As the State of the Union approaches, Americans are being confronted by two competing visions of their economic future. A progressive vision, where a resurgent middle class will drive economic growth; and a conservative vision, in which greater corporate freedom will hopefully create wealth that might one day trickle down.
In recent weeks, Mitt Romney's record as a business leader has come under increased scrutiny. His opponents in the Republican primary have tended to focus their attacks on his dubious record as a job creator, characterizing him instead as a corporate raider. More troubling, however, is his vision of what is good for business and what that would mean for the American economy and society.
Earlier this month, Romney gave a revealing interview to Fortune, during which he indicated that Sarbannes-Oxley is high on the list of meddlesome government intrusions he would like to repeal. While Sarbannes-Oxley is an imperfect piece of legislation -- as George W. Bush stated post-Enron -- it was designed to ensure, "No boardroom in America is above or beyond the law." It needs reforming, or perfecting, not repealing.
Romney also argued for slashing legislation, taxes, and social and environmental standards in order to attract new investment and avoid off-shoring of current jobs. Just as "water finds the lowest point," he stated, so "businesses find the most attractive place." In Romney's eyes, then, the United States, American businesses, and the American worker are trapped in a global race to the bottom.
Romney's solution is informed by the story he tells himself -- and Americans -- about Bain Capital: namely that the firm invested in and turned around failing companies. His conclusion is that a CEO who knows what he is doing can make any business succeed, and as such, should be given greater freedom to act. What Romney is promising, then, is government of the CEO, by the CEO, for the CEO.
Unfortunately, in the grand scheme of things, management is one, albeit potentially significant factor, in what determines business success and economic growth. After all, some of Bain's investments failed. Presumably, Romney hired good people to run those companies too (unless of course he instructed them to simply strip assets).
So what does drive investment, job creation, economic growth and business success?
In 2011, Forbes ranked America a dismal 10th on its top 10 list of the best places in the world to invest and do business. Australia, Canada, New Zealand, Norway, Sweden, Denmark, Germany, Singapore, and South Korea all placed higher. Interestingly, all have tighter financial and corporate regulation, and each of these governments spends a much larger percentage of GDP on education, skills, research and development and infrastructure programs. According to Romney, these are policies that reduce competitiveness. So why is the United States lagging behind?
What Forbes and the World Economic Forum understand, but Romney has failed to grasp, is that countries and regions with modern infrastructure, a well-educated and healthy workforce, tolerant, diverse and creative societies, and good public services, are both better places to live in and better places to invest in (the two are related, these countries attract more highly skilled labor, while their egalitarian approach also strengthens domestic demand for goods and services.
America needs to be engaged in a race to the top, one in which the ambition is to be a world leader, not the "lowest point" of the global production chain. This is what President Obama referred to in last year's State of the Union as winning the future. The challenge this week is to build on that vision, presenting a progressive pro-business agenda, one in which a resurgent middle class helps support the creation of high quality jobs, and where investment in people, technology and infrastructure supports today's business as well as the industries of the future.
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