Tuesday, June 09, 2009

Penn Jillete - Is The New President Skidding Or Crashing? More Pointedly, Will President Obama Be A Modern Day Herbert Hoover?

As an avowed contrarian and someone who believes there is economic value in esoteric social data, seemingly insignificant "stuff" often catches my eye. To that point, Time Magazine's cover of President Obama as the new Franklin Roosevelt went generally unreported. And Time has become the poster child for lazy journalism. Then back in April, Penn Jillete's article at the title link came across my feed. I am going to use Penn's article and the general social mood portrayed in the media to qualitatively look at esoteric economic, historical and leadership contexts which I believe are very likely to be valid today.

I'm sure some will have an emotional response to this post because it involves the polity. Yet this post is based on reason, not emotion. In fact, as I have noted, I like President Obama. But that doesn't mean he or his team have any greater skill than President Bush's team when it comes to economic policy. In fact, the new administration is generally continuing failed economic policies from the last administration. This really isn't surprising because modern economic ideology generally has no party affiliation. Instead it has a class affiliation. Politically there may be perceived differences on the role of government but not actual economic ideology. And please don't buy into the political rhetoric associating causation with correlation - the finger pointing back and forth between political parties. Economic effects from political factors are often not felt for years or even decades. In many ways President Clinton did more to systemically harm the American economy than President Bush regardless of the remarks of stuttering political stooges engaged in the blame game. Although I would classify both as two of the worst Presidents in our history from a factual economic policy analysis.

For those of you who don't know Penn, he is an entertainer and comedian. Because we are indeed living through a great tragic comedy, Penn's article was a good foundation for what is to follow. If you don't want to read the article, Penn basically uses humor to remark about our new President's intellectual prowess. And because of his perceived brilliance many people are willing to place their faith in any policy he may propose.

On that note, many in today's society have what I would classify as a clear infatuation with President Obama. That infatuation is global in nature. There is a substantial belief amongst many that the new President is going to save society from this economic environment. To fix what ails us. That all we needed to do was remove the prior dunces from office and we would surely see a better world emerge. For lack of a better term I would classify this as a sort of "messiah syndrome". Even as adults, in times of great distress, society often seeks solutions in the form of a leadership figure. We effectively seek the protection and direction of our parents. A timeless fault of the human condition from which we all suffer. This deference to leadership has often been a very dangerous and ill-founded emotional response. President Obama fills that role on some level - he's bright, he's analytical, he ran on a platform of uniting the country and he speaks authoritatively.

Many literally hang on his every word for some proof our future will be brighter. We see it everywhere in the press and in the blogosphere. And we see it in the consumer and business confidence numbers rising rapidly. I see this as absolutely no different than Wall Street's infatuation with the Federal Reserve. When the U.S. economy was beginning to slow, the bulls (most of Wall Street at the time) were bleating that the Fed was going to save the economy. It was pervasive. Now it seems almost unbelievable to recount any such enthusiasm for the Federal Reserve because the crisis has become so deep and the Federal Reserve has become a pariah on many levels. That's why we documented that enthusiasm in a post at that time. And that is why I am documenting this enthusiasm for the new President now. Because I believe this too shall pass.

Ironically economists are almost always unprepared to evaluate psychological and social factors. Often I wonder why a heavy dose of sociology and psychology isn't part of economics curriculum. If it were, we would have substantially superior economists. And, most people who are currently economists would have either found the curriculum to be unappealing or would have flunked out of such a curriculum. And, that reason in itself is a major contributor to why the economics profession is filled with so much incompetence. Economics is a social science yet as a PhD in economics once told me, we generally feel most comfortable hiding in our offices. The pockets of brilliance in the profession are in spite of much of the mythology taught at most institutions. In other words, superior success in the field is due to the achievement of a superior individual as opposed to inferior curriculum and failed theory.

Let's look at some historical context. It was 1928 when Herbert Hoover was elected President of the United States. Contrary to many accounts, the 1920s were not "roaring" for everyone. In fact, the environment was much like the last eight years. Therefore, the mood amongst many was very similar to the 2008 election in the sense that many in the country were already marginalized economically. Obviously the stock market had not collapsed as it has today but underlying fundamentals shared many substantial similarities.

