Leadership is not just a technical thing, a matter of hiring the right nerds to recommend the right policies. Leadership is knowing when and how to tell your people unpleasant truths. Since WWII few American Presidents have had the moral courage — or trust in us — to do.
Other nations are more fortunate in this respect. Or perhaps their people better deserve their leader’s confidence. Let’s look forward to the day when our leaders speak so forthrightly to us.
Speech by Mervyn King (Governor of the Bank of England) To the CBI, Institute of Directors, Leeds Chamber of Commerce and Yorkshire Forward at the Royal Armories, on 21 October 2008 — It strikes a fine balance between a realistic summary of this situation and hope that the government’s efforts will succeed. This excerpt shows the former, not the latter.
Since August 2007, the industrialised world has been engulfed by financial turmoil. And, following the failure of Lehman Brothers on 15 September, an extraordinary, almost unimaginable, sequence of events began which culminated a week or so ago in the announcements around the world of a recapitalisation of the banking system. It is difficult to exaggerate the severity and importance of those events. Not since the beginning of the First World War has our banking system been so close to collapse.
… The scale of central bank liquidity support during the crisis has been unprecedented, and all central banks have increased the scale of their lending in broadly similar ways. The UK taxpayer now has a larger claim on the assets of banks (in the form of collateral held by the Bank of England) than the total equity value of UK banks. Massive injections of central bank liquidity have played a vital role in staving off an imminent collapse of the banking system. Such lending can tide a bank over while it is taking steps to remove the cause of the concerns that generated a run or lack of confidence. But it can also serve to conceal the severity of the underlying problems, and put off the inevitable day of reckoning.
I hope it is now understood that the provision of central bank liquidity, while essential to buy time, is not, and never could be, the solution to the banking crisis, nor to the problems of individual banks. Central bank liquidity is sticking plaster, useful and important, but not a substitute for proper treatment.
Just as a fever is itself only a symptom of an underlying condition, so the freezing of interbank and money markets was the symptom of deeper structural problems in the banking sector.
… With the plan for recapitalisation in place, the focus of attention has moved to the outlook for the UK and world economies. Over the past month, the economic news has probably been the worst in such a short period for a very considerable time.
… Looking ahead, the outlook is obviously very uncertain – both for the world as well as our own economy. The MPC cannot simply extrapolate the past into the future. The prospects for oil and other commodity prices are difficult to assess. So too are the period over which bank lending will return to normal and the extent of the damage to business and consumer confidence. Moreover, the credit crunch affects not just demand but also the supply potential of the economy, complicating the assessment of the inflationary impact of changes in the level of demand.
… Let me take you back again to 1958. In the very first television interview given by a Governor of the Bank of England, Cameron Cobbold explained national debt to Robin Day on “Tell the People”, the highlight of ITN’s Sunday evening schedule fifty years ago. Here is the exchange:
Cobbold: The National Debt represents the sums of money which the Government have over the years borrowed from the public, mainly in this country and, to some extent, abroad. That is really the amount of expenditure which they have failed over the period to cover by revenue.
Day: Have we paid for World War II?
Cobbold: No. Day: Have we paid for World War I?
Cobbold: No. Day: Have we paid for the Battle of Waterloo?
Cobbold: I don’t think you can exactly say that.
… I hope banks will come to appreciate, just as the New Zealanders at Headingley in 1958, the Yorkshire virtues of patience and sound defence when batting on a sticky wicket. I have said many times that successful monetary policy would appear rather boring. So let me extend an invitation to the banking industry to join me in promoting the idea that a little more boredom would be no bad thing. The long march back to boredom and stability starts tonight in Leeds.
Afterword
If you are new to this site, please glance at the archives below. You may find answers to your questions in these.
Please share your comments by posting below. Please make them brief (250 words max), civil, and relevant to this post. Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).
For more information from the FM site
To read other articles about these things, see the FM reference page on the right side menu bar. Of esp interest these days:
- about America – how can we reform it?
- about the Financial crisis – what’s happening? how will this end?.
- about The End of the Post-WWII Geopolitical Regime.
