Small Business Needs Leadership in Washington
In my last post, I presented the fact that American banks were actually cutting back even more on loans to small business. Then today I read a post by Arianna Huffington, on the Huffington Post, where she discusses this same issue, plus, the lack of leadership in Washington to resolve this problem. I have included some excerpts from Arianna’s post below, but I would encourage all small business owners to read her post in its entirety.
—The president, in a recent radio address, said he would take appropriate steps to “encourage” banks to meet their responsibilities. Encourage them? Pundits encourage while presidents execute…that’s their job!
—The president’s plan of action for getting small business back on track financially is to convene a conference in the coming weeks. Instead of taking decisive action, the most powerful person on earth is going to “convene a conference.” Here is what Arianna had to say:
Of course, we all know that in Washington-speak ‘I’m going to convene a conference’ is somewhere up there with ‘I’m going to establish a blue-ribbon commission’ in terms of kicking an issue down the road.
But, is there anything the president can really do, other than use moral suasion, to sway the behavior of our financial system? Of course there is! How about this:
—Open up the Fed to full transparency. This should have been a condition for the president appointing Bernanke to a second term. Instead, the Fed is now fighting an audit proposed by Congress—and the White House is silent.
—The president also appoints the heads of the Office of the Comptroller of the Currency (supervises commercial banks); the Federal Deposit Insurance Corporation; the head of the Office of Thrift Supervision (regulates savings and loans); the head of the Securities and Exchange Commission; and the head of the Commodity Futures Trading Commission (oversees derivatives). If these powerful people cannot move the banks to support small business…it is time for the president to make some re-appointments. That’s what would happen in any successful American business.
—More importantly, the president picks the person who runs the Treasury Department. Here is what Adrianna said about this appointment:
…the Treasury Department…is not legally mandated to be overseen and staffed by former Goldman Sachs executives and their friends. And there is nothing in the Constitution that says the Treasury Secretary has to be in near-constant contact with the heads of Goldman, Citigroup, and J.P. Morgan, often taking their calls late at night.
Perhaps this is an appointment that needs to be reconsidered now.
—The president also has the power to regulate. Instead, he has chosen to allow the proposals for financial regulatory reform that are working their way through Congress to be riddled with loopholes and exemptions favorable to Wall Street.
Here is Arianna’s closing statement:
…if only Barack Obama would stop acting like a pundit, egging on change from the sidelines, and start acting like the president, dictating the game from the middle of the field.
Every small business in America has a congressional representative and two Senators, who have been elected to serve and represent those who put them in Washington. Now is the time to tell these representatives, as well as the president, that it is not Wall Street, nor K street who deserves their allegiance—it is the people who elected them, and we demand to be represented. It is up to us to demand leadership. It is also up to us to reappoint our representatives at the ballot box, it they don’t do their job.
Read Arianna’s entire post here.
NOTE: This Friday, Arianna, along with Howard Dean, will take part in a debate on C-Span with Dick Armey, and John Kasich on the question “America’s Future: Can Capitalism Survive? This is something that should interest every small business owner in America.
American Capitalism?
It seems the U.S. has, for quite some time, prided itself in being the true Capitalist nation of the world. With relatively low taxes, fewer government controls, and that indomitable American spirit of freedom, entrepreneurs have a free rein to start whatever business they want in the U.S. This is the land of opportunity, and that is why we lead the world in entrepreneurship—right?
Sadly, the above comments appear to be part of a giant myth. John Schmitt and Nathan Lane, of the Center for Economic & Policy Research published a paper in August declaring that the U.S. ranked second to last out of 22 countries in the ratio of self-employed workers to the total civilian workforce. Not surprisingly, the U.S. also appeared near the bottom for workers employed in small-business manufacturing. Much more surprising, was that the U.S. was also near the bottom for computer related services.
Here are a few comparisons of self-employment as a percent of total civilian employment, as published by the Organization for Economic Cooperation & Development:
- Greece – 35.9%
- Spain – 17.7%
- Britain – 13.8%
- Germany – 12.0%
- France – 9.0%
- U.S. – 7.2%
Of course, when throwing big corporations into the mix, the U.S. fairs much better, but what does this say about small business being the future of the American economy? What does this study say about the role of American small business in any part of our future?
