Shared prosperity is part of competitiveness

One more program for emerging leaders wouldn't be all that interesting, until you learn more about the problem that a new Minnesota initiative is addressing.

What is being called the Minnesota Young American Leaders Program is a response to the entirely reasonable fears that Americans and American business have been losing their competitiveness in a global game.

That is a problem that needs to be far better understood.

The origin of this program goes back to the Harvard Business School, where similar training for small cohorts has been underway. And the impetus for the whole thing came out of concerns about the competitiveness of the American economy.

HBS Prof. Jan Rivkin was in Minneapolis last week to help launch the Minnesota version, describing for me before the sessions began how it all started with a conversation in 2011, not long after the worst of the Great Recession. A suspicion had grown among the professors that there was more to that downturn than the usual turn of the business cycle.

Some of the lost ground for a lot of Americans had up until then been mostly masked. Wage stagnation for middle- and lower-income households was slow to derail increasing homeownership, for instance, thanks to how easy it became to get a mortgage in the 2000s housing boom.

And as Rivkin explained last week, the Harvard folks had to first sort out what they meant by competitiveness and try to come up with a good explanation for what could have gone wrong.

They decided that two things had to be true at once for American products and services to be considered competitive globally. These products had to find a profitable market, of course, but they also needed to be produced and sold in a way that would raise living standards broadly in America.

In other words, if the only way a company stayed alive was by dumping American jobs or paying subsistence wages, it wasn't really competitive.

The best way to understand why the competitive position of the American economy has eroded, Rivkin said, is as the consequence of too many years of not investing enough in what he called "the commons."

That's a term from pre-industial England, now usually used to describe something that is shared by everyone or somehow owned in common. He is talking about things like public education, a big factor in workforce skills and job opportunities, or highways.

Americans used to be great at investing in this kind of commons, Rivkin said, building an interstate highway system and not only passing the G.I. Bill but broadly supporting public education. Rivkin pointed out that we did not always treat everybody fairly with these projects, like by ramming a freeway project through a poor neighborhood, but at least we made the investments.

Another one of the group's fundamental observations is that the prosperity we have enjoyed, now 10 years into an economic recovery, isn't being broadly shared. People who work for big companies or invest in big companies seem to be doing the best, Rivkin said.

One way he illustrated his point was by talking through a simple chart of the results of a 2016 survey of thousands of Harvard Business School alumni. They had been asked about lots of things described as "elements of the U.S. business environment," but most could be considered good indicators of the health of what Rivkin called the commons.

Several things landed in the upper right-hand quarter of this slide, thought by the HBS alums to be in good shape and getting better. These were things like a healthy capital market for businesses and great communications infrastructure.

At the other end, in the lower left-hand corner, were the things judged to be in bad shape already and getting worse. Fair or not, K-12 schools appeared in the bad-and-getting-worse box. So did American health care.

And here is how all of this illustrated the basic problem that prosperity seems to be enjoyed now mostly by the corporate elite: The things in the upper right (good and getting better) were the things that mostly benefited them.

For things down in the lower left, like K-12 education, corporate executives could always buy a better option for their own kids via a private school if they did not like their public-school choices. And an American company, if it were big enough, could simply opt out of much of American tax law, as Medtronic did by using a merger to become formally based in Ireland.

"You stare at this [chart] long enough, it does kind of scream lack of shared prosperity," Rivkin said.

When the professors left Harvard to go discuss shoring up American competitiveness with members of Congress, they were surprised to find near bipartisan consensus on the need to invest more in the commons. On the other hand, they were assured that there was little chance of much of anything being enacted, with Washington as dysfunctional as it has become.

So if there is going to be anything done to increase the effectiveness of the programs and organizations that make up the commons, they decided, it has to happen at the state or local level.

"The challenge with the commons is that it's common," Rivkin said. "No one is really in charge of it; we all are. So to get things done about the commons it often requires collaboration."

That is why this first group of leaders in Minneapolis includes people from U.S. Bancorp and Andersen Corp., the cities of St. Louis Park and Bloomington, and nonprofits like the Northside Achievement Zone.

In looking through the agenda for last week, there was nothing that could have surprised anyone. There were sessions on regional economic history, what is called "cross-sectoral leadership," and innovative government programs. But hopefully this program will be delivering its real value 10 or 15 years down the road.

That is when these people, by then in top executive jobs in government, business and nonprofits, remember that they can pick up the phone and call an old friend across town to work together on some hard problem in the commons.