Lee Hamilton: To stay competitive, U.S. should focus on fundamentals

The United States emerged in the 20th century as the world’s most powerful and competitive nation.

Our economy, our technology and our political system became the envy of all others. But in recent years, many observers have claimed that America is losing its edge.

What do we need to do to strengthen our competitive position in the global economy? We need to focus on the basics. Our competitiveness depends on the fundamentals.

First, we need to support the talent and skills of our people, their productivity and their ability to innovate. Second, we need to strengthen our infrastructure: not only roads, bridges and transit but the “soft infrastructure” of education, the tax system and health care. Finally, we need to bolster the stability and credibility of our institutions. America’s deep political divisions and growing economic inequality weaken our ability to compete.

We are deeply attached to the idea of the United States as a global leader and the world’s “indispensable nation.” But while our economy is the world’s largest, that doesn’t make it the most competitive. China presents formidable challenges, while nations in Europe and Asia are among the most innovative.

An annual competitiveness index from the World Economic Forum placed the U.S. at No. 1 in 2018, but it fell to second the following year, surpassed by Singapore. (There was no rating in 2020). Another competitiveness rating, from the Institute of Management Development in Switzerland, dropped the U.S. to No. 10 last year; the IMD said America’s trade war with China had hurt both countries.

America has not done all we can to develop the talent and skills that we need to compete. We have excellent universities, but access to higher education can be challenging, and many young people struggle with overwhelming student debt. K-12 education is dramatically unequal, with uneven local and state funding. Strengthening education — at all levels — will make us more competitive.

We can make meaningful gains by reforming our immigration system to prioritize the skills that employers need. Immigration reform has been stalled for years by partisan divisions in government, however.

In the area of infrastructure, federal legislation approved this fall will provide a welcome infusion of funding for roads, bridges, broadband service, and water and energy systems. But other forms of infrastructure also matter. We spend more on health care than any other country, for example, but our health outcomes are mediocre, and many people still lack access to affordable care. A recent study found Americans had a staggering $140 billion in unpaid medical debt.

We can boast of the best universities, research centers and entrepreneurs, but we rank 10th for research and development spending as a percentage of GDP, according to the Commerce Department. China is growing its R&D spending three times as fast as we are.

Our dynamic capitalist economy creates enormous wealth, but the rising tide hasn’t lifted all boats. Income inequality is a serious problem, and many Americans struggle to pay for housing, child care and other necessities. All this makes us less competitive as a nation.

Finally, we’re going to have a hard time fixing these problems if we can’t repair our dysfunctional and deeply polarized politics. When elected officials put their partisan interests ahead of the public interest — when Republicans and Democrats can’t have productive debate — it’s hard to get anything done.

America is still, unquestionably, the world’s wealthiest and most powerful nation. By many measures, we are the most successful, but there’s no guarantee we will remain on top. We’ve got a lot of work to do to stay competitive.

Lee Hamilton is a senior adviser for the Indiana University Center on Representative Government; a Distinguished Scholar at the IU Hamilton Lugar School of Global and International Studies; and a professor of practice at the IU O’Neill School of Public and Environmental Affairs. He was a member of the U.S. House of Representatives for 34 years. Send comments to [email protected]