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Why These Pessimistic HBS Profs Are Optimistic

The Harvard Business School report, "Problems Unsolved and a Nation Divided," looks at the impact on the economy of political gridlock

The Harvard Business School report, “Problems Unsolved and a Nation Divided,” looks at the impact of political gridlock on the U.S. economy

Whenever he ponders the divisiveness of political affairs in the United States and its grim portents for the country’s economy, Harvard Business School professor Jan Rivkin thinks of the students in his MBA courses and in B-schools around the nation. The next generation of business leaders, he says, are so determined to make the world a better place that it’s hard not to get excited about the future.

“There are truly incredible, innovative things being done by young leaders in cities across the country,” says Rivkin, the Bruce V. Rauner professor of business administration and co-author of an annual report that surveys Harvard alumni and the general public on the economy and its impact on the state of U.S. competitiveness. “There are so many local, cross-sectoral efforts to improve the resources on which working and middle-class Americans depend. So we see companies partnering with community colleges to train the workers they hope to hire; we see universities partnering with local government officials to get ideas out of research labs into startups sooner; we see civic alliances figuring out how to get infrastructure improved in the cities.

“Our MBAs are deeply extraordinary. They are civic-minded. They come here already committed to change the world for the better, and I hope that we give them educational opportunities to raise their sights and enable them to achieve their dreams in that regard.”

‘A WINNING STRATEGY TO PURSUE NO PROGRESS’

Jan Rivkin. Jon Chase/Harvard News Office

Jan Rivkin. Photo by Jon Chase/Harvard News Office

You might not expect such optimism from the author of “Problems Unsolved and a Nation Divided,” the fifth edition of a report from Harvard’s U.S. Competitiveness Project, which was launched in 2011 in an effort to understand why the U.S. economy has continually underperformed in the 21st century. Written with fellow professors Michael Porter and Mihir Desai and senior researcher Manjari Raman, this year’s report — which is based on a survey of 4,807 HBS alumni and 1,408 members of the general public — concludes that the toxicity of the nation’s politics is holding down the economy and “no longer delivering good results for the average American.”

“If you look at economic outcomes in the country today, what you’re struck by is the combination of growth and a lack of shared prosperity,” Rivkin tells Poets&Quants. “The country is growing, but it is growing so slowly and it is growing apart. Big companies and the people who run them and invest in them are doing quite well, working- and middle-class Americans are struggling, as are many small businesses — and those economic outcomes in the current climate have produced an election season that arguably will produce certain policies that will make the outcomes even worse.”

Sixty-five percent of business leaders see the political system as an obstacle to economic growth, according to the report. Fifty percent of the public agrees. Gridlock in Congress, and the divisiveness of presidential elections going back to 2000 — and especially during this year’s contest between Donald Trump and Hillary Clinton — have stymied economic progress, Rivkin says.

“The American political system is a grave threat to the American economy, and vice versa,” he says, and the majority of surveyed Harvard alumni concur: 82% of Republican respondents, 74% of independents, and 56% of Democrats bemoan the impact of extreme political polarization on an economy that has seen only 2% GDP growth since the turn of the century — after an average of 3% to 4% in the previous 50 years.

“As far as I can tell, the system is set up in ways that make it a winning strategy to pursue no progress,” Rivkin says. “Somewhere along the way, doing nothing became a way for people to advance their political careers. As long as that is the case, we can elect the best people in the world and we will still not solve the problem. It is a vexing problem.”

IN THE CLASSROOM

The Competitiveness Project report may have a grim title and many grim conclusions about the vicious cycle of toxic politics and tepid economic gains, but Rivkin insists he is nonetheless “deeply, deeply optimistic about the American economy” — and a big reason is the young minds he interacts with daily.

“Yes, we are in danger of a cycle in which economic outcomes make our politics worse, and political outcomes make our economy worse,” says Rivkin, now in his 19th year on the Harvard faculty. “But what’s great is that at Harvard we’ve got a student population that is deeply engaged in issues beyond business narrowly defined. Start with that. Then we’ve got a whole set of faculty who are studying the role of business in society. The Competitiveness Project has had probably 20 faculty involved in it over its course, and that doesn’t include some faculty who study related phenomena and have not been deeply involved in this particular project. So we’ve got critical mass of faculty.”

Rivkin says as a result, concern about business and its role in society come into both the required curriculum of Harvard MBAs’ first year and the elective curriculum. He cites a first-year course called Business, Government, and the International Economy that teaches students to understand “the larger institutional context in which business operates,” in which students learn macroeconomics by the case method and dive deeply into the strategies of countries around the world — “and I think they come out of the course with their minds broadened and their eyes opened. A team of faculty teaches the course to all 930 students in the cohort.

In the elective curriculum, Rivkin’s colleague Rebecca Henderson teaches a course called Reimagining Capitalism, one of a number of courses that look deeply at the role of business in society. “What I like about that one is that it asks whether business can be part of the solution to some of society’s thorniest challenges — climate change, inequality, corruption. We all can think of those problems as being caused by business to some degree, right? But imagine that capitalism can be the engine to absolutely solve those problems, or help solve those problems. There’s a lot of pedagogical innovation in this area.”