Whistling Past the Graveyard
The experts are finally seeing the light: most now agree we are in a recession. Harvard professor Martin Feldstein (http://www.nber.org/feldstein), former chairman of the Council of Economic Advisors, says it could be the worst since World War II. But this belated “recession” call seems particularly academic — a meaningless quibble over technicalities while the American Dream goes up in smoke.
Ordinary people, like yours truly, have understood for years that this country was not on sound economic footing. Just look at the “fundamentals” — and I don’t mean the fundamentals the experts love to cite when claiming that the economy is basically doing OK. It was those “fundamentals” that Herbert Hoover was extolling just before the Great Depression hit.
Some of the fundamentals, macro and micro, anecdotal and otherwise, that matter to the majority of Americans are these: Wages and buying power have been virtually stagnant for decades. Two incomes are required where one used to suffice. Jobs and entire industries have gone overseas. The trade deficit has grown enormously. Tax codes have become skewed to the very wealthy. People have no savings and have maxed out their credit cards. The overvalued stock market looks like a casino of smoke, mirrors, and all-too-frequent bubbles. Then there’s gasoline, food, and heating, basic expenses that are suddenly breathtaking. Oh, and merchants are refusing dollars in India and accepting Euros in Manhattan. That’s a fundamental picture of where we are, and where we are headed. (http://www.robertreich.org/reich20080213NYT.asp)
Here’s another fundamental fact: This economy, as experienced by folks on Main Street, was already staggering some time ago. In its weakened state, it now may be going down for the count, with knockout blows delivered by the hubris, incompetence, greed, and conflicts of interest in key sectors of corporate America. Sure, the vast majority of companies and their people are upstanding folk who want to play by the rules. But after a string of disasters from Enron to Wall Street, one must ask at what point corporate America forfeits its insistence that it can best police itself. More “ham-handed” government regulation and oversight, not less, might be just what we need (http://financialservices.house.gov). As HBS professor emeritus Sam Hayes said recently of Wall Street and the subprime fiasco, “The executives’ stature and credibility have been eroded — and by their own doing.” Too bad the rest of us suffer the consequences, and can’t look forward to astronomical compensation when we’re incompetent in our jobs.
Business schools are in an interesting position amid all this. Many business schools, through their multi-faceted connections to, experience with, and research inside the corporate and financial sectors, know firms’ operations and industry practices well. They have a pretty good hunch where the corporate O-Rings are located — those potential pressure points that could explode without warning and take the economy down with them. (Also knowledgeable of risky business and potential O-Rings are the men and women who work in those industries.)
Those of us who are out of the loop wonder how these things can happen, and where the next eruption may be. What do you knowledgeable insiders out there think? Your ideas are more than welcome. And the economy you save may be your own.
