“The confused national discourse about our economy and future prosperity in this election year is our worst nightmare,” Harvard Professor Michael Porter claims.
“There is almost a complete disconnect between the national discourse and the reality of what is causing our problems and what to do about them. This misunderstanding of facts and reality is dangerous, and the resulting divisions make an already challenging agenda for America even more daunting.”
Porter says the key issue for America today is a lack of “shared prosperity,” as working and middle-class citizens are struggling, according to Yahoo Finance.
“The lack of shared prosperity has rightly been a central issue in the 2016 campaign, but the diagnoses and proposed solutions are way off the mark,” the report points out.
In its new report on competitiveness, “Problems Unsolved and a Nation Divided: State of US Competitiveness,” Harvard Business School (HBS) found the US economy currently faces grave concerns. And the path to a solution—namely tax reform, immigration reform, and infrastructure investment—is being hindered by the current political climate.
Led by Porter, along with Professors Jan Rivkin and Mihir Desai, the report finds that since the launch of the US Competitiveness Project in 2011, concerns about weak job creation and stagnating incomes—particularly for the middle class—have not waned.
Porter explains while many pundits and politicians have focused on the Great Recession to diagnose America’s economic woes, this is misguided.
“Despite the hope of finding reasons for optimism, the ‘recovery’ remains slow and uneven, largely because America’s competitiveness problems took root long before the downturn,” Porter writes. “Since those problems remain unsolved, it should not be surprising that the average annual economic growth (1.6%) during the current recovery is slower than during any recovery since the late 1940s.”
"The report adds that the wrong diagnosis, along with political paralysis in Washington, has meant that we have made no meaningful progress on any of the critical policy measures needed to address the nation’s underlying competitive weaknesses—which would restore economic growth and also the standard of living for the average citizen," Yahoo Finance reported.
Porter isn't alone in sounding the alarm.
Nobel laureate economist Robert Shiller of Yale University warns economic inequality “could become a nightmare in the decades ahead” that “we are not well equipped to deal with it.”
He warns that “truly extreme” gaps in income and wealth could arise from many causes.
“Consider just a few: Innovations in robotics and artificial intelligence, which are already making many jobs uncompetitive, could lead us into a world in which basic work with decent pay becomes impossible to find. An environmental disaster like global warming, pollution or disease could sharply reduce the ability of people of ordinary means to live in specific regions or entire countries,” he wrote in the New York Times.
And new research indicates that indeed, income inequality helps to paint a bleak economic future for today's younger generation: ironically, the same generation arguably benefiting most from such technological advances.
The new report, entitled "Poorer Than Their Parents? Flat Or Falling Incomes In Advanced Economies," comes from the McKinsey Global Institute. The study examined the prospects for over 800 million workers in the 25 wealthiest countries and found that the rising generation is at serious risk of ending up poorer than their parents.
The report found that between 2005 and 2014, real incomes in those same advanced economies were flat or fell for 65 to 70 percent of households, or more than 540 million people.
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