More from David Olive - Everybody's Business

After six months of blogging on the Great Recession, David Olive launches Everybody's Business, with commentary on business, politics and culture.

Check out David's new blog here.

Sometimes banks don't even get the ATMs right...

Out-of-reach ATM at the Melli Bank, Iran.

Courtesy Oddee.com.
 

Volcker slaps down the bankers. Well done.

Paul Volcker, arguably the best central banker in U.S. history, was interviewed in April by Karen Christensen of Rotman Magazine, the public-issues and alumni journal of U of T's Rotman School of Management. The interview with the former Federal Reserve Board chairman appears in the current, Fall 2009, edition of the magazine.

Volcker was one of the earliest economic advisers to sign up with the Obama campaign, and remains on the U.S. president's economic team. Volcker's wary regard for bankers and the need for keeping a sharper eye on them stand up well in the current debate in Congress on much-needed regulatory reforms:

"Major banks should be more tightly controlled and less able to make the sort of risky bets that led to the current debacle. There should also be more oversight of some kind for hedge funds, equity funds and the remaining investment banks. People argue that this will stifle innovation. But 'innovations' like asset-backed securities and credit-default swaps have brought few benefits. Most would agree that this 'bright new financial system' has failed the test of the marketplace. Let's face it, the most important innovation in banking for most people in the last 20 years is the automatic teller machine."

Bagehot said it best: "If bankers are busy, there is something wrong."

Rotman Magazine is subscription only.

Addendum (Oct. 21)

* Felix Salmon (Reuters): The importance of Volcker.

The first thing we do, let's kill all the consultants.

Not much to be learned from Fortune's current cover story, "Can GM Survive?", like for instance details on the "New GM's" turnaround strategy. But I enjoyed this GM anecdote from Fortune's veteran auto reporter, Alex Taylor III:

"If you want to understand how the old General Motors stumbled for 30 years until it collapsed into bankruptcy, consider the story of GoFast.

"GoFast was a program started in 2000 by Rick Wagoner, then the company's president (and later CEO), to untangle bureaucracy. The idea was simple: When negotiations over an issue reached an impasse, all the interested parties would be put together in one room until they agreed on a decision. Human resources was assigned to spread GoFast through the company. It trained GoFast coaches, arranged thousands of GoFast workshops, staged GoFast feedback sessions, and distributed GoFast coffee mugs. At one point, GM claimed savings of more than $500 million from GoFast.

"But the program took on a life of its own. GoFast workshops were held to eliminate other meetings; eventually the number of workshops reached more than 7,000. In other words, GM held more than 7,000 meetings to discuss how it could hold fewer meetings. Managers might see their performance evaluations downgraded because they weren't holding enough GoFast meetings. "The whole premise of GoFast became going slow," complained one executive.

"Don't expect to see many more GoFasts under Fritz Henderson, the man who succeeded Wagoner as CEO last March. [Wagoner, of course, was sacked by Barack Obama.] It 'wasn't helpful for decision-making,' he says." 

From Fortune's Oct. 12 edition, not yet online. 

[ed.- With apologies to the Bard, Henry VI, Part II.]

Boring democracy is best.

After dubious elections in Iran, Afghanistan and Kenya in the past year, and a stolen 2000 election in the U.S. whose impact will long be felt, this report from the New Yorker's George Packer on a placid German election in which Angela Merkel was re-elected chancellor is refreshing:

"Germany held an election yesterday, though you might not have noticed if you don’t live there. I barely noticed, and I’ve been in Berlin for the past three weeks. True, there are posters of candidates’ faces on streetlamps around the city—charmingly un-slick posters like those of a race for county commissioner in central Ohio. The photo of Angela Merkel, with her pudgy smile, makes the German chancellor look like a grade-school principal. But even compensating for my American-level expectation of political drama, there has been a distinct lack of excitement in the air. After a candidates’ debate, the headline in a German tabloid wisecracked, 'Yes We Gahn' (to get the joke, you’d need to know that gahn means yawn, which had to be explained to me)."

Blogger Andrew Sullivan adds: Of course, boring politics in Germany is always good news. In successful countries, politics is always boring. It's life that's interesting.

Writing original headlines for Fortune - world's toughest job.

 

Afghanistan's drug czar - world's toughest job.

Afghanistan's drug czar is waging a new campaign against heroin traffickers who fund the Taliban, The fate of the war may hang on it.

 

Fortune, September 30 edition.

 

The world's toughest job.

A talk with Indra Nooyi, the No. 1 Most Powerful Woman.

 

Fortune, October 12 edition.

 

 

[ed.-Nooyi is CEO of PepsiCo. Inc.] 

TV host seeks handouts.

Quick, somebody, anybody, give Charlie Rose some money:

"Walter Cronkite never had to ask for money from an underwriter. Neither he nor his colleagues at the commercial networks would even be allowed near sponsors. That separation between church and state doesn't apply in public television. Rose has to scramble to meet his [$3.5-million U.S.] budget. So do his PBS colleagues Jim Lehrer at the primetime 'NewsHour' and Tavis Smiley on his talk show that follows Rose's...With a roster of well-heeled underwriters that include News Corp. and investment banker Herb Allen's firm, you would think 'Charlie Rose' would get most of its donations effortlessly. But it doesn't work that way. 'People assume we're on automatic pilot. We're not,' Rose says. 'I've raised all the money myself.'"

