Broke E-Book

John Mumford

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 488

Veröffentlichungsjahr: 2010

Beschreibung

What principled business leaders can do to solve America's current financial crisis Broke is a startling wake-up call for America and an honest accounting of what our future holds if we don't take charge and change our country for the better. If the business of America is business, then it's up to our business leaders to solve the mess we're in. Broke offers practical, nonpolitical, and nonpartisan solutions that every business leader can implement today for a better tomorrow. Whether you operate a giant corporation or a local small business, you'll find practical steps to limit future risks, strengthen every business, stabilize the current economy, and help turn the country around. Author John Mumford has spent decades helping business leaders turn around failing companies. Now, he helps them to turn around a failing country. * Presents bold initiatives and concrete steps every business leader can use to create a better future-for their businesses and for the country * Includes practical, actionable steps for every business leader who wants to build for the future, while preserving the best of his or her existing enterprise. * Shows how business leaders can contribute to the solutions for our problems concerning public debt, the environment, and international relations * Offers a turnaround plan for the country ideal for use by the U.S. Chamber of Commerce, small business organizations, non-profits and others as the centerpiece of a 2010 campaign for America's turnaround * Endorsed by current and former CEO's, top business school leaders, former governors and senators, and leading journalists Desperate times call for creative, effective measures, not desperation. If you're a business leader, here's how you can do your part.

Leseprobe

Table of Contents

Title Page

Copyright Page

Dedication

Preface

Acknowledgements

PART I - Business Leadership in Twenty-First Century America

CHAPTER 1 - Down a Dark Road

A Proud History—A Great Experiment

How Long Do We Have?

The Warning

Is There Hope?

The Bottom Line

CHAPTER 2 - The Dilemma—Is America Off Course?

The Celebration

The Long, Hot Summer

Restoring the Homeland

Restoring the Nation’s International Standing

CHAPTER 3 - Applying Timeless Principles to Business Leadership

A Long Look Back

A Great Leader—Joseph

Another Great Leader—Nehemiah

The Importance of Measurement

Action Steps

Key Measures of Success

Suggested Reading

CHAPTER 4 - Business Leadership and the Political Process

Solving the Puzzle

Leadership and the Political Process

Action Steps

Key Measures of Success

Suggested Reading

PART II - Principled Leadership and Financial Stability

CHAPTER 5 - The Vital Role of Business Leaders—Getting Your Enterprise in Top Shape

A Scary Future

Action Steps

Key Measures of Success

Suggested Reading

CHAPTER 6 - Overcoming the Declining Dollar

Realignment

The Layoff Factor

Action Steps

Key Measures of Success

Suggested Reading

CHAPTER 7 - Managing Business Debt (So It Doesn’t Manage You!)

Managing His Career

Business’ Responsibility for Our Future

Action Steps

Key Measures of Success

Suggested Reading

CHAPTER 8 - Avoiding Derivatives and Financial Tsunamis

The Big Party

The Challenge—Gambling? Hedging Risk? Courting Disaster? What Are Derivatives?

Action Steps

Key Measures of Success

Suggested Reading

CHAPTER 9 - Preparing for Inevitable Disasters

The Warning

Action Steps

Key Measures of Success

Suggested Reading

CHAPTER 10 - Controlling Inflation’s Damage to Business

New Accounting

Action Steps

Key Measures of Success

Suggested Reading

CHAPTER 11 - Avoiding the Liquidity Traps

Money, Money, Money

U.S. Money Supply Growth—1950-2010

Action Steps

Suggested Reading

CHAPTER 12 - Maintaining Sound Business Pensions

The Awakening

Where Are Private Pensions?

Where Are Public Pensions?

Action Steps

Key Measures of Success

Suggested Reading

CHAPTER 13 - Business and Our Nation’s Financial Stability

Changing Course

Action Steps

Key Measures of Success

Suggested Reading

PART III - Managing Vital Resources

CHAPTER 14 - Water—Business and a New Direction

The Awakening

The World’s Water Picture in Brief

Action Steps

Key Measures of Success

A National Young Adult Action Plan to Preserve Vital Resources

Suggested Reading

CHAPTER 15 - Business Solutions to Energy Gridlock

The Puzzle

Action Steps

Key Measures of Success

Suggested Reading

CHAPTER 16 - Environment—Renewal and Redirection

Taking Action at Last

Action Steps

Key Measures of Success

Suggested Reading

CHAPTER 17 - Infrastructure Renewal—Business Can Lead

Blackout

The Size of the Challenge

Action Steps

Key Measures of Success

Suggested Reading

PART IV - Principled Business Leadership and Our Global Challenges

CHAPTER 18 - Business and Renewed International Relationships

Expensive Friends

Action Steps

Key Measures of Success

Suggested Reading

CHAPTER 19 - Business and the Limits to Empire

The World’s Policeman

Action Steps

Key Measures of Our Success

Suggested Reading

CHAPTER 20 - Overcoming Technology Losses

Counting the Cost

Action Steps

Key Measures of Success

Suggested Reading

CHAPTER 21 - Limiting the Impact of Terror

The Copenhagen Shock

The History of Terror

Action Steps

Key Measures of Success

Suggested Reading

CHAPTER 22 - Business Solutions for the Developing World

The Visit

Action Steps

Key Measures of Success

Suggested Reading

CHAPTER 23 - Business and International Environmental Resources

International Environmental Risks

Action Steps

Key Measures of Success

Suggested Reading

PART V - Business: Leading or Following—The Choice Is Ours

CHAPTER 24 - The Role of Principled Leadership in America’s Turnaround

New Resolve

Action Steps

Key Measures of Success

CHAPTER 25 - A Tale of Two Nations—Which Path Will We Choose?

