered a major economic recovery': Harvard professor


The nation wasted the major economic recovery, according to a new report by Harvard Business School on U.S. competitiveness.

“We had this wonderful recovery. It could have given us the chance to take some significant resources and devote them to some of our well-known challenges, like infrastructure or health care...none of that happened. Instead, we squandered a major economic recovery and didn’t use it to make things better,” said Harvard Business School professor Michael Porter, a co-author of the study.

The business community’s role in politics has made a significant contribution to Washington’s dysfunction, according to HBS’s report. The majority of the business leaders surveyed said businesses’ overall engagement worsened the political system by advancing policies that benefited special interests.

The report lays out the different ways in which businesses engage in politics today. The $6 billion spent annually on lobbying is just one facet; others include spending on elections and ballot initiatives, efforts to influence employees’ votes and donations, and adding former government officials to companies’ payrolls.

(The report surveyed thousands of business leaders, including 5,713 Harvard Business School alumni and 1,006 members of the general public).

‘Perverting everything’

The overwhelming majority of business leaders surveyed in the report said lobbying primarily advanced company interests, sometimes at the expense of the public interest. More than half (56%) of the general public agreed. Only 26% of the general public view corporate lobbying as a means of advancing public policy, according to HBS.

US Capitol dome illuminated, Washington, DC, graphic element on gray
US Capitol dome illuminated, Washington, DC, graphic element on gray

“Lobbying has been hugely expanding and growing over time and it’s just perverting everything about legislation,” Porter said. “If you want your M&A deal approved, you do lobbying. You get to the people in the legislature that are involved in [the Federal Trade Commission] or connected with the various groups and you can get regulations modified. You can get deals passed.”

Businesses that lobby make sure to play both sides. “It’s one great lobbying fest going on and the [political] parties are just playing it for everything they can. They have a lot of clout, a lot of money pouring into their ranks,” Porter said.

The report highlights the opioid crisis as an example. “You know why the opioid crisis happened in America? Because the political system and lobbying by the opioid production industry – they spent so much money that they defeated various ballot initiatives and they were able to overturn a lot of the regulatory ideas to control the prescriptions of opioids,” Porter said.

‘Distorting the Democratic process’

Corporations spent an estimated $2.8 billion on federal elections in 2018, according to OpenSecrets; 71% of business leaders surveyed in the report believe the overall business community’s election spending distorted the democratic process, while 60% of the public agreed, according to HBS.

Tellingly, when asked about their own companies’ behaviors, HBS alums painted a rosier picture. “Alumni felt that what their own companies were doing was just fine, but they felt that what business as a whole was doing was bad for America,” said Harvard Business School professor Jan Rivkin, a co-author of the report.

Of the HBS alumni who were asked about business overall (not their company) 60% said companies shouldn’t have corporate political action committees (organizations that raise money privately to influence elections). A majority of alums also stated that business as a whole should not use corporate PACs as a way to solicit employee contributions to candidates the company supports.

But this is not an uncommon practice. Porter said the survey suggests many companies “actually go to their employees and try to persuade them to vote for the candidate the company wants and to give money.”

U.S. President Donald Trump delivers remarks to mark six months since the passage of the Tax Cuts and Jobs Act, in the White House East Room in Washington, U.S., June 29, 2018. REUTERS/Jonathan Ernst
U.S. President Donald Trump delivers remarks to mark six months since the passage of the Tax Cuts and Jobs Act, in the White House East Room in Washington, U.S., June 29, 2018. REUTERS/Jonathan Ernst

“Employees are getting dragged into this game,” he said, adding: “We don’t see that as democratic principles. We think that’s not democracy where your employer is telling you how to vote and telling you where to give money.”

Narrative on how well U.S. economy is performing ‘not exactly right’

Businesses were among the largest beneficiaries of President Trump’s signature tax cut passed in 2017, but there’s little evidence that those savings trickled down to a broader swath of workers. While unemployment is at a record low and stocks are at record highs, wealth inequality persists. In fact, 65% of HBS alumni ages 18-44 said the U.S. should use the tax system to undertake more redistribution toward lower-income individuals.

“There’s lots of areas where the narrative isn’t exactly right,” Porter said. “For example, we have a lot of people employed, but there’s a lot of data that shows that the people employed are often not getting a living wage, or they’re not being paid for their qualifications. A lot of college graduates in jobs that don’t really compensate them for what they know.”

Porter said the real unemployment rate is closer to 10%.

“On the state of the economy, I think there’s a certain tendency now to tell a good story,” he said. “But if you look underneath the hood at some of the things that really matter to our society, we’re not doing as well as is sometimes alleged.”

More from Sibile:

New ‘Top Gun’ will be good for Paramount but ‘doesn’t change the narrative’

‘Millennials are spending more on almost every vice,’ survey finds

Wilbur Ross and Ivanka Trump tout women’s prison program that teaches coding

Wilbur Ross reveals biggest obstacle for China trade deal

States struggling with highest credit card debt? Trump’s South