Peter Drucker on Great Depression -
from article in November Business 2.0 - I think it has someone from Enron on the cover....
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But can't people alter the fate of an organization or even
an entire economy?
Yes. The Depression in this country was totally unnecessary. The country was
recovering from a mild recession when Europe crashed, and that started a run
on American banks. Eugene Meyer [Katherine Graham's father, and President
Hoover's chairman of the Federal Reserve Board] happened to be a friend of
my father's. And during World War II, when I was in Washington and quite
lonely, he had me to dinner often. He told me this story.
He knew perfectly well how to stop a run on the banks. Anybody knew this.
You just pay out, just print money. What can people do with the money? One
night they put it under their mattress, then the next day they have to deposit it
again. Meyer knew he should just pay out. He went to Hoover after the 1932
election, and Hoover said, "I am a lame-duck president. Immediate action has
to be sanctioned by the president-elect." So Meyer went to Roosevelt. But
Roosevelt said, "This is Hoover's watch." I asked Meyer, "Why didn't you just
pay out?" He said, "My boy, you couldn't possibly do that in 1932 without the
president's approval." If he had paid off the banks and stopped the run, there
would have been no bank holiday and there would have been no Depression,
except perhaps in the farm sector. Hoover and Roosevelt never met in those
four months. They hated each other. Meyer said he should have gone ahead
without the president's approval, but that was in hindsight.
What is the management lesson in all of this?
There is a 12th-century German proverb: "Don't go near your prince unless he
calls for you twice." You go ahead and do things. You don't ask for permission
because that implies the other fellow can say no. Yes, you risk ending up in
jail. You have to take that risk. Meyer did not.
What do you think about the Federal Reserve's
effectiveness today?
The Alan Greenspan of the 1920s and 1930s was Montagu Norman, the
governor of the Bank of England. He had the same reputation as Greenspan
has now. But he lost it with the Depression, the same way Greenspan will
lose his. The idea that the Federal Reserve chairman has power is a delusion.
The only power he has is over the interest rate, and the interest rate has
ceased to be important because businesses are no longer dependent upon
borrowing from banks. The interest rate is only important to the stock market,
to people that short or buy on margin. For the economy -- yes, if it goes up to
18 percent or down to 2, but half a point is a symbolic gesture. The Fed has
control only as long as people trust that when Greenspan opens his mouth, it is
meaningful. But the first time it does not work -- well, magicians get no second
chance. |
