James Pethokoukis reports that at a recent jobs summit with business leaders, CEOs told Obama that his economic agenda and giant programs may in fact be hindering jobs recovery.
CEOs are saying as much amongst themselves. At a recent symposium, Intel boss Paul Otellini, a contributor to both parties, expressed concern about the “amount of variability in the system” created by the state of policy flux in healthcare, energy and tax policy. “It is very difficult to make a hiring decision,” he said. General Electric chief executive Jeffery Immelt, a strong supporter of Obama’s cap-and-trade proposal, added he would just like to “know what the rules are.”
All in all, a disturbing replay of the 1930s when FDR’s big changes left business reeling with uncertainty and confusion. The “devil you don’t know” and all that.
That is very similar to what business leaders were saying during the Great Depression. But there’s one key difference, which is that businessmen are much better at playing the game and shaping the rules today.
When businesses are afraid to invest and hire because they don’t “know what the rules are,” it’s called regime uncertainty. Regime uncertainty’s role in exarcerbating and extending the Great Depression has been carefully examined by the economic historian Robert Higgs, most notably in a 1997 paper by the name “Regime Uncertainty (pdf).” Higgs presents poll data and anecdotes from the businessmen of that era, who sounded frighteningly similar to the Immelts nad Otellinis of today.
For instance, Higgs notes a 1939 Fortune poll that found that 65 percent of a sample of business executives agreed that the policies of the Roosevelt administration “have so affected the confidence of businessmen that recovery has been seriously held back.” A 1941 Fortune poll indicated even deeper sources of uncertainty: almost 93 percent of businessmen expected that in the case of a war (which looked increasingly likely, obviously) the postwar regime would be one with significantly weakened propert rights. Fully 40 percent thought that the US regime would be a “semi-socialized society in which there will be very little room for the profit system to operate” or “a complete economic dictatorship along fascist or communist lines.”
Of course, both the executives of the Great Depression and those of today have it in their best interests to stoke fears about the influence of government, so that they are better able to exert their own influence. Surely a 1941 executive in the know didn’t really think that we were going to end up with a fascist dictator, just as Immelt, a big-time Obama supporter [Immelt actually donated to the McCain campaignm as a commentator pointed out. GE overall, however, broke two thirds for Democrats in 2008. –JL], doesn’t think that Obama’s going to destroy the private sector.
But Higgs presents another poll that highlights an interesting difference. A majority of businessmen, according to another Fortune poll, thought that the administration had such disregard for business and contracts that it could not be trusted even in the rearmament process. As Higgs explained, “[e]vidently, many business executives so distrusted the Roosevelt administration that they would rather forgo potentially lucrative munitions contracts than deal with the administration.”
Contrast that with the actions of Immelt. At every turn, GE has been begging to deal with the administration on everything from the stimulus and the bailouts to cap and trade. It’s not that GE and the others are afraid that the Obama administration is incorrigibly antibusiness, as the Depression businessmen thought of the Roosevelt administration. Instead, it’s that they are terrified that the fruits of their lobbying will be wasted and Obama’s programs will benefit someone else, and not themselves.