Phil Gramm, notwithstanding, it is not only our economy that is in trouble; American capitalism is also in a funk. And, I contend, it is largely due to a failure of leadership at the corporate level and the policies of the current administration.
The problem at the corporate level has for years been the result of very short-term planning on the part of company executives fighting for “instant gratification” on the bottom line, along with a large dose of greed. This has resulted in shortsighted planning at the executive level — quite unlike that of business leaders in a number of other countries. Nowhere is this better seen than in the automobile and airline industries.
The gas “crisis” first reared its ugly head in the 1970s. Japanese automakers, understanding where this was headed, were gearing up to build quality fuel-efficient automobiles with emphasis on reliability, desired features and style. American manufacturers, taking the short-term view, saw a relaxation of fuel prices and fat profits in SUVs, trucks and large cars. But that was not to be the future.
While companies like Honda and Toyota were developing hybrids, and churning out their incredibly desirable Camrys, Civics and Accords, the American corporate leaders started getting the message a few years ago. So, to hedge their bets, they tossed into the market fuel-efficient cars like the ugly and poorly rated Aveo. Now, of course, American manufacturers are in the tank, and hustling to catch up; and General Motors currently has a market capitalization slightly less than Hershey. Meanwhile, Honda in recent months was able to show a sales increase and good profits.
Airlines’ solution: cut, cut, cut
Conversely, in the airlines industry, America’s corporate leaders are in a tizzy trying to deal with rising fuel costs. Their solution: Cut everything to the bone including passenger comfort, convenience and cost. The result, a spiral down that will likely continue. One of the interesting side stories about this activity is the recent call by airline executives to request government regulation of fuel prices! These were exactly the same folks who cry out for less government regulation, and in fact wanted the industry de-regulated.
As a juxtaposition to the American business leaders in the airline industry, we can again turn to Japan, where Japan Airlines took a much more creative approach. Knowing prices would have to rise due to fuel costs, JAL decided to improve service! They improved seating, added upgraded classes, served delicious food from well-known Japanese restaurants, and, most of all, have friendly, well-trained personnel. They put special emphasis on their flights to and from the United States. Guess whose planes are flying full, and which airlines are cutting back as fast as their little jets will let them?
On a different transportation front, a French company (Alstom) now has in production a 300-plus miles-per-hour supertrain. What a great way to travel, plus it is energy-efficient and a fine alternative to traveling by air. American companies have ignored this solution, and along with it a great long term capitalist opportunity for jobs and profit.
As noted above, there is a strong emphasis on trained and friendly personnel at Japan Air. American airlines — indeed American businesses — have been experts in providing lousy service at virtually every level. Part of it is a lack of training. Part is, again, the desire to generate short-term profits, by cutting costs at precisely the wrong places. And part is the terrible discrepancy in executive wages vis-a-vis those of the average worker. That not only is unfair and a negative for sound capitalism, it is also a component for poor worker morale. In 1965 (according to the House Committee on Financial Services), U.S. CEOs at major companies earned 24 times the average worker’s pay; by 2004 it was 431 times the pay of the average worker! In fact, according to this same study, the real wages for the 92 percent of Americans who earn under $92,000 per year have actually fallen since 2001.
A failure of political leadership
Which brings us to the failure of leadership at the national level. The Bush administration has been one of the worst enemies of strengthening American capitalism. It has harmed our economic system in a variety of ways, but the two largest are running massive deficits (and the belated decline of the dollar) and President Bush’s stubborn adherence to the Chicago School’s trickle-down economics — which, while clearly benefiting those at the top of the economic ladder, has proven to be a flawed policy and antithetical to robust capitalism. Further, Bush has regularly eschewed valuable and cooperative public/private partnerships through his lingering dislike of anything resembling government participation or regulation.
The deficit, and subsequent dollar decline, has poured incredible amounts of money into less than friendly nations and/or positioned foreign companies to literally “buy” American business at will. That translated into $276 billion of foreign purchases of American business in 2007. Abu Dhabi buying the Chrysler building was a bit embarrassing; but even though I am fond of imported beer, the sale of an icon like Anheuser-Busch is kind of the last straw. Indeed, foreign companies now have a huge stake in our economy.
Trickle-down has been a mantra of conservative philosophy for decades. Problem is, history shows it hasn’t matched the “rising tide benefits all” way of thinking. This point could be argued about endlessly — but here are the facts as we know them today: For six years the Bush administration held all the levers of power in our country with an especially compliant Congress. His trickle-down tax policies (heavily skewed to less taxation on the wealthy) have prevailed during virtually this entire period … and I ask you: Has this been the road to a successful economy and growth of capitalism?
America is such a great country, with a history of leading the world economically. We still have great imagination, creativity, production capacity, and strong (if not ebbing) financial strength. But corporate greed and mismanagement, lack of long-term planning, poor stewardship of our resources, a horrendous deficit and a specious tax policy have all contributed to the decline of a robust capitalism and American leadership as it used to be. To borrow from Winston Churchill’s remarks on democracy: Capitalism is the worst form of economics — except for all the others that have been tried. We’ve been here before, and survived; but the world is different now, with wealth spread over many nations and continents.
Only a radical change in American corporate governance and enlightened fiscal policies can get our capitalism out of the tank this time.
Myles Spicer of Minnetonka has spent his entire business career as a professional writer and owned several successful ad agencies over the past 45 years.
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