America Without a Turnaround

America With a Turnaround and a Vision for the Future

APPENDIX A - America’s Economic/Business Leadership Failures: 1965 to the Present

APPENDIX B - Repaying America’s Debt: Staffing the National Service Corps—2010 ...

APPENDIX C - Meeting America’s Growing Power Demands

Notes

Bibliography

Index

About the Author

Copyright ©2010 by John Mumford. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Mumford, John, 1939-Broke : what every American business must do to restore our financial stability and

protect our future / John Mumford. p. cm.

eISBN : 978-0-470-56461-5

1. Industrial management-United States. 2. Financial crises-United States. 3. Leadership-United States. I. Title. HD70.U5M85 2009 658-dc22

2009023575

To

Karen for her great patience and long-standing love Our beautiful grandchildren: Zachary, Caroline, Ellis, Emma, and Laine

and to

Your beautiful children and grandchildren With the hope that they may all enjoy the same blessings and abundance that we have enjoyed . . . until now

Honoring the memory of two outstanding young men:

Keith Warren Mumford (1968-2009) Jesse John Payne Kay (1988-2007)

With special thanks to

Lindi Stoler for her invaluable suggestions and coaching Sarah Tackett and Ron MacDuff for their timely help with edits and production

and to

Dan Ambrosio of John Wiley & Sons, Inc., for his outstanding professional guidance and leadership in this effort

Christine Moore, Ashley Allison, Kate Lindsay, and the superb team of professionals of John Wiley & Sons, Inc., for their outstanding editing and production work.

Preface

When almost any one of us thinks about the United States of America, we envision one of the world’s greatest civilizations. We picture a great empire. We think of democracy, freedom, and abundance. We think of taking care of others. We imagine a superpower and leadership. We think of the land of the free. We think of people who have it all.

However, because we busy Americans have full lives, many of us have not stopped very often to think about where this great country is in the course of history. We are too preoccupied with living our lives. We are busy soccer moms taking out kids to their practices. We are harried executives, rushing off to the next meeting. We are active at the gym, trying to stay fit. We are occupied on the golf course with our buddies for our weekly relaxation. We are busy at our next power lunch, or on our next business trip, or on our next cell phone call. Or we are busy just trying to make ends meet and to survive from one day to the next.

Most of us are busy doing everything we can to keep our own and our families’ lives running well. So, although many of us may have an occasional talk or in-depth conversation with friends or family about the future of our nation, we do not typically focus too heavily on the future of the United States. This is especially true if our own lives are going along well. In other words, our nation’s well-being is not what most of us are staying up worrying about at night.

If we are up worrying about something, it is probably an issue related to our own individual problems or our families. It is more likely that we worry about whether that next big business deal will go through; whether our health is okay; whether our marriage is in trouble; or whether our kids will win their next big game.

The average person doesn’t stay up at night agonizing over national debt, the strength of the dollar, whether we are prepared for the next disaster, the state of our educational system, our failing health care system, an upcoming housing crisis, or where our country is headed and how it will impact us, our children, and their children. These issues are far too vast and complex for even the most motivated of us to study on a consistent basis.

Unfortunately, all of us would surely be shifting our worries if we knew where the United States of America is headed—and how it may affect each of us. Broke: What Every American Business Must Do to Restore Our Financial Stability and Protect Our Future is a startling, factual account of America’s challenges in 17 different areas that should be of great concern to business leaders. Most of us care deeply about our nation and its future. That is why I wrote this book: to help each U.S. business achieve financial stability; to protect its future; and to show our citizens a way to meet head-on the problems that we, our children, and their children are facing. Business must lead the way in engaging both the problems and the solutions. We are at a crossroads, and business must lead the way to recovery.

Broke will describe the deep financial holes that we have created. It will also detail our three substantial deficits—financial, ethical, and leadership—on each issue. Most importantly, Broke will provide business leaders with a series of immediate steps that they can take to restore theirs and our financial stability and protect our future!

Only business has the capacity to lead our turnaround and transformation; and only business has so much at stake in keeping our nation’s economic ship on an even keel. So business must point the way. Many Americans realize that our drift downward has occurred during the past 45 years. Broke says that the financial train wreck that is roaring toward us must be stopped now.

How did we get here? A trusted colleague of mine for more than 25 years said sadly that “We are fools [to have allowed these disasters to occur].” But how could we be so foolish?

One explanation lies in the nature of our daily battles—those that we see and those that rage in the mind and in the unseen. Prominent among them is the battle between good and evil that many ignore as foolishness. Another is our misunderstanding of the values and ethics of belief that drive behavior and that have haunted the United States since its founding. The first value set—the Judeo-Christian ethic—is the basis for the Constitution, the American system of common law, and most of the institutions that have been created in the United States during our 234 years of history.

Clearly delineating the forces of good and evil, this ethic holds that man is inherently evil; so he must confront this evil and look to God as the ultimate source of guidance, redemption, and ultimate accountability. These are the principles upon which this republic was established. Alexis de Toqueville describes the profound speed of development of an early America, because of its focus on community and associations dedicated to serving others in his 1832 epic study, Democracy in America. But that was then.

More recently, an opposing system of thought has taken hold of the American consciousness—secular humanism: a doctrine, philosophy, and way of life that rejects a supernatural God and stresses the dignity, worth, and capacity of the individual for self-realization through reason.1 This system teaches that man, and not God, is the ultimate being. Further, it teaches that man is a captive of society—a society that has obligations to those who have grown out of the historic reality of one class exploiting individuals for the gain of others. Therefore, society is the source of man’s problems, and these problems must be addressed and rectified by those in authority (presumably government at all levels) in the interest of righting past wrongs to individuals.