Most people today probably don't realize President Hoover was an engineer. While engineering doesn't have the same mystique in today's America, in the 1920s it was held in very high esteem as the U.S. was the global engineering and industrial powerhouse. There had never been a mightier industrial nation in the history of humankind. In other words, engineers were often viewed with a unique mystique as the world's messiahs or problem solvers. My point is that there was a conscious knowledge of Hoover's perceived intellectual abilities and his pedigree as a problem solver. (Unlike today where that esteem has been nearly completely obliterated. By the way, if you are a young adult, it's time to be an engineer again. The worm has turned.) The enthusiasm for Hoover parallels nearly perfectly with the enthusiasm for an intellectual and reasoned President Obama. And for exactly the same reasons.

In 1929 there was chatter by many in society that America had finally elected a reasoned intellectual who would solve its problems. Just as we hear today. Yet from a historical perspective it's pretty well accepted that Hoover was one of this country's worst Presidents. Is the label as 'worst' appropriate or was his Presidency preordained by exogenous circumstances? I would argue both to some degree without writing a book about why. Hoover policy response was generally abysmal. Then there was the profligate foolishness of the Federal Reserve. But mostly the completely criminal behavior on Wall Street. Other similar parallels to today that contributed to somewhat of a preordained Hoover administration. But, here is a key point to remember. Hoover's economic policy decisions were driven by generally accepted economic ideology of the day. And so were the actions of the Federal Reserve and Wall Street. Today we similarly see politically-driven economic responses that are also generally accepted economic ideology. Ideology that has been built up in large part from ex post facto analysis of the Great Depression. In other words Hoover and Obama again are both beholden to existing economic polity. Learned idiots as I would classify them. (Not the Presidents but the economic ideology their advisors and the country's leaders are beholden to.)

To that point, President Obama's main economic policy team are supposedly experts on the Great Depression. Much of their expertise has no foundation in any remote view of science and, in fact, much of their economic perspective is utter nonsense. Were many of these beliefs subjected to public discourse and debate in society, most of their positions would be exposed to be absurd. Frankly, the economic team in the White House bears an eerily similar resemblance to what we experienced over the last eight years. And it has the potential to be worse. This is substantially important not only because the government, for the first time in my life, has now become the economy but for another substantial reason. That is President Obama has started confidently remarking on economic policy to a degree that he is now staking his reputation on specific claims. Two glaring examples are his remark that it may now be a good time to buy stocks and his remarks at the G20 conference that their combined efforts mark the turning point for this crisis. The press and society will not forget these remarks and it sets the President up for a potential public confidence crisis in the future. This same environment unfolded with President Hoover's administration who proclaimed the crisis was over on numerous occasions. And because these turning points didn't materialize, Hoover's administration eventually lost the confidence of the country.

Let's make something very clear as it pertains to politics and economics. Political leadership does not have a systemic process to analyze complex systems such as the global economy. Hence, their analysis and policy is always fraught with substantial risk and erroneous conclusions often based on what feels right. Or what policy will positively impact beholden political interests. In normal economic periods, this may be quite insignificant. But in a very unique period when the government has become the economy and is mortgaging our future to enact said policy, those erroneous conclusions have the potential to be catastrophic in scale.

Now let's take a detour for a moment into leadership. I have a relatively unique perspective on leadership having dealt with so many leaders across a wide spectrum of businesses. One becomes somewhat of an expert on leadership qualities after working with hundreds of personalities in leadership positions. Additionally, I have probably had just about all of the leadership training any single person can possibly absorb. Not necessarily beneficial in my estimation. The net is that I understand the realities of prevailing thoughts on leadership. (Much of it nonexistent as we have highlighted in numerous posts on a vacuum in leadership across America today.) So I want to tie a few thoughts on leadership into the role of the President as it pertains to this crisis.

"A leader is best when people barely know he exits. When his work is done, his aim fulfilled, they will say, 'We did it ourselves.'." - Lao Tzu

I have used this quote in reference to leadership in the past. Mostly because it is probably the most concise and complete perspective on leadership ever uttered.

