Can Politics Be Fixed?

WITH THE POLITICAL SEASON upon us, the temptation in coming months will be to argue that one political party or [...]

July 1 2004 by Chief Executive


WITH THE POLITICAL SEASON upon us, the temptation in coming months will be to argue that one political party or one candidate for president has the right answers for CEOs and the business world. Before the madness begins, it might be appropriate to step back and ask, “How should CEOs engage with the political world?”

The fact of the matter is that most CEOs have regarded Washington as a place to argue for special favors or to block unfavorable regulation. The political sector has been degraded and corrupted. It has not attracted the best and the brightest. It has not benefited from the technological and managerial revolutions that have transformed the private sector. The same can be said for education, which is essentially controlled by government. If government and education were seen as corporate enterprises, it would be obvious that they are poorly run.

This reality was acceptable to business leaders for many years. But increasingly, American CEOs are realizing that the whole cost structure of doing business in this market is getting out of control. The educational sector also isn’t producing the skill sets that companies need, or at least not enough of them.

So it’s easy to complain about the avalanche of lawsuits and exploding health care costs, overregulation and high tax rates. But the root cause is that the political system is out of touch with business and economic realities.

It seems what is missing is genuine leadership. Not just leadership that benefits one particular constituency or constituencies, whether it is the oil industry or the trial lawyers. Right now, Washington is the scene of a feeding frenzy of interest groups fighting for the spoils. Instead, CEOs need political leaders who understand business as the foundation of wealth and understand the principles of free trade and competition.

So as you contemplate the election, it’s inevitable that you have to allocate dollars to the two parties. But over the longer term, the goal should be to engage with political leaders on the basis of ideas and principles, not petty favor. CEOs should work to elect people who have real leadership abilities. CEOs should have more personal relationships with political leaders and give them more exposure into how business works. And CEOs should use their own bully pulpits to begin correcting a system that is putting America’s economic success story at risk.

Let Airlines Fail

CEOs OF MAJOR AIRLINES have gone hat in hand to Congress, asking for billions of dollars of taxpayers’ money. They’re blaming high oil prices and security costs for their financial plights, but their problems are far more deeply rooted. (See “Clipped Wings,” January/February 2004.)

We say it’s time to face facts: The major airlines are mismanaged and have cost structures that are out of line with reality. They’re also capable of offering appallingly bad service. If they can’t make it on their own, they should be allowed to fail. Market forces should prevail. There are other people, at Southwest and JetBlue among other upstarts, who seem to know how to run airlines.

United is in bankruptcy. Both American and Delta are threatening to file. That’s just fine. They need to attack their cost structures. They have given away so much money to pilots and other highly unionized sectors of their work forces. They also have locked themselves into hub operations that cause them to bleed red ink the minute there is an external shock.

If the major airlines can’t fix themselves, their assets should be sold off. We’ve seen Braniff, Eastern, Pan Am, TWA and many other carriers go out of business. As long as it doesn’t happen all at once, there’s no reason we shouldn’t see yet another wave of extinctions.

More broadly, the spectacle of airline CEOs going to Washington begging for handouts sends a negative signal to the public about all CEOs. If chief executives are serious about arguing that the government’s role in business ought to be reduced, you can’t support handouts for those who have failed.