The source of hope for the secular humanist, therefore, is the revolutionary change of society. This new hope is the result of an enlightened and progressive new ethic, which will bring a new selfishness of all individuals who in turn strive for a new and enlightened success that they will enjoy until death—the end of everything.2

Business, however, cannot succeed if its members base their actions and efforts at exploiting one class for the benefit of others. The tragic outcomes of the economic meltdown of 2007 to 2009 are only the most recent evidence of this failed ethic and system of values. Business professionals must act on the basis of overcoming man’s inherent weaknesses and serving his needs in line with his better instincts. This battle is a continuing one. If the United States is to overcome the leadership failures that brought about our current state during the past half century, business will be the institution that leads the way. In so doing, it must successfully confront all of these seen and unseen obstacles, as well as the obstacle of the “elite minority”3 that sees the cures differently.

The late Bob Slosser—author, theologian, and educator who died in 2002—had a more subtle explanation for the changes in the United States during the last four decades. In his 1984 book, Reagan Inside Out, Slosser describes the fresh but pervasive influence of a new public force: “The Elite Minority.” Recounting the events leading up to the 1979 General Election in Great Britain, which resulted in Prime Minister Margaret Thatcher’s rise to office and the 1980 election of President Ronald Reagan in the United States soon thereafter, Slosser describes what he calls the “unusual impediment to the execution of the popular will” that had impacted electoral politics in both nations. Slosser boldly faults this “unusual impediment” for systematically thwarting the will of the majority in both British and U.S. electoral politics. He describes the reality in this way:

Quite simply, there is the nation, which is the people, and there is the “political” nation, which runs things. Put another way, there is a common majority and an elite minority. Strangely, in this marvelous democratic republic, the majority has not prevailed, at least for many years, certainly not in the last twenty years.4

What does this mean for us? In essence, it means that those in politics will listen more to the elite minority than they do to the majority. What did it mean to Thatcher and Reagan, who were elected “without the support—indeed, with the opposition of influential and articulate groups in the civil service, the academies, the media; and also against the wishes of ‘progressive’ businessmen, political writers, critics, trade union leaders, clergymen, entertainers, and professional humanitarians?5. . . Thus,” Slosser concluded, “President Reagan and Mrs. Thatcher [were] merely in office, not in power.”6

There is a third reason that the United States may have come to its current position of serving the priorities of its citizen-politicians. The nation’s Founding Fathers saw public service as a part-time calling of motivated citizens. Citizen-public servants were in the legislature (or equivalent elected office) for only a small part of the year, and each of them managed a farm or business for the balance of the year. After a time, they left public service and another part-time public servant took their places. This practice has largely been abandoned in recent years, however. Since the mid-1960s, there has been a permanent class of politicians. At the federal level, for example, these full-time legislators have made permanent public service a career. Their reelection rates have exceeded 90 percent, because they set the rules for the opposition. Their health care and pension benefits exceed all but the highest levels of wealth or position. As a result, their priorities reflect their career aspirations: (1) being reelected by virtue of contributions of interested parties, (2) serving their partisan causes to remain in favor and appointed positions of power, and (3) serving the nation—in that order. You will likely agree that third on the list is a low priority.

Business cannot follow the path of pleasing only a few, well-heeled customers. It must serve every qualified customer that it can find. Business cannot survive if it serves only narrow partisan interests. It must address the larger markets of human need and opportunity. And lastly, business cannot survive if the nation and the institutions that set the rules and provide the healthy economic platform for its proper function vanish. Unfortunately, this, too, has occurred.

Where have these changes taken our businesses—those on Main Street who do not belong to the elite minority? Broke will explain.

Part I of Broke will take you on America’s modern business and economic journey, starting in the mid-1960s and continuing to the present, and covering the good, the bad, and the ugly. It will examine key issues impacting the financial stability of businesses and the economic future of the United States, with emphasis on the attributes and actions of principled leaders, as contrasted with others who would give only the appearance of service, wherever they may be.

In Part II, Broke sets forth a complete action plan for business—to restore financial stability and to protect our future. Business stands to lose its economic platform unless principled business leaders take bold action: first, to strengthen their individual enterprises for the turbulent markets that now exist, and second, to step forward and lead the transformation of the nation from its current, weakened financial and physical state to a new economic and tangible reality. The time is right to shed what some would see as a culture of arrogance and reveal ourselves as a culture of realism. And it is right to move from what is all too often a deteriorated self-serving political culture in business to a culture of principle. The future is at stake.

Part II will also offer two first-step national solutions to rebalance our larger national interests and to begin restoring the financial foundations of government at the federal, state, county, and local levels, as well as the strength of our culture at home and abroad. Chapters 13 and 14 detail these first, vital steps to launch the United States’ larger transformation. Broke explains how these two solutions will overcome and reverse past leadership failures in our finances.

Part III explains how the proposed solutions will enable the nation to overcome past leadership failures and launch transformation in our management of resources, international relationships, and global resources. It will conclude by taking the reader on a journey into the two possible Americas of the future—one in which we followed our current path (America Without a Turnaround); and one—America With a Turnaround and a Vision for the Future—wherein we will have launched the transformation called for in Broke. You will like the second story much more than the first.

Fasten your seat belt.

—John Mumford

Acknowledgments

The nearly 6,000 work-hour journey that resulted in Broke started late in 2004, when a outstanding and dedicated former federal civil servant, Fred Tillack, challenged me to develop a strategy to realign many of the business systems that are used to manage our nation’s defense activities. The project was so exciting that it motivated me to look broadly at a number of issues that confronted the United States and its leaders in business as we began the 21st century. One year later I had catalogued 24 major issues facing the United States and had begun to see the common threads of values, leadership excellence, corporate responsibility, and, yes, the failures that ran through each of them.

