Let's Hear it For Weak Leaders!

This exchange, between blogger Barry Ritholtz and renowned investor Felix Zulauf, caught my eye:

Ritholtz: In the US, we only have politicians who tell people what they want to hear, and very few who say “Here’s some medicine, it’s going to be uncomfortable, but you got to suck it up because the alternative is far worse.”

Zulauf: That is the case everywhere, but I’m hoping that can change. It doesn’t change just by saying things. You get strong leaders only after a period of pain and hardship. You don’t get them in a world of high prosperity.

--The Big Picture blog

So, let's hear it for weak leaders.

The Lincoln's and Roosevelt's only appear when times are really tough.

"10 . . 9 . . 8 . . 7 . . "

George Bush's Role in
Today's Economic Car Crash

Everyday Americans -- if not historians -- are likely to remember George W. Bush as the President who crashed the family car (the economy).

However, it would be too easy to simply lay it all on #43 and move on (or try to -- right now we're all sort of waiting for Triple A -- Obama and team -- to show up with the tow truck).

If we're honest about it -- and there will never be a better time than Inauguration Day -- we have to allow that there were other, contributing factors. Such as:

--The car Bush got the keys to had major flaws and defects, at least a few of which were non-obvious (at least to people other than Warren Buffett). The role of credit derivatives, the shadow banking system, the (far too) interdependent global banking system and the consequently high risk of financial contagion -- all these phenomena are only now clearly being understood and dealt with.

--The family "car" wasn't in such good repair. In fact, its chassis and fundamental design date back to The Great Depression. As economic systems go, that's the equivalent of a car with 200,000 miles on it. The economy Bush inherited had none of the latest, technologically advanced safety equipment (like air bags, electronic sensors, etc.), and the basic ones it did have -- like brakes -- were old and poorly maintained.

(In fact, there's ample evidence that, in what can only be called an act of economic sabotage, the brakes were intentionally disabled by the very mechanics hired to fix them.)

--The car crashed not just because the driver was inept -- although that's clear -- but because of poor weather and road conditions. Specifically, visibility was poor, the road was slick, and safety features such as guard rails and proper lighting were sorely lacking.

--Unfortunately, we let the insurance premiums partially lapse. The reason people buy insurance is to make them whole in the unlikely event of a catastrophe. We're now in the position of owning a totaled car, without all the money needed to replace it.

What Would Lincoln Do?

So what do we do now?

The first step is to attend to those passengers and innocent bystanders most severely harmed (financially) by the current crack-up. That includes, but is not limited to, people who've lost their homes, their savings, and their jobs. Over time, we must also attend to those who've lost less tangible but no less real things: their faith, their trust, and their hope.

The next step is to make sure that the current driver is the best possible person for the job. On that score, thank God for -- and God bless -- Barack Obama.

Once those two pieces are in place, the last step is to set about re-designing a brand new car.

As Lincoln understood at Gettysburg, the best (and only way) to honor an otherwise unfathomable sacrifice is for the survivors to rededicate themselves to the completion and perfection of the cause at the heart of that sacrifice.

In this case, that means designing a better, market-based, capitalist economy -- one that's fairer, more productive and even more durable than the one FDR bequeathed us (and LBJ and Reagan adjusted).

Obama's Forebears

Obama's Forebears: FDR, Lincoln . . . Gorbachev??

Talk about anticipation: political pundits are already engaged in a spirited debate about which historical leader faced circumstances most closely paralleling the financial crisis now confronting President-elect Obama.

The most obvious candidate is FDR, and the broken economy he inherited in early 1933.

Now like then, the economy is dealing with the aftermath of an enormous asset bubble caused by easy (if not promiscuous) credit and exacerbated by excessive leverage. The carnage includes millions of foreclosed homeowners; a tanking stock market; catastrophic banking and insurance failures; impoverished savers and investors; and the specter of rising unemployment.

Lincoln comes to mind because he also saved the nation from a mortal threat, albeit a political, not economic one.

Through leadership, moral clarity, and sheer resolve, Lincoln prevented the Union from being ripped apart by slavery. Lincoln also appears to be a personal hero of Obama's, who seems to be emulating Lincoln's "team of rivals" leadership style. Of course, as the nation's first Black President, it would hardly be surprising if Obama felt a special affinity for, and kinship with, the Great Emancipator.

But there's a third, more contemporary leader whose situation and challenges at least superficially evoke Obama's: Mikhail Gorbachev.

"Change Agents"

Gorbachev's policies of Glasnost (openness and freedom) and Perestroika (economic restructuring) correctly perceived that the old, Soviet-style command-and-control system required radical reform. Like Obama, Gorbachev was also a figure of great personal appeal, and evident political and intellectual gifts.

Unfortunately (at least for Gorbachev), the changes he initiated spiraled out of his control and ultimately swept away the system he was trying to save (the old U.S.S.R.).

Like Gorbachev, President Obama must preside over a very tricky transition.

His task is to repair and reform a strained system that has already left millions of Americans without homes, without jobs, and with little or no retirement savings. Even before the current financial crisis, tens of millions lacked access to decent health care. As 2009 begins, there are signs that conditions may in fact be deteriorating.

While Obama enters office with a huge store of goodwill amongst everyday Americans -- and especially African Americans -- he must surely be aware that economic desperation and patience don't easily coexist.

It's one thing to campaign on a platform of "change you can believe in." Delivering the right change-- and the right amount of change -- is entirely another.