We lack a workforce that is up to our economic challenges.

Topic: The Future of American Prosperity.

Michael Porter: We’ve prospered mightily. The U.S. accounted for one-third of all economic growth in the world in the last 20 years. We have been the driver of the success of all these other countries. On average, our standard of living has gone up.

The concern I have for the U.S. is that we’re polarizing into “haves” and “have nots” that can cope with this new economy that we’re in. This issue of inequality is a corrosive issue. And unless someone approaches it in the right way, it can just get you on a downward spiral into society. This is the reason more than a decade ago [in 1994] that I founded the ICIC – the Initiative for Competitive Inner Cities – because I was desperately concerned that we had to create a way to get our citizens to prosper in this market system, not start with the presumption that they couldn’t succeed and needed subsidies, and set asides, and preferences and so forth.

Intellectually, I think we’ve carried that debate; but I think as a society, we’re very much caught up in this question of really how to help all of our citizens prosper in a way that really deals with the fundamentals. I think our human resource issues in the U.S. are probably the most frightening issues – the fact that so many of our citizens are not really equipped to prosper in a knowledge-based economy.

If we were Hungary, it would be fine because the bar would be low. But to support the U.S. standard of living, you have to have enormous skill, you have to have enormous ability, and we’re not generating enough of those folks because we failed. We failed at reforming many of our institutions, and I think we failed on both sides of the aisle. Democrats and Republicans have both failed.

I think many of the same general issues apply to the U.S. The U.S. has been relatively prospering in the new environment; but as we look forward there are some real challenges.

I’ve recently led a 20-year review of U.S. competitiveness as an organization called the Council on Competitiveness that was founded some years ago [i.e. 1986] as a reflection of the first real concerns about U.S. economy which first occurred in the ‘80s. It’s been very interesting to look back and think about how we’re progressing as an economy. The general answer is, for us, pretty darn well. But there’s some underpinnings that one starts to worry about at this point in our history.

I’m very optimistic about the U.S. There are some things that we have that are so unique in this country. And thank God that we have them. And thank God that some smart people put in place a system that preserves it.

So what are those things? We’re very decentralized. You go to other parts of the world and people are always looking to somebody else to solve their problems. Here in the U.S., if Boston is having trouble, then people in Boston feel responsible. So we have a commission, or a council, or an effort or whatever to do something about it. If a community is doing badly, we have a sense of philanthropy in this country that people will give their time, and their energy, and their money. Whereas in other countries, they’ve been taught to depend on government, on outside forces.

We have the sense that we can change things in this country rather than be this fatalistic, “Oh my gosh, we’re doomed to this future forever.”

We have this basic, competitive spirit in this country. We really do believe in competition as being a good thing. You’d be surprised how rare that is in other parts of the world.

So we have some wonderful things which make me optimistic, but we have some very difficult problems that start with education and the basic education system that are the real scary things. Because all of these wonderful values and these wonderful institutions that we have won’t work unless the raw material is capable.

Recorded on: June 11, 2007