A COUNTRY is Not a COMPANY: CEOs Should Sit Down and Shut Up

Jonathan TasiniI am continuously amazed by the reverence accorded company bosses. Put aside the incompetent ones, who get huge severance packages when they leave, or those who have looted their companies of tens of millions of dollars in pay and benefits, even when the companies lose money or collapse. I’m talking about even the ones who oversee profitable companies.

Why would anyone think that a CEO knows how to run a country? A country is not a company, as Paul Krugman wrote many years ago.

I’m struck by this point today because of three different public pleas by CEOs who essentially say, “the country is screwed up, I know what’s best so listen to me…you fools”. I’ll come back to the pleas in a moment. First, to Krugman.     Back in 1996, Krugman wrote a trenchant article entitled, “A Country Is Not A Company” (which was published as a short book). The beginning of the book is on the mark:

What people learn from running a business won’t help them formulate economic policy. A country is not a big corporation. The habits of mind that make a great business leader are not, in general, those that make a great economic analyst; an executive who has made $1 billion is rarely the right person to turn to for advice about a $6 trillion economy.

Krugman’s book talks about two areas that CEOs claim expertise but demonstrate they nothing about: Exports and Jobs, and Investment and the Trade Balance. I don’t think you need to know the specifics of his argument on those specific areas (but they are pretty interesting) to be able to move to his general observation:

Yet even if a business leader may not be very good at formulating general theories or at explaining what he or she does, there are still those who believe that the businessperson’s ability to spot opportunities and solve problems in his or her own business can be applied to the national economy. After all, what the president of the United States needs from his economic advisers is not learned tracts but sound advice about what to do next. Why isn’t someone who has shown consistently good judgment in running a business likely to give the president good advice about running the country? Because, in short, a country is not a large company.

Many people have trouble grasping the difference in complexity between even the largest business and a national economy. The U.S. economy employs 120 million people, about 200 times as many as General Motors, the largest employer in the United States. Yet even this 200-to-1 ratio vastly understates the difference in complexity between the largest business organization and the national economy. A mathematician will tell us that the number of potential interactions among a large group of people is proportional to the square of their number. Without getting too mystical, it is likely that the U.S. economy is in some sense not hundreds but tens of thousands of times more complex than the biggest corporation.

Moreover, there is a sense in which even very large corporations are not all that diverse. Most corporations are built around a core competence: a particular technology or an approach to a particular type of market. As a result, even a huge corporation that seems to be in many different businesses tends to be unified by a central theme. [emphasis added]

The point is that actually CEOs, and business people generally, are quite narrow-minded. I don’t, in this context, mean that pejoratively. It is simply that they think in terms of their industry, their product–and they have almost no capability to think in broader terms that we need as a country.

Finally, Krugman says:

The next time you hear business-people propounding their views about the economy, ask yourself, Have they taken the time to study this subject? Have they read what the experts write? If not, never mind how successful they have been in business. Ignore them, because they probably have no idea what they are talking about.[emphasis added]

This argument is elegant and simple–and does not even take into account the most obvious reason not to put economic policy in the hands of business executives: today’s CEOs generally are not interested in the plight of their workers, the middle-class or the poor.

Which brings me to a whole roster of business people who want to give us advice on how to run the country: Steve Schwartzman, Howard Schultz and today’s Heinz-like concoction of 57 varieties of business people et al who are squawking about the phony debt and deficit crisis. Let me take them in turn.

Leading off is the almost comical, if not pathologically perverse, CEO of Blackstone, Steve Schwartzman. Hand-wringing today in the Financial Times, Schwarztman calls for “shared sacrifice” and writes in a piece entitled–hold your laughter, please–“An olive branch to Obama: I will share the pain”:

This problem began when the administration sought to attribute blame for the financial and economic crisis and alienated large segments of the business and banking community. They cast them as villains regardless of their culpability. Predictably, business reacted with fear and limited economic expansion, hiring and new lending. A second response to this was the rise of the Tea Party, which in turn attacked the administration and the Democrats. Unless we end targeted class warfare in the US, we cannot solve our economic problems or stop a long period of potential decline.

So, let me get this “economic logic” straight: the president mildly castigates an industry that was clearly and demonstrably responsible for the financial crisis that obliterated trillions of dollars in wealth and because the president hurt the feelings of the people running this industry and others stopped investing? You mean, as opposed to the economy freezing up because of plummeting demand?

Forget for a moment the whining about “class warfare” (which, in Schwartzman’s mind, is the criticism of the super-wealthy who have robbed the country). How can anyone take seriously a man who connects criticism to the cause of the massive economic crisis? That’s just loony.

Now, in fairness, I understand where Schwartzman is coming from with his bruised feelings because, as I wrote about in The Audacity of Greed”, he’s truly a party man:

Here’s a question to ponder: does Stephen Schwarzman still stare at the giant portrait of himself that hangs in his living room and thinkabout what a financial genius he is—even though his company, the private equity firm Blackstone, lost $232 million in the first quarter of 2009? I’m going to bet that a man who has the desperate need to constantly look at a larger than life representation of himself is not capable of admitting that the vision he has of himself as a financial wunderkind is, based on real world results, a fantasy.