In early 2006, Harvard Business School Associate Dean John Quelch invited me to be one of four panelists for a June 2006 Global Leadership Forum, sponsored by the Business School and held in Washington. The panel was to examine the commonalities and differences of public and private sector leadership. Dr. Quelch assembled a superb panel consisting of then Labor Secretary Elaine Chou; Mr. Craig Coy, who had just completed a very successful job with MASSPORT, and Mr. John C. Read, CEO of Outward Bound, Inc. The panel discussion and audience participation energized me so much that I put the writing project into overdrive, returning to Boston many times over the next several years to meet with Dr. Quelch and other endorsers.

In July 2006, Mrs. Roberta Hromas, CEO of a worldwide ministry organization, referred me to Ms. Lindi Stoler of STOLER MEDIA, a California-based public affairs and media management firm. Lindi patiently walked me through the myriad of lessons and techniques that turn ordinary writers into ones who earn readers—a three-plus year journey. Lindi has often provided guidance and support numerous times in the same week, and she never lost faith in the effort.

During those early days Jeff Ross and his daughter Megan, then a senior at the University of Virginia, offered a series of excellent recommendations on organization of the material and content so that the reader could better associate issues with their origins and collective impact.

As I reached out to potential endorsers, I was so fortunate to align with men and women of courage whose lifelong passion for truth and integrity had been a model for me—Steve Reinemund, former CEO of PEPSICO, whose call for business responsibility was so pivotal to this work; Fred Barnes, whose candid writing and speaking delight millions; Governor Tommy Thompson, whose life in public service is admired by millions; former Governor and Senator Zell Miller, whose life and courage in public service as a governor and later as a U.S. senator are legendary; Dr. John Quelch of Harvard, who has succeeded in demonstrating that educators can also manage complex public enterprises (Boston’s MASSPORT); Dr. Larry Kotlikoff of Boston University, whose writing and sterling example of deep love of country helped to stir my passion for America’s future; Dick Schubert, whose leadership in government, private industry, and in the non-profit sector always championed the American worker and inspired me; Vern Grose, whose life of integrity, writing, public service, and genius for risk management are the envy of the world and this long-term fan; Dr. Barbara Williams-Skinner, whose career and leadership in both public and non-profit enterprises has impacted and continues to influence thousands of the nation’s future leaders; Dr. George B. Weathersby, whose career in public service, enterprise management, and writing has had a worldwide impact; and Stan Cottrell, who has won friends for the United States in 44 countries as an athlete and in numerous commercial enterprises as a manager and leader. I could not have been more fortunate.

During the many months of laboring over text, message, and content, I had the benefit of the steadfast encouragement, suggestions, and detailed comments on key passages from Dr. Vern Grose; Ralph Rosenthal, a professional of the highest caliber who read every line that I drafted; and Mrs. Jeanne Woodside, a friend whose love of country matches her love for books. They were invaluable, and I can never thank them enough.

During this long work period, two colleagues, Robert S. Strain, a Virginia businessman, and Dr. Vern Grose, CEO of Omega Systems Group, Inc., were instrumental in helping me to articulate the critical differences between principled leaders and principled politicians both of which make enormous contributions to our institutions. Moreover, they were able to guide me through the discussion of the elements of the political process and to show how leaders of high character and principle are able to accomplish so much, without compromising values and by looking only at the interests of those whom they serve. Of course, these wise counselors also enabled me to sharpen the distinction between these people of principle and the very different outcomes that result when self-serving leaders or politicians act only for the special interests that support them. Employees, citizens, and/or taxpayers all suffer when this occurs. I am most thankful for their superb advice and assistance.

Equally valued with the counsel of Vern and Bob was the enthusiastic and steadfast support of John E. Bishop, an experienced Maryland businessman; Van L. Lanier, Managing Director of Lanier Turnaround Consulting; international businessman Michael J. Feeley; New Jersey businessman Frederick P. Guttroff; and Outward Bound CEO John C. Read. None of these distinguished business leaders ever lost sight of our important goals in this effort, and they supported my efforts at every opportunity. No one could ask for better allies.

Charles B. Brown of North Carolina and Conrad R. Harper and Michael H. McDaniel of Virginia provided insight, wisdom, and encouragement at many important junctures in this journey as well. Their support has never subsided and continues to this day.

More recently, Mrs. Kay Coles James, CEO of the long-famous Gloucester Institute in Gloucester, Virginia, provided some important insights on African-American contributions to our modern history. Moreover, her experience as Chair of the Joint Financial Management Improvement Program for the federal government filled a long-missing section of the vision for standardization in financial reporting, accountability, and financial management for all federal programs.

Of course, I am deeply grateful for my wonderful friends from Atherton High School in Louisville, Kentucky, the U.S. Military Academy at West Point, and from Harvard Business School in Boston—and you know who you are—who were constantly ready to listen to a proposition, offer a suggestion, or add a word of encouragement at many stops on this long journey. Truly, “a man’s riches consists of his friends.”

And to Sarah Tackett, and the amazing team of professionals at John Wiley & Sons, Inc., whose skills in editing, coaching, questioning, producing, marketing, formatting, word processing, and indexing made good work look outstanding, I shall long be grateful.

Of course, to my Karen, who had to put up with an 8:00 A.M. to 9:00 P.M. work schedule for months on end, persevered as much or more than I did. She has been a constant reminder of the importance of leaving a better world for our grandchildren. I am forever in her debt.

PART I

Business Leadership in Twenty-First Century America

CHAPTER 1

Down a Dark Road

There is no truth on earth that I fear to be known.

—Thomas Jefferson

The test of the morality of a society is what it does for its children.

—Dietrich Bonhoeffer

A Proud History—A Great Experiment

The United States of America will always be referred to in recorded history as one of the great experiments in democracy. This noble enterprise in statecraft will undoubtedly be appreciated because of the genius of its founders, the passion of its people for innovation and progress, and for its basic commitment to one set of values for much of the nation’s history.

