The Business of America … And of the World, Part II

THE OPEN MIND
Host: Richard D. Heffner
Guest: Ambassador Lester Korn
Title: “The Business of America…And of the World”, Part II
VTR: 9/16/92

I’m Richard Heffner, your host on THE OPEN MIND, and my guest today again is a man particularly familiar with and to the world of corporate governance in America…and beyond our borders as well, now that ours is indeed a world economy, with economic interdependence, rather than independence, its hallmark.

When he first joined me here many years ago, I introduced today’s guest s the founder and Chief Executive of Korn/Ferry International, the world’s largest executive search firm. Today he is its Chairman Emeritus as well as the head of a privately-owned investment firm.

But Lester Korn is also Mr. Ambassador, having served as America’s Ambassador to the United Nations Economic and Social Council.

And so I’ve asked Ambassador Korn to THE OPEN MIND today to talk broadly about the business of America and the world at large.

Now we actually record this program weeks before America’s 1992 Presidential election, and I must say that at no time in my own long career as a quadrennial election watcher have I noted as much concern in America for matters economic and corporate as surfaces today.

So, as in the program we’ve just completed, let me turn again and ask Ambassador Korn about some of those concerns and learn his own very tutored points of view on them. Now, Mr. Ambassador, thank you for staying with me. Thank you for doing the second program in this present series. At the end of the last program, I, I was sort of unfair to you. But I was intrigued by your saying, in what I assumed, and since our audience will see this program after the election is over, there’s nothing political about it. What I would have assumed was not quite so much a contemporary Republican attitude, I would identify it with the internationalist Republicans of the past. But you were saying the counter part of you felt that we had to turn…we, we shouldn’t reject the outside world, we must understand that our future is international. But that we had to be increasingly concerned these days with our domestic economy, with what’s going on in our own country. And, in the moments between the last program and this, you said we need something like a Marshall Plan for our own country. I wonder if you’d elaborate on that.

Korn: Well, Dick, again, thank you for asking me to stay and to be here without. It’s always such a pleasure to do this program with you. The…I consider myself a Conservative Republican. I served in the Administrations of two Conservative Republican presidents. The fact of the matter is that the differences internally are how to accomplish objectives once the priorities are set. And it is my view that we will have to bring the deficit down. We will have to bring spending down. The corporate sector and the business sector and the private sector will have to understand that there are certain things that can be done on a voluntary basis, and should be done on a voluntary basis because, quite frankly, we cannot afford to continue to be the world’s largest debtor. Now, having said that, you, as a noted historian, would know far better than I that the greatest periods of growth in the United States of America have come when we have been debtor nations. And the smallest amounts of growth have come when we have tried to not be debtor nations. And, so we have to be very, very careful. I am of the opinion that over the next four or five years the economic and social planning have got to come together, and I don’t think labels are going to matter quite as much. We’re going to have politics as usual. We’re in a political period…Democrats will be Democrats and Republicans will be Republicans and we’ll each try to get our own elected. But the fact of the matter is the problems are the same, whether you‘re a Republican or a Democrat. It’s how you approach those problems. I think the further we move away from the free capital system, the further we move away from the private incentive…the more dangerous it becomes for the United States of America.

Heffner: Still you say we need…you seem to say this…we need economic planning.

Korn: Oh, absolutely.

Heffner: Well, now…how do you reconcile a national economic plan, let’s say, with your position that the further we move away from a free capitalist society, the worse off we will be?

Korn: I think that the time has come to take a look at the way the bureaucracy of the government is working. I believe that the country needs an economic Czar, because I can’t think of a better word to integrate the banking system, the worldwide markets, which are instantaneous, the Bundesbank…and what’s happening in London, and what’s happening in New York, and what’s happening in Tokyo…are interchangeable. If one hiccups, the other sneezes. And I think that we have got to get focused on one area of the business world that is hurting very badly. If you drop below the Fortune 200, which is really a very few companies…not the Fortune 500…

Heffner: Yes.

Korn: …the Fortune 200…you will find that they are having massive banking problems. They cannot borrow money to expand, they cannot borrow money to lend…to build new factories, or to add product s. Now, we’re in a recession. We’re going to come out of this recession. I can’t tell you when. I can’t tell you whether it’s going to be in the next four months, or in the next six months, or in the next year. But we will clearly come out of his recession. Public will start buying again, values will begin to stabilize in real estate and so forth. And we have got to find a way to decide, particularly now that we may be a trading zone of enormous magnitude that will be highly competitive with Europe and the Pacific Rim. We can no longer say that we can act alone…we can’t. The Group of Seven must act together to accomplish anything. Now we are the leaders of the world, and with all good hopes we will have no major war or…we’ll have regional wars, I rather suspect, unfortunately…but I think that the country has to stay armed, it has to maintain a strong defense. There are at least one or two major nations out there that I think have some military objectives, and I believe that it’s far from clear as to where Russia will end up. So that I don’t think you can simply say, “Oh, well, we’ll take it fro the budget of the Defense Department”.

Heffner: Where, then, will we take it from? What will be the source of the Marshall Plan, American Marshall Plan aid?

Korn: If you accept the notion, which I’m not sure you and I being such old friends, you will accept on me…if you will accept the notion that there is considerable inefficiency and considerable fat and waste, not only in the government, but in business, and if you take a look at something like Peter Graces’ Commission Book and start to implement some of these programs, you pick up billions and billions of dollars. Somehow we have to find a way to tap into the third market in this country. I believe there’s more money lost in taxes through what’s going on in the barter world of the United States at the moment than anyone can imagine. I believe that the capital gains tax has to come down to provide incentive. I think that you have to give the President of the United States, be he a Republican or a Democrat line item veto power, and I believe you have to have a coordinated economic policy for this country. That doesn’t mean directed.

