Rebuilding the Will to Believe

By Paul A. Laudicina
Managing Officer and Chairman of the Board of A.T. Kearney

The daily recitation of problems U.S. President-elect Obama faces as he takes office is inescapable, the litany beginning with an economy on the brink. And while he won the American presidency on a simple and powerful message of “change we can believe in,” the irony is that a failure to believe is now protracting our economic problems. Mr. Obama surely recognizes this, as undoubtedly so do countless other world leaders. In discussing the stimulus package recently, Mr. Obama explained that "Our problem is not just a deficit of dollars. It’s a deficit of accountability... a deficit of trust."

The credit crunch has spiraled into a near total collapse of the financial infrastructure, shattering belief and trust in the integrity of the system. Original causes aside, even as we dissect the financial crisis to understand why we lost trillions of dollars of capital, it becomes clearer that a confidence deficit is now the chief impediment to moving forward. And there is no dialing down on all the other deficits that bedevil us short of redressing this gaping one.

Even before the October market crash, this erosion in trust was evident. A Gallup poll last summer indicated that confidence in financial services had declined dramatically, with 50 percent of all consumers professing little or no trust “in business broadly or institutions of all kinds.” This loss of public confidence in the private sector provides impetus for the pendulum to swing from deregulation back to re-regulation. Similarly, the private sector has lost trust in consumers—as companies have ceased to extend credit to anyone but those who need it least. So the break in the cycle of trust is evident at all the critical synapses of the economy—lender and borrower, employer and employee, business partner to business partner.

The result is a fractured economy in which disparate groups no longer believe that others will be able to deliver on their promises or meet their obligations, and no longer see each other as partners in the great social and economic enterprise, but as potential threats. In this environment, we instinctively recoil: We put our wallets under lock and key, we hoard rather than invest—and we stop growing our economy. In Keynesian terms, we are now prey to the paradox of thrift. The longer we retrench, the longer we delay responsible solutions that spark renewed, healthy economic growth—the polar opposite of “irrational exuberance.”

The last time the U.S. was in a confidence crisis was, of course, during the Great Depression. Even after the government began taking strong measures, investors held back. President Roosevelt understood that even the most ambitious programs would not succeed without renewed belief. In a public address at the nadir of the banking crisis of 1933, he cautioned that the success of readjusting the financial system rested with confidence, which was "more important than currency, more important than gold." Restoring the American dream required the quintessential American approach: innovative, pragmatic solutions and the unfailing optimism that tomorrow will be better.

In the last few months, swift and coordinated action of global policymakers pulled the global economy back from a dangerous precipice. This was a good start. But even as global stimulus plans are being fortified, even as we address the failures of the credit system, we continue to lack confidence, without which no amount of actions or policies will bring about forward momentum. President Roosevelt would surely agree, saying "We have provided the machinery to restore our financial system; it is up to you to support and make it work."

To make it work, however, we need to turn a critical corner. The old rules that set borders to our interests and rigidly defined our constituents, our allies and our competitors, will no longer suffice. The old antagonisms between business and union, worker and employer, environmentalist and industrialist, public commons and private estate, are no longer affordable. The forces driving global opportunity or risk—trade, finance, technology, pollution, terrorism—know no borders. There can be no constraints on the intersection of private good and public interest.

Mr. Obama will need to forge multilateral partnerships that don’t just cross the aisle but reach far beyond Capitol Hill. Indeed, we can be encouraged by the broad-based demographic support achieved in the election as he swept to victory, and the spectrum of his early cabinet appointments. But there is little time to spare: He must engage—and quickly—with leaders in business, governments and academia to create an environment that allows both sustainable economic growth and a mechanism for sharing the benefits.

As Peter George reminds us in The Leadership Mandate of the Millennium, “The era of ‘privatizing’ profit and ‘socializing’ the social and environmental costs is passing. These costs are growing and they can no longer be regarded as somebody else’s problems at some indefinite time in the future…the future is now.”

In short, the President-elect has an opportunity to orchestrate the best of our nation’s talent to develop the pragmatic and creative solutions that are the genius of America. Only by doing so, together, can we restore our confidence and our trust to build a new era of prosperity.

Paul A. Laudicina is Managing Officer and Chairman of the Board of A.T. Kearney. Earlier in his career he served as Vice President-elect Joe Biden’s Legislative Director for five years.

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