There was one group, one big "arrow in the quiver" so to speak, which was clearly missing in the President's call-to-arms on jobs in his first State of the Union Speech -- it was the nation's CEOs and business leaders.
Assuming that the economists in the administration start focusing more on 'real' unemployment and less on GDP growth and stop believing that a "job is a job" and that the decline in our nation's manufactured goods can be offset by a favorable trade balance in such products as software, legal services, university tuition, and motion pictures, and assuming that our politicians stop being overly concerned about inflation and deficits and instead agree to fully fund the many job creation initiatives needed to produce the 22 million new jobs required to get the nation's 159 million workers back near full employment, then how do we best engage the nation's business leaders in revitalizing our economy? And what traits do we hope to find in them?
You see, even if the economists inside the administration and the politicians are fully on board with turning our economy around from the bottom up, in the all-important private sector "It Takes a CEO" to decide to hire someone before that person is hired (or, in this troubled economy, re-hired). And the 22 million new jobs we need are unprecedented in size and scope in the history of American business -- they're the equivalent of starting up 68 new General Electric Companies or 55 new IBMs or 109 new Ford Motor Companies.
What businesses of all sizes are missing right now, however, is a strong sense of confidence, a condition which can be extrapolated from the headline in the January 25 Wall Street Journal that read, "Fourth-Quarter Profits Jump as a Range of Companies Cut Spending, Payrolls". And absent confidence and the sense of certainty which comes with it, they will, as the article notes, continue to "grow by slashing", slashing their capital spending with one hand and their payrolls with the other.
To this point, even Intel, a great company whose extremely high year-over-year fourth-quarter earnings growth was highlighted and lauded in the Journal article, still has, after its own slashing of payroll and expenses generally, annual revenues that are down 9.5% from their peak in 2005, annual earnings that are down nearly 50%, and a workforce down all the way to its 2003 level.
In past recessions, CEOs eventually created the certainty and confidence they needed out of their own courage and convictions. The Great Recession of 2007 is so "great", however -- and 22 million new jobs so many -- that this time it takes certainty of the sort that only large-scale Keynesian-type government intervention in sustained job creation can generate.
The five government incentives that would most immediately get CEOs in the U.S. back hiring and investing would see the administration and Congress:
1. Throwing their full weight behind an all-of-government, fully-empowered manufacturing and jobs policy that: puts U.S. workers, miners and farmers first; is as neomercantilist in every aspect as the policies of our major trading partners; and results in a timely doubling or so of the 20 million American non-service workers and their contribution to GDP.
2. Mitigating, by whatever tools are available, China's currency manipulation -- which alone creates a staggering 25% illegal subsidy on Chinese exports -- and its other unfair trade practices and illegal subsidies.
3. Adopting "Buy American" requirements related to federal government procurement, since no single stimulus effort would do more to resuscitate U.S. employment, especially manufacturing employment, and materially reduce our nation's massive trade deficit.
4. Funding a 10-year program of significant public investment to upgrade and rebuild our nation's major infrastructure, to include a new National Infrastructure Bank and incentives for private funding of public infrastructure, which would immediately create 18,000 new jobs for each $1 billion we spend.
5. Enacting a value-added-tax, or VAT, of the sort which 152 countries in the world already have, which would quickly restore the essential tax-policy link between productivity growth and wage gains, also materially reduce our nation's crushing on-going trade deficit, and largely stop the offshoring of high-quality American jobs.
But even when CEOs have these five external incentives in place, we still need to find in them traits and characteristics of the sort Mahatma Gandhi had in mind when he said, "You must be the change you want to see in the world." And at a time when we know that a 'rising tide' does not in fact always lift all boats and when the trajectory of both national and global industrialization has reached such a peak of development that it is straining every principle of fairness and balance, these leaders must also have an unprecedented level of responsibility.
For many decades, right up until the early 1980s, executives at every level of American industry largely viewed responsible and fair business behavior as a critical component of the American dream. Now, however, when some companies alone and many corporations acting together have such influence that they can and essentially do dictate our nation's income distribution, its working conditions, the balance between services and manufacturing, the offshoring of jobs, and our governing legislation, too many CEOs have abandoned this overriding 'dream' principle for selfish individual and company reasons.
A few years ago I wrote a book entitled It Takes a CEO: It's Time to Lead With Integrity (Free Press, 2005), in which I tried to identify the several traits that I believe characterize truly successful CEOs. In this time of unprecedented income inequality and near-unprecedented real unemployment, however, four of them are especially needed as we collectively -- business, workers and government together -- try to fairly recover from the Great Depression of 2007. They are:
Honest and ethical. A fish rots from the head, as they say. Harley-Davidson's Rich Teerlink more tactfully phrased this when he said that a "single beacon alone is not sufficient illumination, of course, but the absence of this one beacon can undercut all others" -- however, former SEC head Bill Donaldson put it even better still when he said that a CEO "must have an internal code of ethics that goes beyond the letter of the law to also encompass the spirit of the law."
Live life with grace. A CEO needs to be comfortable with himself and with the world, and able to forgive himself and forgive other people. In a single word, he needs to have grace.
Take smart risks and make tough decisions in a timely way. Think back to the example of Franklin D. Roosevelt, who took over as president at the first-most frightening juncture in U.S. history. (Today, pretty obviously, is the second-most frightening juncture.) FDR initially had no strong ideas about how to get the country out of the mess it was in, but he made tough calls quickly -- and he undid them just as quickly when they didn't work. And every day, people saw courage in his actions.
Most urgent, given the times, define your universe of stakeholders broadly. In 1972 Reginald Jones, Jack Welch's predecessor as CEO of General Electric Company and later a much cherished friend of mine, defined nearly a century of American business when he said in his maiden speech as chief executive that henceforth he had equal responsibility to shareholders, employees, customers, communities and the nation. (I should note for those who don't remember Mr. Jones, he actually generated a higher annual earnings growth rate at G.E. during his stewardship than did his much more lauded successor, Welch.) The magic of his statement was the obvious inclusion of his employees alongside his company, and, alongside them, his communities and our nation.
And when you define your universe so broadly and so inclusively, over and above the honesty and grace which it implies, as a CEO you arrive at far better solutions and thus do far better by your shareholders. And society doesn't end up with the twin plagues we have today: unprecedented income inequality generally, and similarly unprecedented excessive executive compensation at the top of commerce. It is this combination, I believe, that is the root of almost all recent corporate misbehaviors, corporate America's relative inattention to creating and preserving high-quality domestic jobs and fair overall employee compensation, and the massive trading and credit losses on Wall Street out of which we will be digging for years to come.
As the administration seeks to transform the President's rhetoric on jobs into the reality of effective government policy, it needs to get beyond the political and the theoretical and to get into the head's of the nation's thousands of CEOs and business owners. While all of us should appeal to these leaders' better angels, they are also entitled to policies that provide the economic and commercial certainty they need now in order to robustly re-invest in their companies and the welfare of America's workers.
Leo Hindery, Jr. chairs the US Economy/Smart Globalization Initiative at the New America Foundation. He is the former chief executive of AT&T Broadband and other major media and telecom companies.
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