If business should invest during tough times, why not government?
"Tough times have a way of revealing what you really believe," a well-known leader said during the recession. His strategy, he said, was to continue "to invest in technology during the downturn because we believe our future growth depends on it."
Those words were not spoken by President Obama, who spoke at length Tuesday night in his State of the Union address about investing in innovation as a way of fostering future growth. Rather, they're attributed to Ivan Seidenberg, the chairman of the elite association of CEOs known as the Business Roundtable.
He's hardly the only top executive of a major corporation that's advocated a similar point of view. Here's ExxonMobil senior vice president Andrew Swiger in November 2009: "As we look beyond the current economic challenges, we see tremendous opportunity to apply our leadership in technology and project execution to invest during the downturn." Automatic Data Processing CFO Christopher Reidy told investors in May that back in the 2001 recession, his company did something "we regret, which is we tried to tighten our belt a little too much. And by doing that, it impacted our ability to be well positioned for an inevitable recovery."
But when President Obama spoke about funding clean-energy projects, rebuilding broken infrastructure and investing in education to better compete against other countries on the heels of a terrible recession, Republicans call it just more big-government spending. "With all due respect to our Democratic friends, any time they want to spend, they call it investment," Senator Mitch McConnell said on Fox News. "This is not a time to be looking at pumping up government spending in very many areas."
But many business leaders would argue that difficult times are exactly when you should invest in future growth. At the same time CEOs were slashing jobs and trimming 401(k) contributions for their rank-and-file, many were quick to trumpet the investments they were making in research and development, equipment that would help improve operational efficiency, and leadership training for their very top people. In other words, innovation, infrastructure and education.
To wit, consider what Jeffrey Immelt, the chairman and CEO of General Electric and the new chair of President Obama's outside economic advisory board, told investors in December at his company's annual outlook conference. He talked about investing in operational improvements in manufacturing and software inside the company. He told investors that despite how hard the company was hit during the downturn, "we still invest $1 billion here in training and education." And to keep the company's pipeline full for when things turn up again, "we've really through the crisis continued to reinvest in R&D."
I realize that it's stretching things a bit to compare a country facing a deficit crisis to companies that have relatively healthy bottom lines. And yes, most major corporations are far more efficient and effective than the federal government with how they set budgets and spend the money they're investing.
But the concept of investing for the future during tough times is one of the most fundamental ideas in business--or leadership, for that matter. Just as CEOs who cut off spending in R&D and employee training during a recession will find themselves slipping against competitors when things turn up again, a country that doesn't invest in education, innovation and infrastructure is likely to quickly fall behind its peers. One would think such pro-business conservatives would tend to agree.
January 27, 2011; 8:37 AM ET |
Federal government leadership
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