There has been a long-standing belief among Americans that experience in business prepares one for political leadership. Yet although we have elected plenty of businesspeople as governors and presidents, their economic record has never been any better than that of their peers without business backgrounds. It does not matter which economic indicator or when measured: A relationship between a chief executive’s business experience and his administration’s economic success does not exist.
Part of this is because of the near powerlessness that a governor or president has in the face of significant economic change. Economies change because of social and economic factors beyond the control of the chief executive.
No matter how much we all want a pulp and paper economy to return to this state, for example, no executive action is going to make the people of the planet want to read newspapers and store information in paper files anymore. The president or governor may use his personal authority to stop a major company from relocating to Mexico, but he cannot stop the loss of 5 million manufacturing jobs to automation and foreign competition. These are market forces well beyond the immediate control of any law, policy, tariff or trade agreement. The chief executive may be able to influence smaller events on the margin, but diverting an economy of 350 million people is like trying to change the direction the wind is blowing.
Of course, it’s not popular to look at facts and confirmed scientific data, so none of this analysis is likely to go far with the voting public. In today’s world, truth is anything that gets you elected. There are, however, more compelling reasons to question the value of business leadership.
Businesspeople see money only once. A client pays for the product and moves on. To the business owner, the transaction is done and profit realized.
In an economy, however, every time that dollar gets spent, the community is one dollar richer. Our business owner uses his profits to buy a new car at the local dealership, the dealer uses the money to buy groceries for the week, the grocer uses the money to build a deck on his house and on and on it goes. The money keeps circulating until it is gradually absorbed through saving, and every time it circulates through a new set of hands, the economy is one little bit more wealthy.
To a business owner, paying for disability claims, medical services and education is little more than red ink on the debit side, but in an economy, this is only the first round of spending. Whatever budgetary gains are made by a cut have to be balanced against the future budgetary loss resulting from reduced economic activity. Planning what to cut from a governmental budget, and how much, is not nearly as straightforward as it is in a business.
Successful business owners have to be familiar only with their own segment of the economy. If you run an insurance agency, what goes on in restaurants along the coast or in the potato industry in Aroostook County has little to do with you. Business owners know their market better than any scholar or government agent. You couldn’t find anyone on the planet who knows more about purchasing discount clothing and used household goods than our governor. To be a chief executive, however, you have to understand the economy at large, with its thousands of businesses and markets, and make decisions based on that understanding.
Business leadership is far more authoritarian than governmental leadership. In a business, the jobs and chain of command are clearly defined and unquestioned. Leadership decisions are usually unquestioned and mistakes are contained, and hidden, within the books of the business. They may go bankrupt, grow exponentially or something in between, but the leadership is clear and the mandate to lead unchallenged.
In a democratic economy, however, leadership is not nearly as clear cut. The Legislature, Congress, the courts and the voting public all have their own power base and can confound any attempt by the chief executive to make significant change on his own. In an economy, gains are made through compromise and conciliation, not through individual action from the top.
We have had remarkable leaders who were businesspeople, but we have had more who were just citizens doing the job as best they could. In the end, what has always made a successful chief executive in both national and state government is the ability to help contending groups forge a tolerable compromise and a vison that extended beyond the next election. All those who think that that is what we have now, raise your hand.
Alan Haley teaches economics for the Maine Department of Education and lives in Skowhegan. He can be contacted at: [email protected]