The US is witnessing a transformational presidency in the figure of Barack Obama. Highly likeable, intelligent and charismatic, President-elect Obama has given the impression that he will govern by consensus with the goal of uniting the country and reaching across party lines to address the many challenges facing the nation.

Many compare Barack Obama to Tony Blair or Bill Clinton as a “personality that represents change” and expectations are riding high.

The United States, still in the leading position in IMD’s World Competitiveness Yearbook (for the 14th consecutive year), is currently in dire straits. What could be the impact of Obama’s campaign promises on U.S. competitiveness?

Firstly, he will have to deal with Priority No. 1 – the consequences of the financial crisis on the American economy. President-elect Obama is supporting an important fiscal stimulus to jumpstart the economy in parallel with the monetary easing of the Fed (interest rates are approaching zero). This fiscal boost would encompass tax breaks to the middle 20% of taxpayers and roll back the tax cuts implemented under the Bush administration for families earning more than $250,000.

Democrats are pushing a more liberal agenda focusing on redistribution – with the goal of reducing income inequalities that have grown over the years. Real wages have been declining while the costs of basic necessities have risen, as have the costs of healthcare and college tuition.

If the newly-elected President succeeds in addressing the problems inherent in the social framework of the US, the implications on long-term competitiveness can only be positive, despite the fact that the country might suffer some short-term competitiveness problems in terms of bigger deficits and slower growth.

From a competitiveness perspective, what happens to small and medium-sized enterprises is critical in terms of their ability to compete in world markets.

During his campaign, Obama stressed the need to protect American workers from the negative consequences of globalization. One strategy would be to end tax cuts for companies that outsource jobs abroad and use the money to support SMEs that keep and create jobs in the US.

This may appear idealistic and difficult to implement, but SMEs contribute around 80% of economic activities in the US. Any boost to their competitiveness would have knock-on effects on national competitiveness. But beware of the rising tide of protectionism that could be lurking behind the scenes! It would be better to provide more reliable assistance, as well as wage, pension and health insurance security for workers who have lost their jobs.

What are the long-term challenges facing the United States’ competitiveness?
The answer lies in President-elect Obama’s second priority: to tackle America’s dependence on foreign oil. He needs to emphasize investment in renewable and alternative energy sources and new technologies for energy (wind, solar, biofuels) as well as measures to fight climate change. In parallel, Obama should encourage investment in infrastructure projects to address the urgent need to upgrade existing basic infrastructure (roads, highways, railroads, airports, etc.).

The US is also falling behind in its technological infrastructure and needs to build more advanced telecommunications and internet networks. The US ranks only 17th for its internet connectivity.

Action on all of the above would create more jobs, stimulate the economy in the short-run and enhance growth in the longer term, thereby contributing to maintaining the US in the top league of competitive nations.

Lastly, there are two critical domains of national competitiveness that show how countries are investing in their future: education and innovation. In these areas President-elect Obama is less clear about how he would go about implementing change. For example, he could boost falling competitiveness by mobilizing America’s human capital (putting more emphasis on maths, engineering and sciences in the classroom and improving workforce training). Secondly, he could accelerate investment in R&D to sustain innovation, create competitive jobs, products and industries.

It is vital to US competitiveness that the nation remains attractive to foreign investment and a leader in innovation and knowledge creation.