From Fortune's Oct. 12 edition, not yet online:"Why Business Loves Charlie Rose," By David Kaplan.

QuickNews, Tuesday, Oct. 13.

Debunking Canadian health care myths.

An oldie but a goodie, U.S. clinical psychologist Rhonda Hackett's debunking of Canadian health care myths in the Denver Post from July 6:

"Myth: Taxes in Canada are extremely high, mostly because of national health care.

In actuality, taxes are nearly equal on both sides of the border. Overall, Canada's taxes are slightly higher than those in the U.S. However, Canadians are afforded many benefits for their tax dollars, even beyond health care (e.g., tax credits, family allowance, cheaper higher education), so the end result is a wash. At the end of the day, the average after-tax income of Canadian workers is equal to about 82 percent of their gross pay. In the U.S., that average is 81.9 percent.

"Myth: Canada's health care system is a cumbersome bureaucracy.

The U.S. has the most bureaucratic health care system in the world. More than 31 percent of every dollar spent on health care in the U.S. goes to paperwork, overhead, CEO salaries, profits, etc. The provincial single-payer system in Canada operates with just a 1 percent overhead. Think about it. It is not necessary to spend a huge amount of money to decide who gets care and who doesn't when everybody is covered...

"Myth: There are long waits for care, which compromise access to care.There are no waits for urgent or primary care in Canada. There are reasonable waits for most specialists' care, and much longer waits for elective surgery. Yes, there are those instances where a patient can wait up to a month for radiation therapy for breast cancer or prostate cancer, for example. However, the wait has nothing to do with money per se, but everything to do with the lack of radiation therapists. Despite such waits, however, it is noteworthy that Canada boasts lower incident and mortality rates than the U.S. for all cancers combined, according to the U.S. Cancer Statistics Working Group and the Canadian Cancer Society. Moreover, fewer Canadians (11.3 percent) than Americans (14.4 percent) admit unmet health care needs.

"Myth: Canadians are paying out of pocket to come to the U.S. for medical care.Most patients who come from Canada to the U.S. for health care are those whose costs are covered by the Canadian governments. If a Canadian goes outside of the country to get services that are deemed medically necessary, not experimental, and are not available at home for whatever reason (e.g., shortage or absence of high tech medical equipment; a longer wait for service than is medically prudent; or lack of physician expertise), the provincial government where you live fully funds your care. Those patients who do come to the U.S. for care and pay out of pocket are those who perceive their care to be more urgent than it likely is."...

N.A. manufacturing just looks dead.

The CV is that N.A. manufacturing, long ailing, was dealt a death blow by the recession. It ain't coming back, outsourced for good to lower-wage precincts.

Paul Krugman thinks the obits are premature:

"The recovered [U.S.] economy will surely involve more manufacturing - in fact, before the world economy collapsed we were seeing a boom in manufactured exports, with shortages of machinists and other skilled workers. It will probably include a lot of green employment in the broad sense - not just people building and running wind farms, but people busily improving insulation and installing white roofs...

"Actually, there are a lot of advantages to producing in advanced countries, even at much higher wages - that's why they're advanced countries. U.S. manufacturing was having a clear revival in 2007, before the crisis hit. So if we get a recovery going, outsourcing will seem a lot less important as an issue..."

In the U.S., as in Canada, a traditionally strong currency, not outsourcing or tax policy, is the chief culprit in the manufacturing downturn: 

"The [U.S.] dollar's role in the world actually looks stronger now than it did before the crisis. Why? Because our only serious rival, the euro, looks weaker. The euro zone has been fragmented in this crisis, especially the bond market, with debt of weaker European countries seriously discounted. This pushes the euro's ability to rival the dollar back, at least for awhile."

As long as Beijing's appetite for greenbacks remains unsated, and the greenback is the reserve currency of emerging economies and the global black market, the U.S. dollar will retain its strength and U.S. manufacturers will be disadvantaged:  

"We've got weak manufacturing because we attract so many capital inflows, which keep the dollar at a high level in normal times. And that era may now be over."

That era may near an end, of course, due to staggering U.S. deficits as far as the eye can see. Unless Obama can eventually restore America to fiscal surplus, as Clinton did. At this point, the prospects for that outcome would have to be described as bleak. But I wouldn't rule it out. 

The point here is that a sustained weakening of the greenback - if, say, Europe and Asia recovered much faster than the U.S. - would be a boost to U.S. manufacturing.

And to that of Canada. Hence Mark Carney's preoccupation not with jobless claims and anemic GDP growth but with the rise of the loonie. The quandary is that the loonie's strength derives largely from the greenback's current doldrums. America will benefit from a sustained lower-valued currency, but that would likely keep the loonie aloft, a drag on our manufacturing sector.  

Maybe we each need to default on an itty bitty series of government bonds, just to knock our currencies down 10% or so for a couple of years. Oops, I see my sponsor for membership in the Canadian Economists Association has just stormed out of the room...

 

Related

David Crane (Toronto Star): Canada can't thrive without a healthy manufacturing sector.