Harvard's prescription for a broken American political system

June 25, 2012: 9:22 AM ET

Is there any hope for America's political process? Not much, was the answer from the group of Harvard Business School faculty gathered in Washington last week.

Updated: 6/25/2012 10:54 a.m.

By Anne VanderMey, reporter

FORTUNE -- Is there any hope for America's political process? Not much, was the answer from the group of Harvard Business School faculty gathered in Washington D.C.'s Newseum last week. Same thing from a panel of D.C. heavy hitters who also showed up for the event, including a sitting U.S. Senator and the director of policy for the AFL-CIO.

You'll also likely get the same glum response if you ask Harvard's business grads. In a survey released this year of 10,000 Harvard B-school graduates, the nation's political system received worse marks than any other institution. Some 80% of respondents said D.C. was holding the country back from competing on the world stage.

What to do about it? Faculty members at the Harvard Business School seem to have taken an end-run approach. Their recent major initiative, the U.S. Competitiveness Project, focuses on what businesses can do to improve the United States' standing without Washington's help. But they have some ideas for government, too. At last week's event, the project's co-chairs, professors Michael Porter and Jan Rivkin, unpacked a plan to address what Porter calls the greatest threat to U.S. competitiveness since World War II or before. The agenda they are putting forward is laden with what sounds like low-hanging fruit -- the trick is getting any of those apples to fall from their trees.

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A few priorities topped Harvard's wish list: Ease immigration regulations for skilled workers. Simplify the tax code and eliminate loopholes. Improve the nation's infrastructure. And enact a sustainable budget, possibly one resembling the widely praised but dead-in-the-water Bowles-Simpson plan that would have slashed the deficit.

It's hard to argue with these proposals. "We've found through our research that there are areas of wide consensus," Porter said. On several of the issues, there's even substantial overlap between labor and industry, an alliance that's hard to forge even in hypothetical terms. "These are divides that we had thought were important divides," says Harvard Business School Dean Nitin Nohria. But wide agreement does not pave an easy path to legislation. "It's very difficult to move from areas of private consensus to actual passage in today's Congress," said Democratic Sen. Chris Coons of Delaware.

Just ask President Obama or House Speaker John Boehner. The two men were said to have privately hashed out a debt deal last July, but the agreement quickly melted in the spotlight once it came time to legislate. The spectacle, which resulted in a downgrade of the U.S. credit rating, seems likely to repeat itself this year as Congress moves toward another vote on raising the debt ceiling. There is near-universal consensus in the business world that it would be disastrous for the U.S. economy if the country were to default on its sovereign debt. However, agreement within the business world doesn't seem to have had much of an impact on negotiations so far.

So what's the business community to do? Harvard is pushing for companies to take on as much social responsibility as they can bear. It's not for the sake of charity, Porter says. It's because a strong and competitive U.S. is good for the global economy as well as the businesses that are based there. The HBS project has determined that it's not cost-effective for companies to simply jump ship, either.

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There are a few shining examples of corporate citizenry out there today, says Harvard Business School Professor Bill George. He cited Indra Nooyi of Pepsi (PEP) and her push to improve the company's healthy food offerings and, ostensibly, rein in the country's out-of-control healthcare costs. He name-checked Unilever (UL) CEO Paul Polman, who has taken steps to reduce the consumer product giant's environmental footprint. And George also tipped his hat to Coca-Cola (KO) CEO Muhtar Kent, who has scaled back his company's water usage and called for solutions to water shortages.

"[As business leaders,] let's all do everything that's under our control," Porter said on Thursday. "If we do that, we can, on at least some level, change the world."

As for politics? George believes not much that's worthwhile will come out of Washington until at least 2017. It's not that government is a lost cause, it's just not Harvard's cause. Despite its list of policy prescriptions, Nohria says HBS has zero interest in jumping into the political fray. Harvard's goals are long-term, he says, and it won't be lobbying politicians any time soon.

And, in some ways, that's a shame. Part of the beauty of Harvard's prescriptions are that they don't resemble the typical, narrowly focused lobbying agenda the country is used to seeing from big business. AFL-CIO's director of policy and special counsel Damon Silvers said that his constituency could get behind some of the HBS business-centric positions. If business and labor could throw their considerable clout behind these ideas -- especially things like tax reform -- there might be more hope for the political process. For now, though, we'll just have to hope the coming debt ceiling negotiation goes better than the last one.

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