I believe the greatest economic impact the office of the President can have is to inspire a nation to do 'great things'. And then to give the people the tools necessary to accomplish great things. That's it. Nothing more. Truly great leaders knew this well before any advent of MBA programs teaching failed leadership and authors pumping the next great management method. Of course, for the lowly price of $29.95 at Amazon.com. Leadership is a qualitative art as timeless as humanity. So simple it sounds ludicrous on some level. But then who would sell all of those books and seminars on the next great thing in leadership with a single sentence uttered a millennium ago? Yet this is not the policy leadership we have seen with any recent President including Obama.

In my experience, greatly accomplished people, not to be confused with great leaders, are often more inclined to overstep their abilities by attempting to personally undertake too many 'great things' themselves rather than giving others the tools and inspiring them to achieve. (In this case that would be society.) This particular quality of overstepping abilities is an incredibly positive human trait as it pertains to personal accomplishment and overachievement. Yet it is instead a critical fault when applied to the role of leadership. I would argue the very basis of all unsuccessful leadership has its foundation in this fault. The only question is whether these failures are altruistic or maliciously intended. In other words a benevolent leader or a ruthless tyrant. We see both in business and in politics. Yet one can look throughout history to apply this standard to nearly all failed leadership. Effective leadership is really much about faith. Faith that if a leader can provide an environment facilitating success that the people will respond and do great things. In other words, faith that inspired individuals regardless of class or education or measured intellect can and do accomplish great acts. Greater than any one person could ever imagine. Greater than any single President or leader could ever accomplish. Exponentially greater.

You may infer from my statements that I believe the traditional measures of personal accomplishment and intelligence used to fill most leadership roles are generally irrelevant determinants when it comes to the qualitative factors associated with great leadership. It's also why your boss at work is highly likely to be thought of unkindly by many. Most often the wrong benchmarks are used as a promotional guide when it comes to positions of leadership. So rather than hierarchical positions being filled with leadership they are most often filled with authority. And no individual feels more of an authority than one who has been personally successful. Yet, we have put forth an argument that the skills of individual success are often counterproductive to great leadership. Or at a minimum are not key determinants of great leadership. We as people clearly understand that authority and leadership are almost always diametrically opposed. Hence why most leadership is failed leadership.

What I am effectively stating is the position of Presidency is far greater than any one individual could ever be. And to be successful in that role is to realize this very fact. Because positions of great leadership almost invariably involve people who clearly do not recognize this, their failures aren't apparent until after major policy snafus have already been set in motion. Major policy snafus supported by the prevailing economic ideology of the time. Such was the case with Hoover. Such will apparently also be the case with Obama. Or at least from what we see to date.

So from a social mood perspective, we now we see many Democrats gloating that the Republican party has been completely marginalized. And it has. Many even stating we may not see the party survive as a national entity. That may be true but I doubt it. Instead they are likely to wonder in the wilderness while they tranform themselves as we have already discussed. What I find most ironic is the party I believe could fracture would indeed by the Democratic party. The party that is incredibly confident it has won most political prizes for the foreseeable future.

So while many are now predicting an Obama Presidency similar to Roosevelt's, I would argue a different potential exists. That is, the Republican party has been marginalized and appears in no immediate throws of recovery. The American people voted for the Democratic party to achieve populist economic change. Yet what we are seeing is that policy will almost certainly throw the country into a deeper economic morass. So, I would argue the logical conclusion is a splinter in the Democratic party in 2012 that would potentially create a new party in line with the will of the American people. And the will of the American people is rapidly changing to be substantially more economically progressive and inclusive. And, that means a new economically progressive party could emerge in the United States.

There are some people citing that both American political parties are in serious trouble. And, I agree. All of the trouble is a result of failed economic ideology. This is all conjecture at this point. But it is conjecture with some historical perspective. Hoover and the Republican party lost the country's confidence post 1929 so the Democrats became a dominant party. In today's society, the Republican party has again lost the confidence of the country. But at the same time, if the Democratic party loses the public's confidence, we would be more inclined to see a new party emerge. One I would expect to be much more economically progressive as social moods and trends in the country change. If something similar to this happens, it will be almost exclusively because President Obama has bet his Presidency on failed economic ideology of the day. Just as happened with Herbert Hoover.

So is history repeating itself comparative to Herbert Hoover? An intellectually capable man yet abject failure as a leader? We shall see. But eighty years later, I find the context of Penn's comments and the economic similarities quite interesting.
posted by TimingLogic at 7:57 AM