I have just returned from two weeks of vacation in the mountains and lakes of New England. More than enough rain…but a magnificent two weeks of vacation, anyway.
Catching up is always the price one pays for taking some time off and with two weeks off, the price is quite high. But, it was hopeful to see the decline in the price of oil, the price of gold, and the strength in the dollar. I see that even Barack Obama took some time off in Hawaii, proving that he is human as well.
I have found in the past that it is always helpful in beginning to write again to discuss something that is more general in nature so as to attempt to gain a focus that might be lost if one starts out with something very specific. (I know, one commentator has stated that my perspective is one of 40,000 feet above the fray anyway.) Therefore, I would like to write about two major issues that I believe are going to provide the background for economic activity, not only in the near term, but also for the foreseeable future. These issues both have to do with Presidential leadership.
As many readers of this blog know, I am very interested in leadership…political leadership, business leadership, social leadership, cultural leadership…. Leadership is important because the leader defines the cultural of his or her administration, the world view and the operating procedure that lies behind all that the leader hopes to achieve. I have found that it is imperative that the leader of an organization reflect this culture in everything that he or she does or says or breathes. Only in this way can the leader galvanize his or her troops to accomplish what is being attempted.
The first issue that strikes me in getting back to the “real world” is that neither candidate for the presidency seems to be presenting us with their world view when it comes to the economic and financial affairs of the country. (The ‘operating policies’ of the candidates are another story…maybe for another time.) Returning to the battle I see little beyond vague generalities on the one hand and the facts and figures of ‘policy wonks’ on the other. In terms of Obama I see vague claims that he is moving toward “Rubinomics” (http://www.bloomberg.com/apps/news?pid=20601070&sid=aJ.pKsYB_DfU&refer=home) and other claims that he lacks “passion” when it comes to presenting his program (http://www.nytimes.com/2008/08/18/opinion/18krugman.html?hp). In terms of McCain, Ben Stein has been particularly brutal in claiming that McCain has no systematic thinking at all behind his statements about economic policy. According to a New York Times article this past week, McCain’s campaign leadership attempts to keep McCain off his cell-phone because many of his statements tend to reflect the last person he has talked with.
In my estimation, both candidates are currently lacking in leadership when it comes to the realm of economic policy. The United States…and the world…are facing some very serious economic problems…problems that will carry over for many years to come. And, we have little or no idea about what the economic ‘culture’ would be forthcoming from either candidate.
Robert Rubin states that Obama is focusing on “competitiveness and economic growth on the one hand, and distribution and fairness on the other.” (See the Bloomberg article cited above.) But, what does this mean?
The value of the dollar has declined for the last six years or so. Inflation seems to be picking up. Although commodity prices have declined recently, many see this as just a pause. What about the financial system and regulatory reform? Just what is the world view that Obama is presenting.
Unfortunately, I see nothing on the McCain side that can lead to any specific comments. Here I don’t know when I have seen such inconsistency in what has been presented.
This leadership void bothers me because it does not allow those of us that must operate in the economy any sense of direction. (Mason’s Rule # 5 is that markets hate uncertainty!) Even if we disagree with the world vision that a leader presents, we have something to go on by which we can make decisions. All decisions are based upon our forecast of possible future outcomes. A leadership void implies that the distribution of future outcomes is larger than it would be if there was a better idea of what policies might be implemented. A greater distribution of future outcomes portends greater volatility in business and financial markets. That is, it implies that the future will be quite risky!
So, the first thing that concerns me upon returning to civilization is that no economic leadership currently exists in Washington, D. C. and that the presidential candidates are not stepping up to the plate and providing a vision of economic leadership for when they are elected. This is bad for economic and financial markets because volatility is not conducive to either “competitiveness and economic growth” or to “distribution and fairness.” It is downright horrible for innovation and productivity.
The second issue of concern derives from the recent unpleasantness created by Russia and Georgia. It is not often that I quote Paul Krugman twice in something I write, but he has presented a viewpoint that I think must be taken very seriously. His column on August 15 (http://www.nytimes.com/2008/08/15/opinion/15krugman.html) discusses the possibility that we could be entering an age in which the world becomes more fragmented, economically as well as politically, leading to greater political and economic instability, slower economic growth, and more war. Krugman points out that into the 1910s the world seemed to be approaching a time of real global interconnectivity and peace. There was real optimism that this could be achieved. And, this collapsed into a lengthy period of revolution, war, and depression.
The question that the Russia-Georgia conflict raises along with the world wide battle against terrorism is whether or not we are now at the crest of another period when world connectivity seems possible and globalization seems ready to make us all world citizens. Could this edifice all come crashing down in another round of regionalism, protectionism, isolation, and war? Krugman presents us with this possibility.
This possibility directs me to another subplot in the upcoming election. This is the stance that organized labor is taking with respect to global trade, government regulation, and sound economic policies. We see this stance presented in the article “Obama Tilt Toward Rubinomics Stirs Warning From Organized Labor” (http://www.bloomberg.com/apps/news?pid=20601070&sid=aJ.pKsYB_DfU&refer=home). To me the worst economic scenario for labor is one in which globalization collapses, a world in which nations cut themselves off from other nations, where economic growth is dismal, and where war and terrorism are a part of daily lives. To me, organized labor is taking a stance that it believes will help the ordinary worker in the United States but is, at a minimum, very, very shortsighted.
Organized labor in the United States is in a bad way. Over the past forty years or so it has become mostly irrelevant and, as a consequence, has lost a lot of its power. It is now attempting to exert itself once again. However, the more power it regains, the less well off will be the worker it is trying to help. Certainly the American worker needs an advocate. That advocate is not currently organized labor.
Here again, leadership is needed on a national scale. The world must avoid a return to protectionism, isolationism, and turmoil. The United States President must support globalization, integration, and inter-connectivity. The United States President must promote communication, education, mutual respect, and worldwide economic growth. Here again, it is time for one candidate or the other to step up to the task and present us with a vision we can buy on to.