By Michael D. Terry

Lest you missed it in an interview a couple of weeks ago on CBS’ 60 Minutes, President Barack Obama made a subtle, but very telling, remark about the nation’s unemployment and business hiring, and his personal economic assessment of it. The apparently innocent remark might be regarded as either naïve, scary or droll, but it has profound implications: “People who have jobs see their incomes go up. Businesses make big profits. But they’ve learned to do more with less. And so they don’t hire. And as a consequence, we keep on seeing growth that is just too slow to bring back the 8 million jobs that were lost.”

Historically high and perhaps structurally-embedded unemployment is a frightening thing, and no one really savors a “new normal”, in the President’s words, of a recovered economy with refractory unemployment. (Indeed, it’s arguable whether that is even possible and whether the continued “uncertainty” would defy a strong recovery.) Obama’s simple remark was less threatening from the standpoint of its economic consequences, and more of a concern from the perspective that economists, politicians and businesspeople might raise new concerns about our President’s fundamental understanding of “how things work”, in his efforts to bring our country back to economic greatness and leadership. In this sense, Obama’s insight was more revealing, than it was frightening. Or maybe both.

So, to Obama, this stubborn unemployment thing is terrible because the longer these big corporations go without hiring people and running at such low worker levels, they are going to learn how to do the same things - and do even more - with fewer people. So when the economy does come back, according to the President, they are going to be able to rebound with a smaller workforce.

That is, Obama is desperately worried that under the bludgeoning of the economy past two or three years, U.S. corporations will, in essence, re-invent themselves, re-engineer their processes, structurally reduce costs, strategically re-think services and returns, and narrowly reconsider the value of every activity which they engage. That’s right . . . this economy is so bad that corporations are going to have to start doing what they should have been doing for decades anyway.

Obama apparently fears those strange phenomena called “productivity” and “efficiency.” Heaven forbid that at the whip of a new trainer, U.S. corporations learn to perform a new dance: producing the same or greater output with fewer resources.

If my company produces 100 widgets a day with 100 people and then my costs increase (materials, wages, healthcare, insurance, transportation, taxes), I can - and economists argue will - try to make a 100 widgets a day with 85 people; move my business to a lower cost country; reduce wages and benefits; or close the business. Adam Smith’s “invisible hand” does not discriminate, nor does it ever take time off. The forces of competition, subtly forcing change and improvement, are never far from a company’s doorstep.

Obama’s concern is in fact the very thing that corporations should be doing: implementing activities and making changes they should be attempting even in absence of a recession, but must be doing in the midst of one. Our recent economic woes force a depth and speed of corporate change that we’d not otherwise see, of course. One metaphor for a weakening economy is that falling water levels expose the most dangerous rocks as they become closer to the surface. A deep recession has the same effect on businesses. Rocks that could once be glided over are now life-threatening and consequently the course of the corporation changes. Like individuals face with dire circumstances, behavioral changes ensue or businesses – and people – hit the proverbial rocks.

Essentially, from corner stores to huge corporations, people – families and businesses alike – learn to do more with less. And despite the President’s claim that during good times, “businesses make big profits”, the better informed among us know that during good times, small businesses make money and during bad times corner stores, entrepreneurs, and small employers suffer. The argument should be not about the size of a business or business in general, but about long-term efficiency and productivity.

One would hardly wish a recession on Corporate America just to achieve fundamental behavioral change: the re-definition of jobs and responsibilities, new processes, elimination of excess staff and overhead, renewed focus on executing those things that touch the customer or improve the product or service . . . not just lower costs, but new ways of doing business. Some in Washington don’t understand that companies are – or should be - organic entities, responsive to external changes to their environments, malleable in the face of change, adapting to new landscapes. That is the very nature of what spawned General Motors, IBM, Kodak, Microsoft and Google in the first place. And, indeed, the collective histories of those companies might be seen as a proxy for why corporations must continually change and evolve.

Despite the President’s concerns, corporations – large and small – are going to learn how to do more with less. President Obama apparently does not understand that change, improvement and adaptation are part of a company’s ongoing business . . . everyday, day after day. A recession accelerates the process of productivity improvement; recessions are “externalities”, forcing fast and profound changes in what previously have been considered acceptable, even sound, business practices.

President Obama’s view is a fundamentally pessimistic one. Don’t buy into it. Much good will come from this recession and our nation’s current economic plight. And when the economy is righted, our small and large companies will have had to do more with less, will have learned adaptation - or had it forced upon them – and will be leaner and stronger and better able to roar back to world leadership through doing ever more with ever less.

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Michael Terry is the author of the Washington, D.C.-based murder mystery So Shine Before Men, about the first African-American candidate for president and written long before Barack Obama came on the national scene. He also authored the non-fiction humor book A Bad Duck Hunt and in January 2010 published a book of poetry, Writing In Form.

This entry was posted 1 year, 1 month ago on Sunday, January 2nd, 2011 at 6:50 pm and is filed under Uncategorized.

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