- links to Damage Reports from home and abroad
Situation Reports about the crisis
- The US economy at Defcon 2, 11 March 2008 — Where are we in the downcycle? What might the world look like when it ends?
- The most important story in this week’s newspapers, 22 May 2008 — How solvent is the US government?
- Another warning from our leaders, which we will ignore, 4 June 2008 — An extraordinarily clear warning from a senior officer of the Federal Reserve.
- High priority report: a geopolitical sitrep on the financial crisis, 15 September 2008
- A new sitrep, as we move into phase 3 of the financial crisis, 19 September 2008
- A sitrep on the financial crisis: why has the treatment been so slow, so small?, 8 October 2008
The government of Washington and Lincoln is clearly recorded. Produce such men, and government will spring up in their style. Forget such men, and their style of government will shrivel. If men proceed in a sane manner, government will spring up quickly.
Government is rooted in men, it is based on man. And one reaches men through oneself.
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Fabius Maximus replies: Perhaps the origin of such leaders lies in the soil from which they grew. Perhaps it is the common people of the founding generation that was extraordinary, not just their leaders. If we become worthy of such men, we might find them in our midst.
In response to messages such as this, the only constructive response that I, as an individual, can think of, would be to go bohemian. Art for art’s sake.
That way, when freezing for lack of fuel, I could grandly throw my unpublished play into the oven to heat things up and, when my girlfriend dies of tuberculosis, I could sing about it.
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Fabuis Maximus replies: I suggest reading first person accounts about the Weimer Inflation or the Great Depression. Neither produced large-scale suffering on the scale you describe (at least, not in the developed nations). Great nations have enormous ability to withstand economic trauma, beyond anything most people of today (raised in the long summer) can imagine.
The last quarter of the 19th century was one of frequent depressions. Yet they continued on building America, without going “bohemian.”
I suggest reading first person accounts about the Weimer Inflation or the Great Depression.
How about Studs Terkel’s Hard Times: An Oral History of the Great Depression. I read it for Eric Goldman’s class at Princeton.
Anyhow, I was making a reference to Puccini’s La Boheme, that premiered in 1896, during the depression of that decade.
Act 1:
In the four bohemians’ garret
Marcello is painting while Rodolfo gazes out of the window. In order to keep warm, they burn the manuscript of Rodolfo’s drama….
Act 4
Back in the garret
Marcello and Rodolfo are seemingly at work, though they are primarily bemoaning the loss of their respective loves. (Duet: “O Mimì, tu più non torni” – O Mimì, will you not return?). Schaunard and Colline arrive with a very frugal dinner and all parody eating a plentiful banquet, dance together, and sing. Musetta arrives with news: Mimi, who took up with a wealthy viscount after leaving Rodolfo in the spring, has left her patron. Musetta has found her wandering the streets, severely weakened by her illness, and has brought her back to the garret. Mimi, haggard and pale, is assisted into a chair. Musetta and Marcello leave to sell Musetta’s earrings in order to buy medicine, and Colline leaves to pawn his overcoat (Colline: “Vecchia zimarra – Old coat”). Schaunard, urged by Colline, quietly departs to give Mimi and Rodolfo time together…. As Musetta prays, Mimi dies. Schaunard discovers Mimi lifeless. Rodolfo cries out Mimì’s name in anguish, and weeps helplessly.
Say what you will against this scenario, it lacks the need for capitalization which is the root cause of the problems you so often describe.
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Fabius Maximus replies: Great! Thanks for posting this, which gives a different perspective.
I would say no politician of either party is as much a “common man” as Lincoln was, as is Sarah Palin. But here on Fabius Maximus, she is mocked far more than the no-executive experience Obama (yes, hardball Chicago politics); or the “who knows what he’ll say Biden”.
There’s also the issue of promises and forecasts about an impossible to know for sure future, vs. statements today about the past.
Voters refuse to vote for politicians who are honestly uncertain about the future — consistently preferring a ‘guarantee’, sort of like what Palin just gave. Promising to win can’t be a ‘lie’ today, because it’s not false yet.