So, what has happened to the entrepreneurial spirit in the U.S.? Why are our European and Asian neighbors beating us at our own game? Have we become so used to living the easy life, with cheap and abundant credit, that we no longer want to work the demanding regimen of the small-business entrepreneur?
It takes guts, passion, persistence, and very hard work to become a successful small-business person today—and it now appears that America has a dearth of people with these attributes.
What has happened in America…and can we retake our former position as a world leader in small business Capitalism?
A New Capitalism?
After writing the post on “The Nationalization of Big Business,” I received a number of emails and comments that made me take a closer look at this issue. Since I’m not a futurist, economist, nor academic, I rely on the following definition of capitalism, which pretty well spells it out for me.
Capitalism is an economic and political system characterized by a free market for goods and services and private control of production and consumption.
Princeton University’s Wordnet defines capitalism as an economic system based on private ownership of capital…antonym of socialism.
To me, capitalism means that if the market (we consumers) likes what a business has to offer, we buy from that business and it becomes successful and continues to grow and prosper. If the market does not like what the business has to offer, we don’t buy from that business and it fails. That is the simplest form of capitalism. Capitalism is totally market driven, and it has worked well for American companies for a very long time–until now.
Now, although we have over 30 million American businesses that fit the basic definition of capitalism…Robert Reich, former Secretary of Labor, has pointed out in a recent article, that we also have companies which operate outside our capitalistic system, because they are no longer accountable to the market. If they were accountable to the market they would close–with mass loses of jobs, which would heavily impact our entire economy. Therefore, they cannot be allowed to fail, because they are too big to fail.
So, if we have companies that are not accountable to the market, and operate outside our capitalistic system, who should they be accountable to? If some of these companies can only survive by living on taxpayer’s money, shouldn’t the taxpayers hold them accountable? Unfortunately, that would mean the government would become involved in the operation of these companies, and does anyone think the largest bureaucracy in America can better manage them?
There are no simple answers, but lots of questions-for instance:
- When is a company, no longer accountable to the market, and becomes too big to fail?
- Should large, unaccountable, businesses be forced to break up into smaller, more manageable (and accountable) units…similar to the former Bell system breakup?
- Should the government take control of these large “too big” companies and dictate who should manage them, and how they should be run?
- Or, should these large unaccountable companies simply be allowed to fail–putting 10’s (maybe 100’s) of thousands of people out of work?
These are pretty heady questions for just a street guy, but I would really like to hear the opinions of anyone out there who wonders what is happening to our capitalistic system–and should it be happening? Better yet, how can it be made more successful in our global economy?
The Nationalization of Big Business
Good grief, what has happened to America’s capitalistic, free enterprise system? As a red-blooded American, native Michigander, and alumnus of Kettering University, I am more than a little shocked, disappointed, and angry at what I see as a major blow to free enterprise, and more importantly, to democracy. Here’s why:
Following is a condensation of a couple of articles that came to my attention today. These are excerpts from an article by Monica Langley and Neal E. Boudette in the WSJ’s Morning Brief, and an article by Dr. Jeffrey Feldman in the Huffington Post.
WASHINGTON — Inside a windowless, ornate room Thursday (3/26) just across from the Oval Office, President Barack Obama and a group of senior economic advisers began the job of remaking the American automobile industry.
The first order of business: Oust General Motors Corp. Chief Executive Rick Wagoner.
Steven Rattner, a former investment banker who is heading the administration’s auto restructuring; chief economic adviser Lawrence Summers; and Treasury Secretary Timothy Geithner were among those gathered around the polished wood table of the Roosevelt Room in the White House’s West Wing. They were there to decide under what conditions the government would continue to prop up once-powerful Detroit car companies GM and Chrysler LLC. At Thursday’s meeting, once the Obama administration concluded the pair were running out of money, their effective dismantling began.
The White House meeting at which Mr. Wagoner’s fate was decided came five days before a March 31 deadline when the administration was set to rule on the viability of the companies.
