Why Competition In the Politics Industry Is Failing America

Year after year, Congress fails to reach consensus on important issues, the electorate screams for change, and voters become more polarized along party lines and ideology. These struggles aren’t causes of America’s political malaise, says Michael E. Porter, co-chair of the U.S. Competitiveness Project at Harvard Business School; they’re symptoms of a much larger problem. U.S. “democracy” is a weak, uncompetitive industry controlled by a duopoly that pursues private interests at the expense of public good.

“To fix our political system, we must see politics as the major industry it has become, the major economic benefits it provides for its participants, and how today’s political competition is not serving the public interest,” as Porter explains in “Why Competition in the Politics Industry Is Failing America,” a just-released groundbreaking study co-authored with business leader and former CEO Katherine M. Gehl.

Experts in the benefits and drawbacks of competition in the private sector, Porter and Gehl describe the four fundamentals of a healthy political system:

  1. Practical and effective solutions to solve our nation’s important problems and expand opportunity
  2. Legislative action to advance those solutions
  3. A reasonably broad-based public consensus on policy
  4. Respect for the Constitution and the rights of all citizens

Measured by these success factors alone, America’s system has already failed. But Porter and Gehl are adamant in their belief that we can recover our former sense of bipartisanship and dynamism.

Read Porter’s and Gehl’s paper to learn more about their poignant perspective on our nation’s most urgent problems and how business, strategy and competition can help solve them.

Danny Stern is Managing Director of the Stern Strategy Group

7 replies »

  1. This gem from p.35:
    // The Duopoly Seeks to Enhance Industry Attractiveness
    The parties work together to improve industry attractiveness and to strengthen and reinforce the way they compete.(…)To do so, the duopoly pursues three additional key
    competitive practices: set industry rules and practices that reinforce partisan division; raise barriers to new competition; and cooperate when both sides benefit. //

    The HBR paper is referring to our two political parties as a “duopoly”, but the analogous health care application is a symbiotic incestuous relationship between insurance and medical providers. Each blames the other for escalating rates (in part by blurring distinctions between *costs* and *prices* — which are not, of course, the same thing). Lower rates/costs/prices are not in the interest of either insurance OR providers, simply because smaller numbers = smaller revenue. And everybody knows smaller revenue means smaller profits for one, smaller compensation for the other.

    Yes, this paper is filled with insights. I wish it were not so long.

  2. “A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.”

    Max Planck

  3. Just for grins, here is a comment I left elsewhere responding to someone’s idea of something called “The Enlightened Health Savings Account (HSA) Plan.”
    Elegant suggestion for people who can afford to escape the current system including ACA, everything that preceded it and very likely whatever comes next — rationing by affordability.

    Two elephants in the waiting room are
    * INSURANCE & HEALTH CARE ARE NOT THE SAME (both manage risks — one financial, the other medical) and

    Sooner or later if America’s escalating medical care costs are to be contained (like most of the rest of the world) we must come to terms with a combination of single-payer (govt, ie federal and/or state) + private sector NOT-FOR-PROFIT auxiliary providers.
    And all of that pipe dream will eventually need to be coupled with realistic price controls.

    We are lifetimes away from any of these ideas, I know. But those are the dreams of my imagination.
    Meantime, I will be happy to see a more attainable change in how we do things (not directly related to health care except that most of those costs are clustered in the geriatric population) would be making IRAs, 401(k) & 403(b) plans OPT OUT, instead of opt-in.

    (Today I plan to drill into that pdf document, but I’m still putting it off…)

  4. A second thought about the Harvard report. It seems to hinge on the hypothesis that a statistical analysis would lead to draw conclusions for accurately workable solutions. Some times the combination of inductive and deductive reasoning, ie the medial model, reproduces the law of unintended results. As a result, I am still stifled by the observation that our nation does not have a means to achieve equitably available Primary Healthcare for each community’s citizens. And, why would we need the scientific method as a basis to solve that problem? I continue my sense of amazement that a government with three divisions was “dreamed up by the Federalists” 250 years ago, written down, and still largely untouched with no scientific data.
    These are the times that a re-reading of the book written by Eric Hoffer is really helpful: “The True Believer: Thoughts on the Nature of Mass Movements.” Published in 1951, it is still the best means to assess the current Paradigm Paralysis that is strangling our nation’s healthcare. Thomas Kuhn had it right. His book, “The Structure of Scientific Revolution” published in 1962 described the process by which a Knowledge Paradigm becomes no longer useful but its True Believers resist acknowledging new forms of Knowledge. The age old cognitive dissonance between the sciences and the humanities continues unabated. I am reminded of the irony that CP Snow was a physician.

  5. Wow! Eighty pages pdf! Good thing I’m retired — this is my next reading assignment.
    Just glancing, this from the Executive Summary jumped off the page:
    “The real problem is that our political system is no longer designed to serve the public interest, and has been slowly reconfigured to benefit the private interests of gain-seeking organizations: our major political parties and their industry allies.”

    In other words our politics has developed a bipartisan rent-seeking system protecting and encouraging crony-capitalism. This is gonna be delicious. If the authors really are “adamant in their belief that we can recover our former sense of bipartisanship and dynamism” I hope they have heavy layers of personal and cyber security. All that protects them now from being assaulted from all sides is the length, complexity and relative obscurity of their paper. (I’m afraid that mass shooting in Las Vegas is making me more cynical than usual.)

  6. My assessment of the nature of our politics, at least at the federal level, goes something like this. First, getting re-elected for a politician is the equivalent of profit for a private business. Getting re-elected generally means doing favors for as many constituents as possible and favors cost money. At the same time, most Americans want more from government than they are willing to pay for. Federal revenue averaged roughly 18% of GDP since World War II and was slightly under that last year. Federal spending typically about three percentage points of GDP above that and significantly more during economic downturns.

    Our entitlement programs run on automatic pilot. If you qualify for benefits, you get benefits and the cost is the cost. If costs are persistently higher than expected, we just add it to our deficit and accumulated debt. As long as investors, including foreign investors, continue to be willing to buy our bonds, notes and bills at very low interest rates, it’s unlikely that much if anything will change, at least until there is a crisis of some sort.

    I don’t think competition or the lack of it between our two political parties is the problem. Instead, every interest group fights like hell to protect its program(s) while trying to push the cost off on someone else. Even if they are concerned about the deficit and debt, they want to cut someone else’s programs but not theirs or raise someone else’s taxes but not theirs. Politicians are unlikely to be rewarded for doing the right thing it it’s unpopular with a majority of their constituents. So, my conclusion is that the underlying problem is selfishness throughout the population. That’s hard to fix in the absence of a crisis.

  7. Nebraska has had a unicameral legislature for nearly 80 years. The 50 legislators are elected on a non-partisan basis, our State’s Constitution does not permit State indebtedness, and our State’s legislature maintains a “rainy day” fund that is the equivalent of $350 per State citizen. I recall that we are only lacking a few States to achieve the number necessary to call a national Constitutional Convention for an Amendment to stipulate an annual balanced Federal budget.
    Oh yes, the rainy-day fund for Nebraska represents a full cash-balance in the Bank. The Legislature has rules about how it may be used and replenished. They are honored faithfully.
    The 80 page report does not seem to acknowledge the decline in the level of ‘social capital’ that is withering away the Common Good of each community and their neighborhoods. It has basically eliminated any social mobility by our citizens who live in poverty. Overall the report would also, indirectly, anticipate the impending bankruptcy of our nation’s economy.