But democracies are fragile; they must be nurtured and protected. Like a good crop of wheat or tomatoes, they must be watched, guarded, and cared for each day if they are to survive and flourish. This book provides the future focus that is needed for this great adventure in freedom and democracy to continue.

How Long Do We Have?

Some years before (1770) when our original 13 states adopted their new constitution, Alexander Fraser Tytler, a Scottish-born British lawyer and writer, is reported to have said about the fall of the Athenian Republic some 2,000 years prior:

A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.1

Tytler very perceptively recognized the frailties of human nature in a democratic culture—falling prey to the temptations of deception, delusion, and denial in the form of promises made by public office seekers, who promise support and assistance to citizens who want or need it. This assistance is paid for with the taxes collected from others and thus comes at no real cost to the recipient. In the end, this practice brings an end to the democracy and to the government whose promises exceed its ability to pay.

Tytler saw this process as a repeating cycle in human history, as civilizations, emboldened by spiritual faith, emerged from bondage to achieve liberty, only to succumb to greed, complacency, and an ultimate return to bondage. The Tytler Cycle is shown in Figure 1.1.2

Since 1700, the U.S. pilgrimage matches this sequence. Unfortunately, the United States has now reached Stage 9 substantial dependence. And we’ve only been pushed there because of a stunning array of financial and leadership breakdowns that have occurred in recent years. The combination of failing to address the most significant national problems in the past four decades, spending well beyond our income, and borrowing in excess of our ability to repay has placed the United States in bondage to its financial obligations.

Figure 1.1 The Tytler Cycle .

See http:sanpetrepublic.com/?p=338

This book serves as a warning. As one reviews the many signs of our nation’s movement (in the wrong direction), it is clear that for nearly half a century, we have placed too much trust in self-serving politicians instead of principled leaders in many of our institutions—business, organized religion, education, and government—and we are now headed for collapse. The nation’s trajectory must be reversed as it enters the twenty-first century. And only business can lead this transformation—because it has the most at stake in a failure to do so.

Role of Institutions

Our four primary economic institutions—business, organized religion, education, and government—are at the center of this poorly directed movement. These institutions have abandoned many of the values3 that served as the original basis for American government and culture in favor of satisfying more self-serving appetites, short-term goals, and compromised ideals. Much of this change has occurred in the past 40 years. Today’s culture no longer aligns with the core principles that the nation followed for many decades prior.

Tracing these changes and their impact on the culture inevitably draws us to recognize the stature and quality of our leaders during the past half century—who they were, what roles and functions they have (or should have) performed, and what they and we are handing down to our children. However, this book will not single out individuals. It will assess the direction of our institutions during this period in the context of the attributes of principled leaders. Leaders reflect, and often determine, values in practice. These values are therefore the core elements of governance for institutions. Institutions guide and reflect the nation and its changing culture; and the nuclear family (husband, wife, and children) is at the center of the culture. The family binds and cuts across all four economic institutions; as such, the family is the centerpiece of the culture and the object of service and support from all four economic institutions. Unfortunately, the family may also be the most eroded of the nation’s core institutions.

Each of the four economic institutions—business, organized religion, education, and government—has an unique agenda and core values that steer its behavior, define its role in the culture, and determine current cultural norms. Some institutions have put their interests above those of the nation. Others have stood by while the nation declined. And it is only principled business leaders who can reverse this decline and refocus our interests on the areas that matter.

Perhaps we are no longer a nation “of the people, by the people, and for the people,” as stated in the preamble to the Constitution. You may indeed conclude that our four primary economic institutions have been hijacked by self-serving politicians, defined in the broadest sense, who individually and collectively are not serving the people and are instead serving themselves—their own special interests and political futures—at the expense of coming generations. This book is a call to the majority interest—not the special interests or to the elite minority.4

Leaders establish values; values set the direction of institutions; and institutions determine the course of nations. Any decline in the state or positive influence of our institutions is a failure of leadership—a deficit. The former comptroller general of the United States, David Walker, often stated that our country has “four major deficits—a fiscal deficit, a trade deficit, a balance of payments deficit, and a leadership deficit.”5 Forty years ago, such a statement would have drawn cries of outrage from across the nation—especially considering its source: a senior federal official. Ironically, however, the statement was not reported, except when it was originally broadcast on C-SPAN. Leadership failures now plague America: Seven million lost jobs, millions of foreclosed homes, and nearly $18 trillion in lost wealth bear stunning present-day witness to those failures.

Noted author and pastor Reverend Henry Blackaby was invited to Africa in 2006 to address a meeting of African heads of state. In November 2005, he previewed his planned remarks to a Virginia seminar audience of some 500 people, saying, “I can tell you right now what I plan to say to those leaders. Every problem in Africa is a problem created and/or allowed by you, the leaders of Africa or by your predecessors.”6

Like our nation, businesses are all too often led by self-serving business politicians instead of principled leaders. The priorities of self-serving politicians are clear and limited—their self-interest and reselection or reelection, their partisan interests, and their wider community or country—in that order. This is true no matter where they serve—business, organized religion, education, or government. They are all the same. Institutions, however, do not thrive (or in many cases, survive) if the priority of the leader is his or her interests. This self-interest is what forces this type of leader to attempt to please everyone—for the sole purpose of securing his or her position. Unfortunately, seeking to please everyone is usually the path to pleasing no one. The bitter divisions among and between America’s institutions are ample evidence of governance by special interests and not by principled leaders. Who will bear the cost of this twentieth century hijacking of the American dream for the twenty-first century? Our children. Is this the legacy that we wish to leave them? Are they not the future of America? Have we put ourselves and our short-term interests ahead of our children’s future?