…On top of earning a lot of money, Schwarzman also seems to have a compulsive need to flaunt his wealth, as he has engaged in some ostentatious spending sprees over the years. His sixtieth birthday party in 2007 is already the stuff of society legend in over-the-top self-indulgence. Held in New York City’s cavernous Park Armory, whose entrance was redone to resemble the birthday boy’s apartment, the event included performances by Patti LaBelle, who sang a song about Schwarzman, and Rod Stewart. The emcee was comedian Martin Short. The tab for the party: $3 million. And, to top things off, the massive portrait of Schwarzman was temporarily borrowed from his living room and hung in the Armory for all to gaze upon.

The birthday party was just the tip of the iceberg when it came to Schwarzman’s spending orgy. As detailed in The New Yorker, “In May, 2000, Schwarzman paid $37 million—reportedly a record sum at the time for a Manhattan co-op—for a thirty-five-room triplex on Park Avenue that was once owned by John D. Rockefeller, Jr. In 2003, he paid $20.5 million for Four Winds, the former E. F. Hutton estate in Florida, which occupies a choice spit of land between the ocean and the Intracoastal waterway.…In 2006, he paid $34 million for a Federal-style house, on eight acres on Mecox Bay, in the Hamptons, that was previously owned by the Vanderbilt heir Carter Burden.” In addition to those homes, Schwarzman also owns a coastal estate in Saint-Tropez and a beachfront property in Jamaica. The total value of the five properties: $125 million. “I love houses,” Schwarzman told The New Yorker. “I’m not sure why.”

Based on the grandiose and very public expressions of his wealth, you would at least think that the actual financial performance of the Blackstone Group under Schwarzman’s leadership would be strong. Guess again. In fact, many of the investments that the company has made under Schwarzman’s watch have turned sour.

So, why would anyone consider this CEO fit to be listened to?

Exhibit #2: Howard Schultz, CEO of Starbucks. You probably have caught his letters to America”.

We must restore hope in the American Dream. We must celebrate all that America stands for around the world. And while our Founding Fathers recognized the constructive value of political debate, we must send the message to today’s elected officials in a civil, respectful voice they hear and understand, that the time to put citizenship ahead of partisanship is now.

Ah, yes, the CEO all worried about “partisanship gridlock”…we’ve heard that song before. Putting aside why anyone would listen to a guy who knows one thing (coffee), why would a country want to listen to someone who wants to restore the “American Dream”, but conveniently forgets how aggressively he has resisted and fought any attempt to unionize Starbucks?

He’s another charlatan.

And, finally, riding to the rescue is the Ketchup brigade, who want us–you and me, dummy–to really think “big” when it comes to the phony debt and deficit “crisis”:

A group of at least 57 prominent business executives and former government officials have signed a petition in support of a greater deficit reduction, which they are to release at a news conference on Monday. Among them are former treasury secretaries, budget directors and economic advisers to eight presidents from Richard M. Nixon to Mr. Obama; former Congressional leaders; and executives of top companies.

Their letter reflects a broad sense of urgency in both parties, and among economists and businesses, that the nation must put in place long-range measures to shrink future deficits.At current spending levels, those deficits are expected to balloon over the next decade as the population ages and as health care costs rise.

The letter does not call for short-term job-creation measures like the tax cuts and infrastructure spending Mr. Obama proposed last week, which would add to deficits initially.[emphasis added]

Ahem. The group is led by David Cote, the CEO of Honeywell, whose main distinction, as far as I can tell is, that he was paid $15.2 million while his company got a $471 million refund and maintains at least five tax havens off-shore

And this is a guy who we want to listen to about ANY policy relating to economic health of the country? Who helps a corporation not pay taxes AND stashed money abroad?

To sum up: it is just foolish to believe that CEOs have any clue how to run a country. The only reason, in real life, that they have any megaphone is simply because they can buy it–either full-page ads, or think-tank loyalty, or literally our politicians.

But, we shouldn’t give them the time of day.

This blog originally appeared on Working Life on September 12, 2011. Reprinted with permission.

About the author: Jonathan Tasini is the executive director of Labor Research Association. Tasini ran for the Democratic nomination for the U.S. Senate in New York. For the past 25 years, Jonathan has been a union leader and organizer, a social activist, and a commentator and writer on work, labor and the economy. From 1990 to April 2003, he served as president of the National Writers Union (United Auto Workers Local 1981).He was the lead plaintiff in Tasini vs. The New York Times, the landmark electronic rights case that took on the corporate media’s assault on the rights of thousands of freelance authors.

Tracking image for JustAnswer widget
Tracking image for JustAnswer widget
Scroll to Top

Madeline Messa

Madeline Messa is a 3L at Syracuse University College of Law. She graduated from Penn State with a degree in journalism. With her legal research and writing for Workplace Fairness, she strives to equip people with the information they need to be their own best advocate.