It all starts at the top!
How desperate are things? Well, the “Decider” stepped out yesterday to calm the American people’s fears about the financial system and the economy. Here is a person who has no credibility…a person that has been put in front of the American people time-after-time to build up their confidence and encourage them to stay-the-course…a person who is worn out and has no energy…and we hear from him that things are “OK”. Thank goodness he didn’t call us a bunch of whiners!
It is apparent, however, that his leadership permeates his whole executive team. The result was dramatically seen elsewhere in Washington, D. C. yesterday. U. S. Treasury Secretary Henry Paulson carries little or no weight in the current exercises. (See, for example, http://www.bloomberg.com/apps/news?pid=20601068&sid=aWssvqlta37Q&refer=home#.) The testimony of Federal Reserve Chairman Ben Bernanke was weak and muddled. Who can we turn to?
In my experience the Chief Executive sets the tone for the organization…the culture, if you will. Everything the Chief Executive does, or says, or seems, is reflected in his or her team and the performance of the institution he or she leads. The “Buck Stops” with the Chief Executive, whether or not the Chief Executive accepts this fact or not.
How are things going in the world? Mister leader…you are the captain of the ship…responsibility falls to you!
Secretary Paulson and Chairman Bernanke are honorable men. They are also capable men. But, so is Colin Powell. The performance of the team is always, for better or worse, overshadowed by the boss. If the Chief Executive is a capable leader…if the Chief Executive has good people around and facilitates the use of their talents…if the Chief Executive doesn’t fall victim to the flattery and ego-inflation of some of his team…that Chief Executive can produce extraordinary results. However, if the Chief Executive does not possess these talents…even good, capable people perform way below what is possible.
In my estimation we are beyond specifics when attempting to judge where the economy is and the soundness of the financial system. We have a leadership void and as a consequence we face a situation in which things can only deteriorate further until some form of real leadership is re-established within the United States government. The scary thing is that we seem to be facing a minimum of six months before the possibility of a change can become a reality. Not only do we have the “Gang that couldn’t shoot straight” in office, but the “Gang” is also a “lame duck”!
What needs to be done, in my estimation, is greater than just specific responses to market conditions. We need leadership in the following areas.
· International cooperation and coordination in economic advancement. The United States is still the one super power in the world but it needs to be a part of the development taking place in other nations and areas. The United States may be disliked and resented by others but the United States is still needed by these nations and areas and can still be a facilitator in the development and advancement of the rest of the world. (You might also look at the T. Friedman editorial this morning http://www.nytimes.com/2008/07/16/opinion/16friedman.html?hp.) And, the United States cannot close itself off from other parts of the world as “Reverse Globalization” takes place. Conversation and communication needs to be expanded from just the G-8 to the G-20.
· The United States must get it monetary and fiscal policy “in sync” with the rest of the world. The government must cease to believe that it can continue to operate its economic policy independently of the world. The budget of the United States government must be brought under control and managed with a firm discipline. Monetary policy must be directed to focus on the value of the dollar and possibilities of future inflation. The Federal Reserve must not be burdened with more and more responsibilities that can present it with conflicting goals and objectives. We have seen what difficulties can arise by just having two objectives—inflation and economic growth.
· The United States must develop a “real” energy policy! Enough of band aids. Enough of political posturing. Enough of catering to the financial interests of a small segment of the economy. If T. Boone Pickens can move on this issue…surely others can also move! (http://www.pickensplan.com/)
These, of course, are longer run concerns, but they pertain to the strategic direction of the United States. If we don’t have a vision of what is needed and if we don’t have leaders that can express a vision we can buy into and trust, then the responses and reactions that happen within the short run result in nothing but a ‘random walk’ and we end up with a hodge-podge of consequences that do not serve us well over the longer run.
Yes, I know…in the long run we are all dead. (Keynes) But, we only become desperate for fixes in the short run when there is an absence of leadership and no one seems to know where we are going.
My short run concern is that since participants in domestic and international markets have little or no confidence in the leadership that exists within the United States…in the business and financial community as well as in the political sphere…the drift in the financial markets and the economy will continue to be on the downward side. Economists and other pundits can continue to come up with suggestions and schemes to contain the trouble or dreamscapes to resolve the whole problem…but, that is all they will be until leadership is established once again. Unfortunately, the current players seem to lack this skill.