A Shameful Legacy

Do we love ourselves more than we love our children? Pulitzer Prize- winning author of From Beirut to Jerusalem, Thomas Friedman, raises this question when he recounts a 1984 dialogue with a 54-year-old Lebanese Druse merchant, Nabih, and Nabih’s 15-year-old son, Ramsi, in the village of Qabr Chmoun. The Druse had recently taken over the region from the Phalangists, who had responded with endless artillery barrages and machine gun attacks—some of which nearly destroyed Nabih’s shop. As Nabih described the “savagery” of the attacking Phalangists, Friedman could see there were no remaining windows, and the interior ceiling of his shop had been reduced to a mess of hanging wires and steel rods.

The Phalangists had failed to retake the region. Nabih beamed with pride as he told how his son, Ramsi, had behaved in the fight. Ramsi echoed his father’s pride as he told of leaving school to fight those who were killing his people. Friedman was puzzled at the story and its obviously deeper implications for the tiny country, and he recounted the event some weeks later to his friend—American University psychologist-counselor Richard Day—whose job was to counsel youth suffering from the trauma of internal civil war. Day responded with a question: “When will there be peace in Lebanon?” Answering himself, he went on to answer: “When the Lebanese start to love their children more than they hate each other.”7

The same question applies to the current generation of Americans. Do we love ourselves more than we love our children? Our actions as a nation would suggest that we unfortunately do, because we are handing our children a nation that is economically, financially, morally, and socially bankrupt. The failures of our leaders have led to the state of our nation. Only principled business leaders can reverse this movement in the wrong direction. If leaders continue to default, politicians will continue to dominate our institutions and manage America’s inevitable journey to mediocrity. Today’s shortcomings will seem insignificant when that occurs. The suffering will be widespread. We are fast becoming victims of the four Ds of disaster: debt, deception, delusion, and denial.

In the absence of values, there is no standard by which the people can discern and refute the ever-present deception, delusion, and denial that become part of any culture. Our lives are saturated with them in all four of our economic institutions. Principled leaders don’t allow entropy to take root and live; self-serving politicians do. Americans are like the frog in the pot of water coming to a boil—oblivious to the rising temperature of the water until it is too late.

The Warning

Sadly, the modern United States may not have the courage to prevent its own fall because:

• No one wants to hear bad news;

• The roots of our worsening situation are not fully understood;

• We are broke; our safety nets and financial systems are technically bankrupt;

• The best measure of our financial integrity—our currency—continues to decline in value;

• Our dual value systems continue to interfere with honest searches for cause; and

• Those in control may not care about the future of the nation as much as they care about short-term self-interest.

Collapse occurs in part because people in positions of entrenched power—the elite—in the four main institutions act to benefit themselves and the special interest groups who fund them. Those in authority pass on problems and growing excesses to future generations to resolve and pay the bills. They fail to reverse entropy.

Geographer Jared Diamond, who has studied the collapse of civilizations, was recently asked whether he thought the United States could survive. “I would give us a 51 percent chance,” he responded. When asked what the critical factor would be in our survival, Diamond said that his studies indicate that “if the elites are not directly affected by the difficulties faced by others in a culture, its survival is unlikely.”8

History Is Not on Our Side

Forty-nine empires have fallen of their own weight and arrogance.9 Twenty-four civilizations have collapsed because they failed to see the long-run implications of their own actions or inactions. Moreover, only a few have succeeded in reversing the trends that ultimately caused their collapse. America has not reversed entropy.

So we must ask ourselves: Do we love ourselves more than we love our children?

Is There Hope?

This is a book of hope. It is a hope rooted in the reemergence of our long-standing, individual passion for reality, for progress, and for solutions and in our rejection of self-serving values. It will require a decade of sacrifice and action. But we must change course. There is still time to do the right thing, “to do the harder right rather than the easier wrong.”10 Taking the hard steps to forge a different future is still an option. We cannot say that we did not know, because history is rich with empirical examples of both collapse and survival. The choice is ours.

We cannot say that we did not have an opportunity to change our trajectory, first by establishing and maintaining a leadership culture built upon unifying values, and then on sacrifice and dedication to stopping the fall. Too many others have done this before us.

We cannot claim that the neoconservatives and liberals are at fault. Both share part of the responsibility. It is the 300 million of us who bear the ultimate responsibility, as we ignored debt, deception, delusion, and denial instead of paying attention to our future.

This surrender has left us broke. Some saw it coming in January 2006, as one of the nation’s large annual investment conferences concluded in Orlando, Florida. One participant reported on the results. Summarizing the three-day meeting in two sentences, he reported “All of the managers tell me that it is time to get our money out of the United States. We are ‘broke.”’11

The Bottom Line

Our nation has now passed through four decades, three wars, several government-induced recessions, several energy crises, and more money than was spent by any entity in history—without truly resolving a single major issue on either the domestic or the international fronts. We have piled up more debt in the process than was ever created, and we have nothing to show for it. We are handing our children a country that is bankrupt morally, socially, spiritually, and financially, while we justify unconscionable waste that only serves the special interests of a select few. Are we ready to change this legacy?

CHAPTER 2

The Dilemma—Is AmericaOff Course?

Dissent is the highest form of patriotism.

—Thomas Jefferson

A politician only looks to the next election. A statesman looks to the next generation.

—Thomas Jefferson

The Celebration

His name is Ross Gregory, and yesterday was his college graduation. He can’t believe that the day is finally here—June 10, 2011. He had his twenty-first birthday just last week, then it was the walk across the stage to receive his diploma; today is a day to celebrate! He scans the backyard of his family’s modest home and takes note of all the people who have joined him to celebrate his graduation and the new job he will start next week.

Dad is at the grill; Mom is busily arranging plates and food on the serving table. There must be 40 people who came to share the day with Ross and his family. Ross is an only son, which makes this type of occasion especially meaningful to his parents. They have done a wonderful job raising him. Both worked hard to support Ross, and their only recreational purchase over the many years of sacrifice is the new motor home that now sits in the driveway. Several days ago, they packed it for a long post-graduation trip they had planned months earlier. Now, it is all loaded and ready to go.