The speech above by Mervyn King was great for clearly stating that the outlook is uncertain. But if was running for office, I doubt that he would against a more ‘certain’ opponent with a different vision.
In fact, in America, liberals and conservatives have far different visions of what is good — we are not united. (So was Obama lying when he said we were?) Not united on abortion, not united on victory in Iraq or in the WOT, not united on the best path to follow to reduce the economic pain of the recession we’re finally in. When the voters are so non-united, it seems pretty unrealistic to expect some magical Harry Potter leader to unite us all (and in the books, Harry notably failed at uniting wizards).
It might well be that rich folks are seldom as united as poor folks, since their interests are so far away from mere survival in an expanding sphere of possibilities.
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Fabius Maximus replies: This is one of the more confused comments I’ve seen on this post. Lots of assertions (most of which I disagree with), few facts.
* On what basis is Palin more of a “common man” than Truman, Ike, Johnson or Nixon?
* How do you know honest statements like King’s would lose elections in other nations? In the US?
* What is the basis for saying American’s are not united in the important things (not being a unitary entity, some alien hive-mind, of course we disagree about many things)? As anyone with the most basic knowledge of global politics knows, the two parties in America are far more homogenious in doctrine than the majority spectrum in almost any other major nation.
My impression with all this is that if we have systemic collapse then it will be far more serious than anything that has happened in the West for some time. Most of us live in dense, technology-dependent cities. Breakdowns in food supplies, employment, electricity and so forth can throw these large populations into live-or-death turmoil. A hundred years ago cities were dense but not dependent on power grids, ATM cards and so forth, and far less dense by many degrees of magnitude. A breakdown now is far worse than one a hundred years ago.
Strangely enough, we find we have an extremely vulnerable situation caused by dependence on that which made us seem so strong. Henry Liu of ATOL rightly proclaimed the US a ‘failed state’ several years ago and has frequently explained in exhaustive detail why what is happening now was almost sure to happen at some point. A shift from a so-called ‘first-world’ power to second or third could happen quite rapidly. Ask an Iraqi how quickly a country can go from being highly successful and wealthy to one of the most dangerous, poverty-stricken nations in the world.
But the point here is that there is far more than just an economy at stake. Our current largely-urban setup is in jeopardy. No wonder they just deployed the first combat regiment on active duty within US domestic territory.
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Fabius Maximus replies: Post-WWII shows that these systems do not break down even during severe depressions. Looking at both ends of that period, consider the 1930’s (a long depression), or the 1997-98 collapse (very sharp) in SE Asia.
Tom Grey: I admire your pluckiness and real insights, even though I come from the opposite end of the political spectrum.
Who knows what’s coming, and how bad it will be? Tom Hartmann (Last Hours of Ancient Sunlight) and James Howard Kunstler (The Long Emergency) provide glimpses of a future in which government authority collapses, bands of immigrants and homeless roam the countryside in search of food and water, and, in Hartmann’s words, the best we can expect is a “new tribalism.”
If this sounds extreme, we will certainly have to live through periods of violence and reaction, before we can resume the citizens’ democracy that FM believes is still possible.
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Fabius Maximus replies: I have not read Hartmann, but what I have read of Kunstler is IMO best clasified as fantasy/scifi, of the horror genre. Along with Frankenstein, 1984, and Brave New World. Expressions of our fears, linear and unrealistic extrapolations of trends in our society.
A nation populated by man-boys, basically adults with the minds and mindsets of children deserves to be managed by the few remaining adults in the room. Learning there is no Santa Claus is an important part of growing up. I look at my community, the people I discourse with daily, and I confess, we have become a nation of children. Parents lie to children every day.
“A boy becomes a man when a man is needed”
John Steinbeck
FM: Let’s look forward to the day when our leaders speak so forthrightly to us.
Sarah Palin is part of looking forward — why can’t you think of any 1996-2008 Pres. or VP candidates from Dems or Reps to compare with Palin for being more like a “common man” at the time of their first running for such office?
