President Obama is setting a new pace for the United States and for people around the world. It is crucial to reconcile the apparent conflict between the responsible economic behavior of citizens and the responsible leadership of the economy.
The message of `save more’, for example, was always helpful for economic stability. Yet, for the sake of economic growth, the necessarily complementary message of `spend less’ was unacceptable in the past. With new excitement about social obligation, now may be the right time to offer and implement opportunities for sacrifice.
There is need for a national agreement that excessive expenditure, wars, and high commodity prices must result in dialing back expectations, expenditures, and excess. Active consumer expenditures will be important to keep the economy going.
The steep decline in vehicle sales demonstrates the disadvantages of too much consumer caution. One needs to prevent individuals and society from becoming cheap. Greater selectivity based on quality should be a key focus of enlightened self-interest.
There seems to be less reliance on market forces. But if one does not use market signals, there needs to be the development of secondary indicators. New non-market criteria encourage the productivity of think tanks, government offices and universities. At the same time, they are likely to lead to an increase in policy errors, performance uncertainty and outcome disputes.
Less faith in free markets affects currency values and exchange rates. Governments will tend to intervene more quickly and perhaps more severely to reach desired currency values. Such extraterritorial application of policy goals will be a new drawback for international trading partners.
Politics do not afford business the same high priority as in the recent past. A reduced linkage between policy and trade will provide allies with less preferential treatment and less market access.
Domestic changes affect international perspectives. Traditional core dimensions of American capitalism, such as risk, competition, profit and property are shifting. For example, the risk/reward relationship is likely to become less central to decision-making.
A reduction in incentives for competition may lead to more harmony, but perhaps also reduce the speed of innovation. More creative thinking about property rights will affect the development of medications, but may also precipitate the global migration of pharmaceutical firms.
A useful analogy may be provided by the traditional pinball machine: Several people can play, and when a player achieves a high score in competition, the machine issues an extra ball ― which allows the winner to further extend his lead.
Now consider what would happen if in a new approach the player who falls behind, receives the extra ball in order to catch up with the leader. Such a shift would not necessarily be uninteresting, but would produce very different rules of the game.
Then there is the key issue of paying for all the desired changes. Past decades of government policy have focused on reducing inflation. The new focus on employment generation will require a neglect of inflation concerns in favor of stimulative expenditures.
Over time, the budget implications of such a shift will require a substantial increase in public income. Doing so will be difficult, given the key commitments already made in the area of tax policy, but will happen nonetheless. Such measures are likely to affect the value of the U.S. brand, leading to more reticence of foreign direct investment.
There are also new expectations for higher standards of virtue, vision and veracity by individuals, corporations and government in order to restore faith and confidence. Yet, both domestically and internationally such values cannot be created overnight, but rather require gradual shifts in perspectives and cultures and global collaboration.
Regardless of the desire for quick action, an era of globalization demands the harmonization of approaches in order to eliminate the jockeying for local advantage.
The American name carries weight in the world. Global leadership has too often been sidetracked by narrow concerns. Inner strength, skills, and morality are essential for long-term leadership for the common good. May the years to come provide us all with social progress and reward.