THE great Calvin Coolidge reputedly said that “the business of America is business.” These days the business of America is carpet-chewing rage. American politicians are intent, not on improving their country’s compe iveness, but on gouging each other’s eyes out.
Businesspeople still enjoy huge advantages from being in America. Business is part of its DNA in much the same way that la dolce vita is part of Italy’s. America has a disproportionate number of the world’s most innovative businesses, from greybeards such as 3M to toddlers such as Salesforce.com. And Americans are to management what Brazilians are to soccer. After studying 10,000 firms in 20 countries, Nicholas Bloom of Stanford University and three other academics concluded that American firms are the world’s best managed, with German, Japanese and Swedish firms a short way behind and Chinese and Indian ones trailing badly.
Yet America’s politicians are intent on squandering this painfully ac ulated capital. As it revoked America’s triple-A credit rating on August 5th, Standard & Poor’s explained that the gulf between the political parties was becoming unbridgeable, and that policymaking was becoming unpredictable. Other sober ins utions concur. The World Economic Forum has downgraded America from second place in 2009 to fourth place in 2010 in its annual global compe iveness rankings. By the forum’s reckoning, America comes a lowly 40th for the quality of its ins utions, 54th for trust in its politicians, 68th for government waste and a dismal 87th for its macroeconomic environment. The World Bank sees a relentless decline in various indicators of American governance. Daniel Kaufmann of the Brookings Ins ution notes that last year 33% of American business leaders told pollsters that a big constraint was the “instability of the policy framework”. The figure for France was 14%; for Chile, 5%.
Optimists argue that S&P’s decision may act as a wake-up call. Yet in Washington it is being treated as another battle cry, with Republicans raging about “the Obama downgrade” and Democrats railing against “tea-party terrorists”. The roots of America’s current polarisation are distressingly deep. The parties have reorganised themselves along ideological lines, as white conservatives have abandoned the Democrats and northern liberals the Republicans. The ideological factions have built mighty propaganda machines stretching from Washington think-tanks to the studios of Fox and MSNBC. And ideologues have resorted to previously taboo weapons, such as the threat of default.
This ideological civil war has led to the marginalisation of corporate America. In the Republican Party country-club types have been elbowed aside by Rush Limbaugh listeners. In the Democratic Party the business-friendly centrists who flourished under Bill Clinton have been sidelined by Ivy League intellectuals and trade-union and minority activists. Granted, Mitt Romney, the front-runner for the Republican presidential nomination, looks like a made-for-television business candidate: a Harvard Business School graduate and Bain consultant who helped to create successful companies such as Home Depot. But on the campaign trail he has devoted more effort to wooing Mr Limbaugh’s legions than to crafting businesslike solutions for America.
The civil war is creating two obvious problems for American business: paralysis and uncertainty. The Obama administration is still pockmarked with vacancies because Congress refuses to approve routine appointments. Important trade deals have been languishing for months. The Republicans are fighting a war of attrition against Barack Obama’s health-care reforms and his new Consumer Financial Protection Bureau.
All this has immediate consequences for business. The federal government not only runs basic services such as the Federal Aviation Authority (where thousands of workers were briefly laid off because Congress refused to renew the FAA’s authority). It also accounts for a quarter of the economy. Scott Davis, the boss of UPS, the world’s largest package-delivery company, recently complained that FAA funding disputes made him unsure how many of his aeroplanes to fit with new air-traffic-control gear, while the failure to ratify a trade pact with South Korea weakened the case for expanding his fleet of aircraft and lorries.
The direst consequences of all this lie in the future, however. America’s health-care system consumes a sixth of GDP but produces only mediocre results. America’s schools produce run-of-the-mill results despite generous funding. The immigration system leaves 11m people in the shadows and condemns many of the brightest graduates of American universities to years of grovelling before bureaucrats if they want to stay in America. Many give up and take their skills back to India or China.
