If the Choice Is a CEO, Obama Should Say No
Tuesday 05 October 2010
by: Paul Krugman, Krugman & Co. | Op-Ed
(Cartoon: KESHAV / The Hindu - New Delhi, India)
There has been a great deal of speculation in the media lately about whether President Barack Obama will, or should, decide to appoint a former chief executive officer to take over for Lawrence H. Summers, the director of the National Economic Council.
Mr. Summers announced in late September that he will be leaving at the end of the year.
Now, obviously, Mr. Obama should simply choose someone who can do a good job as his top economic adviser. Forget about image, or the message the appointment would supposedly send — there are about 600 people in the United States who care, and most of them are paid to care about these sorts of things.
Is having been a successful C.E.O. a good qualification for this job? The answer is no.
For one thing, the director of the economic council is supposed to serve as a coordinator and honest broker of competing views — not, or at least not primarily, as a decision maker. One of the widely repeated complaints about Mr. Summers was that he supposedly wasn’t sufficiently willing to let others air their views. That is not what C.E.O.’s are paid to do — their job is to be decisive, not to summarize other people’s arguments.
Beyond that, the idea that business executives know what the economy needs is just wrong.
In 1996 I wrote an article for Harvard Business Review titled “A Country Is Not a Company.” The theme was that economic policy requires a very different kind of thinking from that needed to formulate company strategy. Companies are open systems, selling the vast bulk of what they produce to other people; companies are able to draw in resources from outside, mostly at will. Countries — even small countries — mainly sell within themselves and must make the most of their labor, land and capital.
Beyond that, companies — even if they have relatively decentralized management — are top-down organizations in which people do what they’re told.
Market economies are free-for-alls, in which policy can be used to implement changes largely by providing incentives to do things (and yes, that’s true even if we’re talking about monetary policy and fiscal stimulus).
I have no doubt that a really smart C.E.O. could master enough economics to do the job, but so could a really smart engineer, or a really smart singer-songwriter.
Experience as a business executive is no preparation for managing the economy.
And no, I am not a good candidate.
Aside from the fact that I’m in a pretty good place for influencing public discussion right now, the job does come with some administrative responsibilities, and it also, obviously, requires significant bureaucratic skills.
Alas, I don’t have them.
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Backstory: A Short List, a Massive Task
As President Barack Obama looks ahead to this November’s midterm elections, his most daunting challenge has been convincing a recession-weary public that he and the Democratic Party have indeed put the economy on the right track over the past two years.
The unemployment rate in the United States hit 10.1 percent in October 2009 — a high not seen since 1982 — and, despite the fact that the recession officially ended more than a year ago, the economy remains sluggish.
If that was not enough to make voters skeptical, by the end of this year, three of Mr. Obama’s original four economic advisers will have left his administration. Over the summer, Peter R. Orszag, director of the Office of Management and Budget, and Christina D. Romer, chairwoman of the Council of Economic Advisers, resigned in close succession, and in September National Economic Council director Lawrence H. Summers announced that he will return to his tenured post at Harvard University in January.
While Mr. Summers’s announcement came as no surprise — when he joined Mr. Obama’s team in 2008, he said that his stay would only be temporary — his resignation no doubt pleases some Republicans in Congress who have publicly demanded a revamping of the Obama administration’s economic team for months.
White House insiders have suggested that Mr. Obama will appoint a prominent business leader to Mr. Summers’s post in order to counter the impression that the Obama administration disfavors Wall Street. Amid the media speculation about this possibility, several names consistently top the list, with not one economist in the bunch — Citigroup chairman Richard Parsons, General Electric chairman and C.E.O. Jeffrey Immelt and former Xerox C.E.O. Anne Mulcahy among them.
A decision is expected after the November elections.
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Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed page and continues as a professor of economics and international affairs at Princeton University. He was awarded the Nobel in economic science in 2008.
Mr Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes, including "The Return of Depression Economics" (2008) and "The Conscience of a Liberal" (2007).
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