Ross’s eyes continue to survey the scene before him. All four of his grandparents are here, and they are so proud of Ross as they reminisce with other parents and friends at the party. Ten of Ross’s friends have also come to celebrate with him, and every neighbor on the block is there. Ribbons and banners are strung from tree to tree. Lights ring the yard so that the party can continue past dusk and into the evening. There is a table on which each of the guests has left a card, a small gift, or a souvenir for the occasion. Overall, this is a great day.

Later in the evening, after dinner has been served, it is time for Ross to open his presents. Ross and his parents sit at the old picnic table near the house, where the light shines out from the kitchen. The first present that he opens is from his parents. Surprisingly, it is the loan payment book for his college education. Ross is stunned to see the 10-year payment book with his name on each of the monthly stubs! He opens the second gift—a payment book for a home mortgage in his name. There are 20 years left on the loan. The third is the payment book for his new car, and the fourth is the payment book for his parents’ new motor home. The process continues. There are health insurance payment books, prescription drug payment books, property tax coupons, life insurance coupons, burial insurance coupons, and others. Ross is dazed but grateful for all that his family has done for him. But, what is the meaning behind all of these payment books? His father and mother are only 57.

The party ends soon after the opening of these unconventional and unexpected gifts. A few friends linger and laugh with Ross about all of the good times in school and how their friendships have progressed. Most of them, like Ross, are single. Like Ross’s family, most of his parents’ friends had only one child, maybe two. It was just too expensive to have more.

As the last guest leaves, Ross’s parents bring out a big envelope filled with the payment books he had just received. They hand it to him and say good night.

Early the next morning, Ross’s parents depart on their cross-country trip and wish him well in his new job as they pull out of the driveway. He returns to the house and takes out all of those payment books that will be his for the next 20 years and adds up the obligations. When the total shows up on the machine, Ross realizes that he must somehow write checks for more than $85,000 per year for the next 20 years just to pay the current and anticipated debts that his parents have left for him. This amount must begin to be paid before he has even started his career or paid his own taxes. How can this be?

The Long, Hot Summer

As the summer wears on, Ross hears regularly from his parents. They are having the time of their lives. Ross, on the other hand, uses the summer to try to make some sense of the world around him. An avid reader, his stack of history and current events books grows by the day. His fervor for reading opens his eyes—and arouses his concern.

Ross’s recent research into the prior collapses of cultures and civilizations has been particularly shocking; he is beginning to realize that many of the deficits that caused these ethnic disintegrations are now prevalent in the United States. The environmental losses, misuse of resources, overuse of land, overfishing of local waters, loss of forest land, unwise expenditures, and the like, are all failures of leadership in Ross’s mind.

He realizes that similar problems exist in his own community. Ross knows that the local police force and firefighters have been protesting in City Hall because their pension fund has not been adequately funded. Their health care benefit plan has been cut as well, and other city employees are also complaining as they begin to find themselves in similar positions.

Ironically, property taxes have been raised every year for the past decade with no increase in services. Roads are going without repairs. Water quality suffers because of an aging water treatment plant. Bridges are closed because there is no money to repair or rebuild them. City council meetings have turned into hordes of angry people.

The county government is also in trouble. Wholesale retirements in the sheriff’s, fire, and police departments—and even in the wastewater treatment department—have occurred. New replacements are very slow in coming because of a long-term wage freeze. Other citizens are openly bitter about the county’s failure to successfully cope with the large numbers of illegal immigrants who have descended upon them, which has led to the taxing of emergency rooms for health care, the packing of already overcrowded primary and secondary schools, and the overtaxing of police and fire services. There are also new gangs, growing drug sales, and an increased rate of serious crimes.

It is the national picture that disturbs Ross the most, however. He is alarmed to learn that his country is risking bankruptcy as it balances huge security outlays, bloated domestic spending, massive unfunded obligations, and growing debt service costs, with dropping tax revenues. Then there was the subprime loan crisis and the takeover of two of the world’s largest government-sponsored enterprises (GSEs) several years ago, while the insiders still collected millions in severance pay. That crisis followed an earlier one that caused the collapse of two of Wall Street’s oldest securities and investment banking names. Soon thereafter, the federal government bailed out two of the three biggest automakers—one of them for the second time!

And it doesn’t end there. Consumers, whose home values had earlier plummeted because of the subprime meltdown, had to turn to credit cards for living expenses. Their home equity lines had long since been drained. Their credit cards have hit their limits, and their stagnant pay levels won’t allow them to keep up with interest payments. One major credit card company has collapsed; others have filed for bankruptcy protection.

This tenuous situation did not go unnoticed around the world. The first groups to begin selling U.S. Treasury securities and GSE bonds were Asian central banks. Several had been looking for such an excuse to dump their U.S. Treasury securities in favor of gold. As the dollar plummeted in value, the economic dominoes soon began to fall throughout Asia and Europe. Even more tragically, several developing nations in Asia and Africa, who survived on exports to the United States, saw their central banks collapse because of the value decline in their holdings of U.S. Treasuries.

After attempting to swallow this new information, Ross emerges confused and puzzled. His thoughts and questions regarding each issue follow.

America’s Institutions

Ross now realizes that the public no longer trusts what it is being told by government, businesses, schools—and even organized religious institutions. Social service groups are overwhelmed, because churches and charities will not take on the burdens of the past. Since he is now a businessman, Ross decides to focus his research on how business should provide leadership to address these issues.

America’s Economic Challenges

Ross quietly considers the staggering array of issues that has confronted him since graduation. His parents are now gone. His inherited debts and financial obligations are overwhelming. His community is failing. His friends are, like him, dismayed and confused.

