Field Guidance

I recently read a news story about North Korea’s despotic leader, Kim Jong-il. He was on the scene at a coal mine, according to the North Koreans, to provide “field guidance” to the mine’s workers. Most North Koreans tolerate or support a system that has starved millions to death and has reduced most of the rest to a state of unimaginable deprivation. Support for the regime can be traced, in part, to relentless propaganda that first Kim Jong-il’s father, Kim Il Sung (the so-called Great Leader), and now Kim Jong-il (the Dear Leader) are semi-divine and possess powers far beyond those of mortal men. Apparently, one of those powers is an ability to dispense accurate field guidance.

Waiting in the wings to succeed his father is Kim Jung-Un. The North Korean propaganda machine is going full steam ahead as it reports on Kim Jung-Un, calling him “the brilliant comrade.” No doubt his brilliance will allow him to dispense field guidance at least equal to that of his father and grandfather.

If it wasn’t for the terrible human suffering in North Korea and the possibility of war on the Korean Peninsula, it would be easy to view all of this nonsense with amusement. It is easy to dismiss what we hear in North Korea believing it is something totally different from the American experience. Unfortunately, we are not so different. In the United States there are plenty of “brilliant comrades” dispensing “field guidance.” The only difference between North Korea and the United States is the degree to which their “field guidance” has ruined the economy.

Consider Larry Summers, the president’s current (but set to depart early next year) chief economic advisor. Last week we covered his arrogance, now let’s take a look at some of his pearls of wisdom. One of Larry Summers’ pronouncements on the automobile bailout is shared by Steven Rattner in his book Overhaul: An Insider’s Account of the Obama Administration’s Emergency Rescue of the Auto Industry:

“We’re already in Vietnam,” Larry Summers said in a separate meeting, referring to the all-but-certain decision to provide more aid to the auto makers. “I can imagine doing something in Cambodia.” By that he meant indirectly helping a few key suppliers, the equivalent of fighting from Vietnam and not sending ground troops across the border. But there he drew the line: “There’s no way we’re going into Laos.” He wasn’t about to commit the government to a full-scale invasion that involved bailing out the entire supply chain.

Apparently, Summers speaks in metaphors that only those attending a Georgetown cocktail party could appreciate. Is this brilliant “field guidance” or nonsense from a meddling and, despite his reputation, apparently mediocre mind? Consider this: While Summers was president of Harvard he approved the purchase of over 3.5 billion dollars of financial derivatives involving interest rate swaps. Like most of these derivatives, this ended badly for Harvard as Harvard lost approximately two-thirds of its investment.

Despite this, Summers had the temerity to appear on CNBC last week and pronounce that: “This administration is committed to fixing the disaster brought about by the last one which was solely a function of financial deregulation.” Of course this is absolute nonsense and flies in the face of Summers’ own record at Harvard. A major cause of the disaster has been decisions made by individuals, such as Summers, who believed they were smarter than the rest of us. They took risky bets and then demanded to be bailed out.

If the United States was completely unlike North Korea, Summers would have been repudiated by now. Rather than issuing economic advice to the president, he would be out of a job like the millions of workers his policies have helped to displace.

Of course, Summers is not the only one dispensing “field guidance” in the United States. To be fair to Summers and our other field guides, they are not as vicious as their North Korean counterparts. But they are just as wrong about their abilities as are those in North Korea’s Kim dynasty.

Consider Congressman Barney Frank. As chairman of the House Financial Services Committee, Frank is generous in giving out his “field guidance.” For example, regarding the automobile industry, in June 2009, Frank called Fritz Henderson, then GM CEO, and demanded that Henderson keep open a GM distribution center in Frank’s Congressional District. Frank discussed with Henderson “the facility’s value to GM.” Henderson agreed to keep the facility open after having his arm twisted. In his own mind, Frank was dispensing needed “field guidance” on corporate assets.

Or consider President Obama. Rattner relates this conversation:

Mr. Obama had asked, “Is there any way these guys are going to avoid bankruptcy?”

“Unlikely,” he was told.

“Why can’t they make a Corolla?”

“We wish we knew,” replied his advisers.

Again, this is a conversation best fit for a Georgetown cocktail party. Most people outside of government and academia understand that one could no more “make a Corolla” then “make a Mozart.” The ability to make a reliable, inexpensive car like a Corolla is grown over many laborious interactions through a discovery process that takes many years. A Corolla cannot be ordered up by central planners. GM and Chrysler could not make a Corolla because their top-down, hierarchical organizational structure with all their plans did not allow for enough innovation and discovery. If a Corolla could simply be ordered up, Chrysler would be the number one carmaker in the world; and North Korea, the world’s wealthiest economy.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: