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The Loss of American Competitiveness

from The Great Degeneration by Niall Ferguson

Experts on economic competitiveness, like Michael Porter of Harvard Business School, define the term to include the ability of government to pass effective laws; the protection of physical and intellectual property rights and lack of corruption; the efficiency of the legal framework, including modest costs and swift adjudication; the ease of setting up a new business; and effective and predictable regulations.  It is startling to find out how poorly the United States now fares when judged by these criteria.  In a 2011 survey, Porter and his colleagues asked HBS alumni about 607 instances of decisions on whether or not to offshore operations.  The United States retained the business in just 96 cases(16%) and lost it in all of the rest. Asked why they favored foreign locations, the respondents listed the areas where they saw the U.S. falling further behind the rest of the world.  The top ten reasons included:

  1.  The effectiveness of the political system
  2. The complexity of the tax code
  3.  Regulation
  4. The efficiency of the legal frameworks
  5. Flexibility in hiring and firing
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