November 10, 2009
During his General Session this morning, Todd Buchholz had encouraging words for the U.S. economy that he described as “meandering and stumbling along.”
“We are experiencing an economic recovery – more quickly and sooner than most any economists expected nine months ago,” Buchholz told the nearly 3,000 PR professionals and students attending the PRSA 2009 International Conference in San Diego. “But it is a painful economic recovery. The job market is very, very slow to repair itself. And 2010 will be a decent year. If we can avoid putting obstacles in front of businesses, then it can be an even better year.”
Before offering his optimistic words, Buchholz, former White House economic policy adviser to President George W. Bush, discussed the shockwaves of change that have rocked the world’s economy.
Specifically, Buchholz called out two states, California and Florida, and two cities, Las Vegas and Scottsdale, Ariz. “[They] imperiled the entire world’s financial system with the incredible excess speculation in the housing marketing and the irresponsible lending [by financial institutions],” he said during an energized 30-minute talk punctuated by humorous asides on everything from narcissistic homebuyers to Pizza Hut. (He said he recently went to a Pizza Hut in New York and was told the restaurant was out of pizza. “So what are they now, just Hut?”)
Buchholz, a frequent commentator on American Public Media’s “Marketplace,” provided economic history, including the policy mistakes he believed were made by U.S. government officials that turned a recession into the Great Depression in the 1930s.
He cited an example from his book, “Lasting Lessons from the Corner Office,” on how business leaders should conduct themselves in times of economic peril. A.P. Giannini opened the small Bank of Italy in San Francisco in 1904. Two years later, the epic earthquake leveled the city. Shortly after the disaster on April 18, the city’s bankers announced that their financial institutions would remain closed for six months. Giannini, however, broke ranks with his fellow bankers, and loaned nearly $2 million to local residents.
As Time magazine noted in its Dec. 7, 1998 issue on the Most Important People of the 20th Century, “With a wooden plank straddling two barrels for a desk, he began to extend credit ‘on a face and a signature’ to small businesses and individuals in need of money to rebuild their lives. His actions spurred the city's redevelopment.”
Giannini offered an important lesson on how to run businesses during times of economic disaster. “One of his fundamental notions was always know as much about the other guy’s business as he does himself,” Buchholz said. “That allows you to provide better service and it also allows you to innovate.”
Giannini’s tiny financial office launched in 1904 is now Bank of America.
Prospering in the 21st century
What will be most important to the to the U.S. and world economy in the years ahead? He said to forget about Dow points and the NASDAQ.
“We’re in a worldwide race for IQ points,” Buchholz said. “Whatever city, town, country or company harnesses intelligence is going to prosper most in the 21st century.”
He talked about how well the United States fared in the 2008 summer games in Beijing. However, when it comes to international math and science olympiads, the American students “are the Jamaican bobsled team of education,” he said.
The race for IQ also has an impact on the debate over natural resources. Many conservationists, Buchholz said, have said the world is running out of crucial raw materials, such as oil and food. “Forget peak oil – it’s peak people,” he said. “If we have the learning, the brainpower, the intellectual capacity, then we can create the resources that we need.
“Need more oil and gas? Fine. But we’d better produce more petroleum engineers,” Buchholz said. “The number [of petroleum engineers] has fallen by 90 percent since 1981. The answer to so many of these questions is our intellectual capability and our school systems, not simply the stuff that’s on the ground.”
As Buchholz noted, “the job market is the last thing to get healthy when an economy begins to improve. Today, the nationwide unemployment rates stands at 10.2 percent.
“The job market is still cracked,” he said. “Yeah, each month isn’t quite as bad as the month before but we’re not creating new jobs.”
Still, the people who remain employed are realizing something: Everything is on sale. “Consumers who’ve been hunkered down in bomb shelters for 12 months are beginning to come out and they want to be able to take advantage [of those sales].”
Learning from the movies
In tumultuous times of crisis, great things often happen, Buchholz said. He quoted Orson Welles’ character from “The Third Man,” the 1949 film-noir classic:
“Don't be so gloomy. After all it's not that awful. Like the fella says, in Italy for 30 years under the Borgias they had warfare, terror, murder, and bloodshed, but they produced Michelangelo, Leonardo da Vinci, and the Renaissance. In Switzerland they had brotherly love – they had 500 years of democracy and peace, and what did that produce?
The cuckoo clock.”
So what does this mean?
“This is now still the opportunity for prosperity. This is now still the opportunity for innovation,” Buchholz concluded. “This is now our chance now to build a better life for our children, our neighbors, our communities and our respective countries.”