Bring back Silent Cal
American companies are sitting on a gigantic pile of cash; Apple alone has $76 billion in the bank. Why won’t corporate America invest in America? It does not help that domestic demand is feeble, and that the global economy is in turmoil. But American politicians deserve some of the blame. Their unpredictability erodes confidence. The gulf between American business and the Obama White House is growing ever wider, as business-friendly insiders (such as Larry Summers, an economic adviser) leave the administration. Even more dangerously, the gulf between business and the rest of the country is widening: opinion polls show that American businesspeople are losing faith in their country even as ordinary Americans are losing faith in business. Calvin Coolidge’s statement was once denounced as the height of bourgeois complacency. Today it sounds like a reminder of an America that is in danger of disappearing.
http://www.economist.com/node/21525839
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It is this regulatory uncertainty that is forcing American businesses to postpone investments.
The Limbaugh crowd wants to blame "socialist policies", but that matter less than the thought that you might, like the lightbulb companies, put money into meeting a standard, only to have Republicans come along and change the regulations.
This article tries to be even-handed, but you don't see a nation-wide leftist movement with any parallel to the tea party.
The move to the right has some rather serious consequences.
Uncertainty about health care reforms, i.e. whether they might be repealed, is costing far more than the reforms ever would, and I can say that from first-hand observation of the health insurance industry.
"move to the right has some rather serious consequences."
.... and ALL are negative.
Can anybody name any positives?
Any positives from 8 years of Repug Reign of Error?
h
The Repugs botching up CFPA, health care, threatening to screan "Barry lost Iraq and Afghanistan" if he goes coitus interrptus, is simply to deny Barry any victories, no matter how muc it costs the country, about which the Repugs don't a Yoni rat .
Lol "move to the right"
The US is a center-right country.
If you want to see what leftist policies do to an economy, look no further than the great state of California.
You forgot about the conservative lassiez-faire policies in DC that created the huge housing bubble that has wrecked the state.
If you want to see what rightist policies do to an economy, look no further than the great US of A.
California is really a perfect storm: ed by both the left and the right.
You're right Darrin; your post was full of fail. Thanks for the warning.
Silly. America is half controls half laissez faire. It's pragmatic, not right wing.
Oh yeah, cuz they had a superhero tv gov, right wing affliction!! You're such a dumbass.
Lassiez faire is not about controlling interest rates and having govt agencies rate bonds, pick winners and losers.
I agree the problem is on both sides. I also agree the solution will have to come from both sides.
that makes no sense. Both sides will have to fix the economy, but it's not capitalism at fault.
Sure it makes sense. When both sides wanted to work together and start doing something about it, they did it (Clinton days). It wasn't all rosy, but they put differences aside and trimmed what they needed to trim, and raised what they needed to raise to get to a balanced budget. A good start.
It's going to have to happen the same way to start getting out of this mess. If they're not talking to eachother, nothing is going to get done.
The "extreme" position of the tea party is smaller government and responsible spending. Heaven forbid.
There's actually a strong faction in the Tea Party that wants cuts to defense. I predict that is the next battle.
How's that going to create jobs?
Definitely not Paul Ryan...
Wanting the country to default on it's debt is actually pretty 'extreme'
Do yo recall the composition of govt during this time period?
Yes. Democratic president, Conservative Congress. That's exactly what I'm talking about.
It is extreme, if you really think that's what they wanted.
What do you think they wanted?
The Tea Party basically acknowledges that our govt is like a crack addict and their drug of choice is spending. The addict will never get better if they are "enabled" and they will never get better without a little bit of withdrawal pains.
So they ed, made clear that the US might eventually default because they're 'extreme', then helped pass the crack...
Not only that, but they condoned deficit spending by extending the tax cuts.
The problem with the Tea Party is that they're full of just as much as the rest of them.
They wanted to change the national conversation and they succeeded. The deficit cannot continue to be the 300 lb gorilla in the room.
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