Monday, February 23, 2009

The Crisis in Capitalism...

"Government is not the solution to our problem," said Ronald Reagan in his first inaugural address almost 30 years ago. "Government is the problem."

I keep thinking about those words of Reagan's as we see government forking over trillions to failed American banks and bankrupt car manufacturers.

And we see bailout funds getting used for things like bonuses and things of that nature.

And we see millions of Americans lose their jobs each month.

And I think that I'm really not sure that government can provide the solution that is needed to solve a crisis of this magnitude. But more disturbingly, business isn't providing the solution either - at least business as we know it today, thirty years after Reagan spoke those words about the evils of government.

In fact, it would appear that in today's political landscape, business is itself a significant problem.

A Bleak, Golden Fog
The landscape of American business today is pockmarked by bad judgment and destabilized by greed. Certainly, not every business in every sector has acted irresponsibly. I've had the good fortune to work with smart, focused executives who have been successful in leading their organizations.

But major corporations in key industries - auto manufacturing, banking, airlines - have contributed in significant ways to the demise of our economy - and I don't see their leaders taking effective action that could move these companies out of debt.

We don't yet know the extent of the problem in our free market banks - and that is something almost terrifying to contemplate - that months into the crisis, we don't yet know the full amount of debt on their books. We don't yet know what the CEOs' plans are for bringing their businesses back to profitability.

We don't even know what they're doing with the TARP money they've been blessed with – nor do they have to account for these funds.

Instead, we've seen business leaders appear more interested in negotiating fabulous salaries and handing out bonuses than leading a company into sustainable profit.

And we've seen business leaders racing (or flying their own private jets) with hands outstretched to Congress. "Self-regulation isn't working," they tell us. "We need money to recapitalize," they acknowledge. "Loan us money or we'll have to declare bankruptcy," they warn.

Then we've seen the bankers on Wall Street pay out astronomical bonuses to their employees - after receiving billions of tax dollars to recapitalize.

Yes. Clearly, self-regulation isn't working in an industry that can't understand why the need for a federal bailout should curtail bonuses for 2008. Who don't realize that the rest of the country (world) believes that "bonuses" are paid to reward profitable behavior, not the expected benefit of a vast federal entitlement program.

What Would Reagan Do?
I wonder what Reagan would make of all of this - how would he spin the golden fog emanating from Wall Street? What would he say to his banker buddies?

Would he pat them on the back for proving his point about the flaws of government?

Or would he chastise today's business leaders for running rapidly to the government for a solution, instead of crafting one themselves?

No comments: