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‘Competitiveness’ redefined

Date Published: 03/23/2014

Author: Dane Smith, President


No word has been more effective than “competitiveness” in advancing a business agenda with a rather narrow focus over the last 30 years.

Since the early 1980s, in Minnesota and across America, we’ve been told that — for the sake of international competitiveness — jobs had to be outsourced, wages and pensions and health care benefits downsized, and environmental and financial regulations reduced.

In the name of global and national competitiveness, we were persuaded to cut federal and state income tax rates and capital gains taxes, and to treat our public sector as a beast to be starved.

And to ensure regional and state competitiveness, we spent billions in direct aid or tax favors for businesses through mechanisms such as the JOBZ program, ethanol subsidies, or for sports stadiums. (Six such coliseums since 1990 — enough already.)

The results?

Mountains of wealth were created during a couple of long growth spurts and several speculative bubbles over the last 30 years, leading to a cataclysmic bursting in 2008. Dramatic technological advances were produced, many of them beneficial to human health and the quality of our lives. And there has been some narrowing of the gaps in standards of living between rich nations and poor nations.

But a consensus also has emerged that too narrow a focus on cheap labor and lower taxes has increased economic insecurity and inequality within almost every nation, badly damaging the basic economic health of middle-income and working-class families in our own state and nation while not really improving our basic standard of living.

We are finally beginning to ask: competitiveness for whom? We seem to be moving back toward a more holistic and healthy view of competitiveness, writ wiser and larger. The word increasingly is used to describe the things we do with tax dollars and public policies to realize human potential, to equalize opportunity and education, to improve physical infrastructure and basic research, and to expand cultural and social amenities enjoyed by everyone.

In January, for instance, the Minnesota Department of Employment and Economic Development held a “State Economic Competitiveness Summit” featuring workshops with titles like “Driving the Talent Pipeline,” “Aligning Business Needs with Training and Education,” “Broadband Expansion and Economic Opportunity” and “Regional Collaboration Through Public/Private Patnerships.” There were no breakout sessions on reducing taxes, regulations or labor costs, although healthy pressure for those policies will continue from mainstream business leaders, and from the so-called “unsession” theme this year for the Legislature.

Meanwhile, Minnesota’s leading foundations, whose funds come largely from the state’s most successful and magnanimous capitalists in the last century, have long been stressing competitiveness achieved through improved human development, as opposed to charity. Typical mission statements for the nonprofits they fund call for a more inclusive prosperity, creating vibrant communities and, increasingly, attacking racial disparities head-on.

The Metropolitan Council, the key interconnecting agency that helps coordinate and plan growth and public infrastructure in the entire Twin Cities region, recently launched Thrive MSP 2040, a long-term plan for the region based much more explicitly on achieving racial equity, and on the premise that concentrations of racial poverty will harm the region’s competitiveness.

Greater MSP, a strong new coalition of business groups, foundations and city leaders committed to promotion and economic development for the metropolitan region, is actually all about competitiveness, writ larger. The coalition’s website and public-relations materials emphasize the region’s diversity, its overall rankings in education attainment, our first-rate infrastructure and public amenities, and a highly competitive overall cost of doing business — rather than focusing on a particular high ranking for a specific type of income or corporate tax.

One of the most important and intelligent takes on Minnesota competitiveness in recent years was published last year by the Center for Fiscal Excellence, formerly the Minnesota Taxpayers Association, which has a reputation as a reasonable, nonpartisan voice in Minnesota’s fiscal policy­making. (Note, in the name change, the shift from attention to taxes alone.)

Written by executive director Mark Haveman, the report was titled “Finding our Balance: Taxes, Spending and Minnesota Competitiveness,” and it borrowed from an analytical framework developed by Harvard University’s Michael Porter at the Institute for Strategy and Competitiveness. This framework identifies “foundational competitiveness” as the “full range of public good investments that contribute to productivity improvements and set the context for an economy.” And in healthy tension, the framework puts equal importance on “Investment Attractiveness,” involving cost factors for business, the traditional taxes and labor-cost piece.

Haveman applied this analysis to Minnesota, sifting through no less than 10 recent national studies and rankings on the subject. The report gently suggests that the state has been doing relatively well recently on foundational competitiveness and may need to reduce taxes on businesses and individuals to ensure “investment attractiveness.”

But the hugely important point is that a voice highly valued by mainstream business leaders in Minnesota for almost a century granted roughly equal weight to “foundational competitiveness.”

A national shift

Minnesota is hardly alone in its evolution toward a more balanced understanding of competitiveness, which could be described as a return to more mature view of competition and community — one that was embraced by moderate Republican governors throughout the 20th century.

The U.S. Council on Competitiveness, composed of the nation’s top corporate and academic leaders, since the mid 2000s has focused its policy advice on three “pillars,” namely “talent, investment and infrastructure.” And although its latest document, “Clarion Call,” calls for reduced corporate taxes and national debt, at the top of the list are demands for heavy new federal investment (that would be taxes and spending) in basic research, infrastructure, cleaner and renewable energy, workforce education and training, and immigration reform that encourages productive and creative immigrants to find a path to citizenship.

Liberal economist and Nobel laureate Paul Krugman has complained for years about America’s “dangerous obsession” with competitiveness. In 1994, when the U.S. was still panicked by fear over Japan’s rise, Krugman wrote a memorable essay arguing that nations are nothing like competing businesses, and that the complexities of their interdependence means they can actually benefit from each other’s success. Japan and Texas are not Pepsi, in other words, and the United States and Minnesota are not Coke, competing over a finite demand for carbonated beverages.

Nations and states, instead, at their best, are communities seeking to maximize the happiness of all their people, and focusing on that priority will likely ensure that their firms are competitive.

Persuasive as Krugman’s arguments are, the word competitiveness and everything associated with it (picture sports fans waving the big foam “We’re # 1!” fingers) remains sacred in the American psyche. Our most watched television shows are now winner-take-all competitions in singing and dancing. Europeans may scoff, but for better or worse, we love competition, and we love the word itself. There is no political future in telling Americans and Minnesotans that competitiveness is unimportant. The competition gene is dominant in our DNA.

And so, it’s a winning strategy (see, winning is everything) to reclaim the word and give it an improved meaning, emphasizing how equity and foundational public investments are crucial ingredients to business competitiveness, rather than to deny or decry competition.

Surfacing in legislation

Thus, President Obama and Minnesota Gov. Mark Dayton both have landed on “competitiveness” as key unifying themes in 2014, and they push agendas for investment that have significant business support.

In Minnesota for the 2014 legislative session, the main pieces that serve competitiveness, writ wiser, are:

Minnesotans throughout 156 years of statehood have distinguished themselves for understanding that building a better place and stronger people was the best recipe for business growth. We built excellent schools, public improvements in water power and transportation, first-rate parks, the best health care and hospitals, and economic security for ordinary folks and vulnerable populations in the dawn, twilight and shadows of life.

And as we wave the foam fingers these days — whether it’s over the latest business vitality ranking or for our favorite teams in one of those extravagant new stadiums — we really must think about the foundations of that competitiveness.


Dane Smith is the president of Growth & Justice, a public-policy organization that seeks to reduce economic and racial inequality in Minnesota.

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