Sadly, he is only now aware of a larger set of issues confronting the nation: a declining dollar, massive debts, a tsunami of risky derivatives, unforeseen disasters with no provisions for overcoming them, lurking inflation, declining infrastructure, millions of jobs lost to overseas employers, stagnant wages, rising unemployment, and a host of international challenges that rival any peacetime era in his country’s history. The economic meltdown of 2007 to 2009, he learns, has stolen nearly half of the value of many families’ savings and investments.

Even more disturbing, Ross realizes that the nation, like his community, is deeply divided and without a unifying set of values on a host of economic and social issues.

Lastly, employers—the engine of free enterprise—are struggling to meet their financial obligations, since bank credit dried up after the meltdown. New investments are being postponed. Plants are being closed. Employers and employees alike are deeply angry. They realize that America’s challenges are the result of bad leadership over a long period. Now it’s time to deal with each of those issues. Ross is still hopeful, as he considers the future.

The Dollar The dollar has lost 95 percent of its value since 1957, and half of its value since the late 1990s. Ross also discovers that the United States has had a positive balance of payments only a few times in the past 60 years, further weakening the dollar. This chronic balance of payments deficit must be repaid by the sale of U.S. Treasury bills, thereby giving IOUs to foreign central banks. He worries that the value of his future savings will be wiped out by the failing dollar, and wonders—What should business do?

Debt Federal, state, county, and local governments are all deeply in debt and are looking for ways to fund pension plans that are now underfunded. If this weren’t bad enough, average citizens are hopelessly mired in personal and credit card debt. How did this happen? And what should business do to resolve the issue—not to mention the debts of the nation as a whole?

Derivatives The market for derivatives—hedges against certain types of financial risks—has grown worldwide at a high rate. By the end of 2009, the total derivatives outstanding had reached nearly $700 trillion—more than 10 times the size of the world economy, 70 times the size of the U.S. economy, and hundreds of times the total capitalization of the banks with derivatives on their books. Again, Ross wonders, what should business be doing?

Disaster More than half of the U.S. population now lives within 50 miles of the nation’s coasts—and therefore is more vulnerable to natural disasters. Many cities are on earthquake faults, while others sit astride pipelines carrying oil and natural gas. We borrow, send out grants, and then borrow again to repair storm damage. How should business remedy this?

Inflation Inflation has reached 10 percent per year, excluding food and fuel, and it is silently cutting the spending value of savings accounts and pension funds. Inflation is only the friend of borrowers, and it is the enemy of lenders, so the nation inflates away its debt, while it borrows to pay current bills. How should business respond?

Liquidity The money supply has grown so dramatically in the past five decades that the dollar is worth only a fraction of its 1957 value. People’s savings are worth little because low interest rates allow for so much money creation. Federal Reserve money supply expansion is rampant, as low interest rates spur cheap bank borrowing and big lending margins. Is this causing foreign governments to replace the dollar as the world’s reserve currency, Ross speculates? Should business demand policy changes?

Pensions Ross knows that slightly more than half of all Americans even have a pension plan, and that fewer still are in fully funded pension plans. Many public pension plans are underfunded, and a significant number lost value in the 2007 to 2009 meltdown. Can business right this situation?

Security The federal government spends more than its net tax receipts for security—the Department of Defense, Department of Homeland Security, Department of Veterans Affairs, and, rightly, interest on the national debt. Should business make us pay off our large debts? Ross is pretty sure that we can’t be secure if we are broke.

Restoring Our Economic Future Ross ponders this urgent set of facts and indicators of the financial condition of his country. He is alarmed and dismayed, and his dismay turns to irritation and anger as the reality sinks in that so many of the nation’s financial resources have been spent without regard for the needs and opinions of the majority of Americans. Business should lead the call for change, he decides.

America’s Domestic Challenges

Then there is the challenge of other domestic issues: demographic imbalances, drugs and other addictions, education underachievement in many cities and states, continued energy overuse, nagging environmental problems, overstressed middle-class families, persistent health deficits, plummeting home values, an aging infrastructure, inequities and inefficiencies in the legal system, and the failure to manage one of the nation’s most valuable resources—water.

Does business have a role in overcoming these deficits? Can it ignore them—perhaps at its peril? How much more delay can the nation tolerate, while politicians listen only to special interests? Should business take the lead in putting forward solutions? Ross begins to feel a sense of exhilaration as he considers the sheer magnitude of the challenges that lie ahead. What an opportunity this is!

Demographic and Population Trends The United States is aging. Ross remembers how in 2007, 77 million baby boomers began to retire and sell their retirement assets and securities. The markets had several bad years, made all the worse by the meltdown. The times were turbulent. What was even more alarming, Ross recalls, was how 60 percent of all federal, state, county, and local employees began to retire starting in 2010. Many job losses followed.

At that time, U.S. birthrates were below replacement levels (2.1 children /1,000 women per year), while the illegal population was growing at a much faster rate. Ross now ponders the relationship between children lost to abortion (1.4 million per year since the 1960s) and the illegal immigrant workers who replace them in numbers. He also sees jobs going overseas because of high corporate tax rates. The unpleasant conclusion to the matter is that members of his generation will be caring for their children and parents at the same time.

Drugs and Addictions Ross finds it surprising to learn that marijuana has taken over as the biggest cash crop in the United States. Why do Americans fall victim to this scourge in such large numbers? The long-declared war on illegal drugs appears to have long since been lost. Ross can’t find a single illegal drug that doesn’t result in physiological or neurological damage to the user. Sadly, he also learns that the health care, rehabilitation, and other economic costs of alcohol and drug abuse had already reached nearly $250 billion in the year in which he was born (1990). These costs are probably $1.0 trillion now, he concludes. Should business assert more leadership in this arena? he wonders.

Education