Politicians Feel Pressure from Business
By John Kornblum

We are paying for the fact that ties between political decision makers and the Executive Suite have never been very close

During the 1950s, when I was a child in Detroit, our local hero was "Engine Charlie Wilson," the chief executive of General Motors.  His favorite saying was "What's good for General Motors is good for America," and we all agreed.  Today, few Detroiters would tolerate such boasting.  General Motors and Ford are closing factories and cutting employment drastically.

The recent bankruptcy of the Siemens-BenQ venture in Germany and the controversy within Airbus are dramatic German case studies of a growing problem: public anger with corporations over the social pain of massive economic restructuring caused mostly by globalization.

German politicians are finding themselves caught in the middle between employers' need to cut costs on the one hand and anger from voters about factory closings and job cuts on the other.

One can read the political reaction each day in the press, and not just from the left.  Even members of the CDU have begun to demand more social justice as a counterweight to globalization.  It is probably no coincidence that two leaders of "old economy" Länder, Saarland Minister President Peter Müller and Nordrhein-Westfalen Minister President Jürgen Rüttgers, are leading the charge.

Politicians from around Germany report high voter interest in strengthening political participation in corporate decision-making.  One official commented recently that voter demands for government action to control globalization were the number one issue raised at political rallies he attended.  He noted: "During political gatherings, we are confronted with a negative atmosphere on this subject more massive than any I have ever experienced."

It appears that for the first time since World War II, the core segments of German society, the workers and middle managers, are beginning to fear that rather than providing a foundation for their prosperity, the behavior of great corporations is threatening to destroy their very way of life.  So far, neither politicians nor company managers seem able to respond successfully to this uneasiness.

Relations between German business leaders and politicians have never been especially close.  But as a result of these pressures, the already weak government-industry dialogue has become increasingly loud and unfriendly.

Many business leaders with whom I have spoken claim that they simply cannot get politicians to understand how restructuring is building a better future for Germany.  Repeating such sentiments to leading politicians often draws a bitter response.  "They should think of Germany instead of their high salaries," was the response from a senior CDU leader recently.

Political scientists have been predicting for a decade or more that the era of clear political majorities in Western countries was over.  Voters doubt that any political party can protect them against the ravages of change.  They fear that their way of life is disappearing. As a result, they spread their votes around, like a good stock market investor, trying to stifle change to make sure that nothing dramatic takes place.

Both government and business have a common interest in avoiding radicalization of the political/economic debate.  But responding to public fears requires more than an agreement to talk more openly with each other.  Neither political nor economic leaders will be able to deal with growing public anger unless they develop a new vocabulary which makes it possible to frame forward-looking responses to the new challenges.

In the past, production was located in places closest to raw materials and markets in order to shorten the time necessary to bring a product to market.  In the world of the globally integrated corporation described by IBM chief Sam Polisario, geography and time will lose relevance.  Resources will be distributed across global networks, and new means of rapid communication will allow corporations build multiple centers of production and distribution. As companies learn to shift resources rapidly across time zones and national borders, maintaining traditional employment in old facilities will become increasingly difficult.

Both business and government will be forced to take account of the effects just this one change will have on every element of the supply chain, from education and innovation to capital markets to flexibility in production and labor.  To argue that social justice is more important than freedom has little relevance to the radical deconstruction of existing economic patterns which is now going on.  But without a broad cultural understanding for how these changes can actually help build more prosperity and social justice in the future, economic reforms could be meaningless.

In fact, even if all reforms now being debated were passed, most countries would still not possess the analytical tools to apply them accurately to the new forces at play in a  globalized world. Existing means of communication between government, labor, education and industry won't let this happen.  There is an urgent need for a new sort of public-private partnership whose purpose is to provide the tools necessary to actually implement reforms.

None of this is revolutionary.  Smaller countries such as those of the Nordic region or the so-called Tiger states of Asia have learned to move fast and have succeeded . The major industrial nations carry so much baggage from the past that they must work even harder to adapt.  If they do not, public cries for more radical solutions which will make matters worse are likely to get louder.

Ambassador John Kornblum is a former U.S. Ambassador to Germany, an AICGS Trustee, and Chairman of Lazard and Co. GmbH.

This essay appeared in the January 18, 2007, AICGS Advisor.  The original version appeared in German in the December 20, 2006, Süddeutsche Zeitung, and is available by clicking here.