I listened to at least a dozen speakers in Chautauqua during my annual stay this summer. Many were preoccupied with our nation’s current economic plight. Speaker after speaker, from the right and the left, lamented what has happened to America over the past thirty years. Nearly a century ago, W.B. Yeats wrote: “The center cannot hold.” And that’s precisely what’s happening. We’re losing our center. Yes, we’re losing the ability to center ourselves culturally with a reliable sense of what’s right and wrong. But in a larger way, collectively, economically, the middle is disappearing as well. The middle class is withering away and, with it, the social upward mobility that America has offered its people from the day it was founded. In its place it has left a widening gap: between rich and poor, the privileged and the rest.
Speakers as diverse as George Packer, Charles Murray, Robert Putnam and Alan Schwarz all touched on this decline, from different perspectives. Packer focuses on widespread organizational dysfunction. The culprit? He pointed to long-term trends that began in the 1970s: deindustrialization, the decline of unions, globalization, and the rise of an economy more and more dependent on finance and information. The result: wage stagnation, lackluster job growth, and the explosion of income inequality. Robert Putnam pointed to the same economic factors as the origin of cultural, moral decline: as globalization and technological advances eroded middle-class jobs, family structures began to dissolve. “When factories closed in the 1980s, almost immediately there was quadrupling or quintupling of out-of-wedlock birth rates (in my home town). Economic change (came first) and cultural change came later.”
In his conversation with Diane Henriques, of the New York Times, my friend Alan Schwartz, the last CEO of Bear Stearns before J.P. Morgan acquired it, spoke about the economic collapse of 2008 as a collective failure, ushered in by the irresponsibility of investment bankers, the federal government (underwriting bad loans to those with no ability to repay them), lax rating agencies, and gullible home-owners. It doesn’t take an advanced degree to see the same long-term factors at the root of these failures. We’ve been driving the economy with financial bubbles for decades. During the most recent one, our consumer economy required home-ownership as a way of leveraging spending. In the absence of higher wages, homes became the new ATM, the basis for equity loans that enabled many people to keep buying goods by spending away the ostensible value of their homes. Thirty years earlier, that spending money would have been generated by lucrative, upwardly mobile middle-class jobs. Not now.
What our economy needs is honesty, from top to bottom, from the private to the public sector. First we need to be honest about how dire our situation has become. The top can’t continue to make a living by inflating the prices of financial instruments by using short-term tactics that have little impact on job growth for the majority of the American people. The government needs to focus on jobs and savings—finding ways to coax money back out into the market as investment in new business and higher wages for current workers. And the average American needs to become entrepreneurial, inventive and willing to learn whatever it takes to fill the jobs that are actually out there now—as well as create new ones with new ventures. (Those ventures need to be underwritten with money idling, hardly earning interest, in the accounts of the privileged elite.) Many of the jobs available now require skills that have long been assumed as obsolete with the retreat of manufacturing to other shores. Those jobs are starting to return, and we need to be training people properly for them.
In other words, we’ve all been contributing to this thirty-year mess. It led eventually to the collapse of 2008, because we’d been hiding our eyes from the reality of what was happening by fueling bubbles, keeping up the appearance of economic vitality. We’re all in this together, and together we need to find a way out. In the coming months, I’m going to focus on one particular topic—shareholder value—and how the elevation of this ideal in the way business is run has contributed to our decline over this same period of time. I believe that those who run private enterprise in this country can learn to see a larger picture than the short-term rise in stock prices, which has become a destructive obsession. It’s only one piece of the puzzle, but it’s a critical one. I’ll be talking to many people, looking for some answers, and looking to find CEO’s and other business leaders who have successfully found another way to shape a vision for their company’s, and our nation’s, future. Do you know of companies or business leaders who are emphasizing long-term values, with the approval of those who have a stake in the company’s success?