Being linked with common folk is not necessarily the best type of leadership, nor do I claim Palin as the best leader. But the desire to mock her, and responsible pro-life non-elite Christians, is a reason that ‘our leaders’ today seem so much less than previously.
FM: Lots of assertions (most of which I disagree with), few facts.
I’d be happy to provide facts and references to any assertions you disagree with:
1) Palin is mocked more than Obama (both here and in MSM)
2) Palin is mocked more than Biden
3) Promises and assertions about an uncertain future are, when they fail to come true, different than lies (statements already untrue at the time made, and known to be untrue by the one making the statement).
4) Voters more often support a candidate promising some ‘certainty’ than one who, more honestly, promises more ‘uncertaintly’.
[I believe the above is true — if you disagree, do you have any races in the last 12 years that show otherwise? Do you even disagree?]
FM:What is the basis for saying American’s are not united in the important things?
5) Americans are NOT united on legal abortion. (you believe they are???)
6) Americans have NOT been united on winning in Iraq. (you believe they have been???)
7) Americans are united on increasing gov’t power over the financial system (failure of pro-market forces), but (7b)are NOT united on how much and in what way to increase gov’t power. [kinda the main point of this site, speculations on this issue.]
8) Perhaps you believe 5, 6, or 7b are not important?
FM:the two parties in America are far more homogenious in doctrine than the majority spectrum in almost any other major nation.
The ‘winner take all’ geography based districs, rather than the proportional representation in most other major democracies, pushes this homogeniety in policy outcome. After being a Libertarian and supporting prop. rep., but now in Slovakia living in such a country and seeing the factionalism allowing extremism, I’m sure most Americans don’t realize how lucky they are to avoid ‘coalition governments’.
One of the reasons I am upset at the Left’s demonization of Bush, and now more open demonization of any Republican, is to break this centrism.
I confess to believing that Obama, despite his Leftist past and rhetoric and even many desires he might have, would end up if he wins to be far more like Bush than his fanclub now believes. But Bush, too, was far more like Gore or Kerry would have been, then the Reps were hoping for; only his big Dem-like spending was never acknowledged by Dems as getting what they said they wanted.
The biggest Rep/Dem differences in President?
a) Whether or not to attack Iraq, then stay in Iraq till victory.
(b) Nominating pro-restraint or pro-activist Supreme Court Justices.
(c) the economy depends mostly on Congress — and both parties want too much spending, tho Reps say they want lower taxation.
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Fabius Maximus replies: These things are too off-focus for me to find citations. But FWIW…
I don’t know what you mean by mock. If you mean look at what she says and laugh, OK — but the only alternative is to cry, that a major party could nominate someone so unqualified. It’s not a subject I will discuss further, as has become consensus wisdom. Increasingly so in both parties. I discuss this in greater detail here, with links.
As for America’s being united in important things, what is your standard of comparison? Heaven? United does not mean everybody sings a chorus with one voice.
I believe your analysis of the both abortion and the Iraq war is incorrect.
* There is broad support for a moderate abortion policy, although both parties are dominated by more extreme voices.
* There was broad support for the invasion, to find Iraq’s WMD’s. Now there is broad support for ending the war, as the original reasons were found to be invalid.
The shock of the financial crisis is too recent for American’s views to have sorted out. But I believe that this will happen, as it usually has in the past, and we will move forward toward a better future.
In Robert Skidelsky’s introduction to “John Maynard Keynes: The Economist as Savior 1920 to 1937” he states “The simple message of Keynes’s economics seems to be that when society’s self-governing mechanism breaks down, it needs more government from the center. This is the managerial response to the breakdown in values…the manager manipulates social relations in the interests of stability.”
Of course this response does not take into consideration that government bureaucrats and central bankers themselves may also identify with a broken culture that supports the proposition that the continual acquisiton of ever more money and ever more power is perfectly worthwhile as our societies primary goal.
In a a more narrow economic sense is it possible for the U.S. economy to become once again interested in making things rather than simply making money(i.e. as in the creation and manufacture of debt instruments) or is that proposition also dependent on some seeminly impossible regeneration of moral values?