Nicole Gelinas, the original and always thought-provoking author of After the Fall, offers a first look at the presidential race in this month’s cover story. You should read the article to understand what she argues is the critical issue suppressing consumer confidence, possible solutions and the shortcomings of the candidates. But I want to raise a different, more basic challenge that President Obama and the Republican candidates face and that is the issue of leadership.
Ron Heifetz and Marty Linksy, professors at Harvard’s John F. Kennedy School of Government, have written about the difference between technical leadership and adaptive leadership. In most instances, technical solutions will suffice. That means that where there is a problem, the leader merely needs to find the solution. So a president, for example, can go to his advisors or technical experts to fix a problem.
More challenging times and situations, however, call for what Heifetz and Linksy refer to as adaptive leadership. Faced with the vast scale of our current economic problems, it is not enough to unleash the technical experts at the Office of Management and Budget. Closing some loopholes in the tax code may be desirable, and may even increase revenue. But when we are on a course that is generally acknowledged to be unsustainable, it is we who are the problem.
And the key leadership challenge at such a time is to help people understand why they must change and how they can do so.
This leadership insight is well known to financial advisors. It is not unusual for example for clients to request retirement account withdrawals at an unsustainable rate. The reasons could be cost overruns on a big vacation or a desire to help the grandchildren pay for college. Regardless, there comes a time when the advisor can no longer provide a technical fix, such as an increase in the equity allocation towards long-term growth or a refinancing of costly debt. It is then that financial advisors must employ adaptive leadership, informing the clients that they must adapt their behaviors to financial reality. The clients could limit their travel and eat out less often; be less generous with gifts to grandchildren; keep their jobs longer than planned or go back to work to boost their income.
And so it is with the economic leadership of the country. The leader deserving of your support is the one who will call for a raise in the retirement age that will keep Social Security solvent; or means-test Medicare, which is on track to go bust this decade; or insist in his or her budget that if we lack the resources, we should not authorize the expenditure. Since we as a nation are not retired, it would be particularly important to hear candidates’ ideas on how to boost economic growth and get companies hiring again. Government spending seems to have been ineffective in achieving those ends (at $278,000 per job “added or saved”), despite cherished Keynesian arguments to the contrary.
The time is ripe for adaptive leadership. Republicans can turn to some of Paul Ryan’s plans and President Obama need only stand behind his National Commission on Fiscal Responsibility for sensible ideas on budgetary restraint and seeding economic growth. Which candidate is ready to assume the financial advisor leadership model?