The auto team (headed by Steve Rattner) prepared briefs for Mr. Obama on his options, as well as viability reports on both companies. The car team wanted an executive who could accelerate the changes it (the administration) desired. Mr. Wagoner didn’t have any support within the group. “This is Obama, and symbols of change are important,” said one person familiar with the situation.
A much harder decision was what to do with Chrysler. A conclusion that the company wasn’t viable could lead to 40,000 workers losing their jobs. To combat that threat, the government is negotiating with Chrysler and Italian car maker Fiat SpA for an agreement that Fiat will continue to make cars in the U.S. if it buys Chrysler, according to an official of the Obama administration.
After the Thursday meeting at the White House, Mr. Rattner asked Mr. Wagoner and Mr. Henderson to come see him the next day. Mr. Rattner broke the news to Mr. Wagoner at his office at the Treasury, according to an administration official. Afterward, Mr. Rattner met with Mr. Henderson, and told him he would take over as GM’s CEO.
Once word started to trickle out that a White House decision on the auto makers’ fate was imminent, GM officials and some Michigan lawmakers began making calls. Michigan’s Democratic governor, Jennifer Granholm, called the White House to ask for a meeting with Mr. Obama. Told she’d need to come in by Friday, which wasn’t possible, she had a personal phone call with the president and urged him to consider the communities that could suffer.
Mr. Wagoner told GM’s board Friday evening that he was asked to step down and informed directors the administration wanted a majority of them to resign, according to two GM officials. Several volunteered to quit over the weekend. Other GM officials speculated that they would also be asked to resign.
On Sunday, …Mr. Obama made one call himself to some of the Michigan delegation, including U.S. Sen. Carl Levin and his brother, Rep. Sander Levin, and Michigan Sen. Debbie Stabenow. He told them that he planned to put some administration staff into the Detroit companies, according to one person familiar with the situation.
Sen. Corker, a Republican from Tennessee, said he told Mr. Rattner on Monday that he was alarmed that the administration would dictate what kind of vehicles would be constructed. “Deciding what vehicles and plants will survive is setting industrial policy,” the senator said.
For the complete article, click here.
Let me see if I have this correct-
- The administration does not give money to the auto industry-Congress does. (Unless the Treasury dept. is diverting funds Congress provided previously.)
- The President has formed a small group of people (the auto team) who are dictating how the American auto industry will be run.
- The head of the administration’s new auto team is Steve Rattner, a former Investment Banker.
- Steve Rattner personally fired Mr. Wagoner and personally appointed Mr. Henderson as the new President of GM.
- The administration is dictating what cars the auto industry will build, and what plants will survive.
- The strong-arm tactics by President Obama and his auto team run roughshod over the Articles of Incorporation and By-laws of GM, rending corporate law meaningless. (Nationalization?)
- The President told some of the Michigan delegation he was going to “put some administration staff” into the Detroit companies.
- The auto team is doing the negotiation between Chrysler and Fiat.
There also seemed to be a few people missing from the Thursday meeting–like:
- Where was the Board of Directors?
- Where was the Michigan delegation?
- Where were the shareholders (the government is only one shareholder)?
- Where were the “car guys?”
- Where were the “union guys?”
- Where were the Congressional leaders?
- Lastly, where is the fairness, executed by the administration, between the auto industry and the banking industry?
What does Michigan think of all this? Here is what Dr. Jeffrey Feldman had to say in his article in the Huffington Post today:
Fear and anger are rising in Michigan: Fear that things are about to get much, much worse than they already are; anger that the federal government is strong arming the Mitten State just a short while after opening up America’s coffers to Wall Street with no strings attached. New York gets what it wants, when it wants it from Washington, Michigan gets slapped in the face. The fat cats on Wall Street caused this problem, they sank the economy, and they got paid off…Executives in Detroit get tarred and feathered and escorted to the door.
For the complete article, click here.
Now, I am not saying that all these things shouldn’t happen to, or within the American auto industry; nor that they wouldn’t happen anyway, but I am shocked, and disappointed, at the way events are being dictated to the auto industry by the President, and his select few, who are taking over the entire industry. That is not how capitalism works. That is not how democracy works.
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