Heffner: Well, you say, “Doesn’t mean directed”. But if you’re talking about an NEP, a National Economic Policy, and if you’re talking…and it may have been a slip on your part…but you’re not given to slips, you talk about an economic Czar…

Korn: Yes.

Heffner: “Czars” have subjects over which they exercise control, over whom they exercise control. That doesn’t sound like a free market which is what you have touted as being the source of our strength.

Korn: I would use the economic Czar to get the economic elements and some of the social elements in control in Washington. That economic Czar is necessary in Washington. I remember several years ago, Jean Kirkpatrick, who is a good friend of mine, great American Ambassador, telling me that she had tried to find out how much we were spending on the UN at that point in time. And that she had looked in the budget, and of course, there was a figure for the UN. But it didn’t include what agriculture was spending, and it didn’t include what Defense was spending, or what the intelligence services were spending and so forth and so forth. And to this day I would rather suspect that both Jean and I do not know the total number despite having served in the UN, and seen it turn around form something that was very ant-American to something that is, at the moment, helpful to the United States. The fact is that we are going to see dislocations over the next few years if the pact is ratified, if the master pact is, is put in place in Europe. If our free trade zone is put in place you are going to see dislocations. I mean it is true…Lynn Martin said the other day a hundred and fifty thousand jobs, perhaps. You can’t quantify it, but it’s going to force us to upgrade what we do with our factories, what we do with our training, what we do with our…the infrastructure of this country. We have spent 40 years fighting a Cold War. Fortunately, we had Presidents who understood that defense came first and we won. We won the Cold War at a tremendous price. It wasn’t apparent at the time, because it wasn’t a “hot” war, so we weren’t losing bodies, thank heavens, of Americans, but we were losing millions and millions and millions of dollars as we subsidized the world. We can’t do that anymore. We cannot subsidize Germany. We cannot subsidize Japan. We have to turn internal. That is not, in my view, a Democratic or Republican issue…it is an American issue. And when I say you need an economic Czar, I think, in my own view, that because of the proliferation of the bureaucracy in Washington that unless you have one figure who is enormously respected and has the kind of credibility that could pull the elements together, we will for instance, if we don’t have it, have a banking problem…some time in the next year of some magnitude. We will not have cleaned up the S&L mess. But these are the kind of things that have to be coordinated. And at the same time they have to protect the Social Security system…can’t keep going off balance sheet, off budget to do it. Now the interesting thing is that both parties have very talented people who can do it. And naturally, you know I would prefer that it be a Republican. And I can think of a couple of people who would be absolutely brilliant at doing just that. I think the nation…if you look at what happened after the Second World War…we put Europe together. If you look at what happened after the Second World War…we put Japan together. We did it with two totally opposite personalities…General Macarthur and General Marshall. They could not have been more different in style and in outlook and so forth, but they accomplished the programs that they wanted to do. If you accept my premise that we have just finished what perhaps a hundred years from now will be considered the Third World War, then we need that Marshall Plan, or whatever plan you wan to call it for America. We have decimated in winning a great deal of our strength. It has to be re-built. At the same time that we remain strong. It would be a terrible mistake in my mind to lose the defense in order to simply immediately bolster the internal.

Heffner: Do you feel that there is some kind of consensus growing? Maybe to it belongs Ross Perot and Paul Tsongas and Warren Rudman and yourself and a number of others wouldn’t talk about an economic Czar, but maybe they would. Do you think that’s what’s happening out of desperation, out of a recognition of the trouble we’re in and the increasing trouble we may be in, in the next year or so? There is that central core of national economic policy persons.

Korn: Let me answer the first part of the question because I do agree with you…and, and I know all of those people…I’ve known Ross Perot for 25 years and so forth and so forth. And I would include in that group of people who understand this Nick Brady, the Secretary of the Treasury, certainly…most certainly James Baker, and on the Democratic side Bobby Strauss, I, I think that the…there is a growing consensus that it cannot continue precisely as it has in the past. Not only in the political world, but in the business world. You, you look at what General Motors has done this year…it finally bit the bullet, and will it succeed? I don’t know. I rather suspect it will. but three or four years ago we decided, as a national policy, if you will, although it wasn’t phrased that way at the time, to make American automobiles more competitive, to make them more saleable around the world. We have made an enormous improvement in that industry. Is it in time? I don’t know. India today buys more automobiles than France.

Heffner: American automobiles.

Korn: No. Japanese automobiles.

Heffner: Aha.

Korn: The entire market in India, which is larger than France’s automobile market is Japanese. So, whether we have come to that national policy in time…and I hope so. But there’s time for others. We have got the housing industry, we have bio-technology, we have…we have opportunities in communication that it’ll be decades before other countries can even under…begin to, to deal with some of the things that we haven’t taken off the shelf. And I must say, Dick, as, as a Conservative Republican businessman, it is high time that the American banks and venture capital companies help the middle band of American companies because what is stopping the 201…Fortune 201 company to say the Fortune 750 company is lack of capital. And until they have capital to expand, you can’t create jobs. Until you create jobs you can’t fix the education system. If you are going to get all of this coordinated…after all we don’t have State Department in the hand so anyone other than the President of the United States and the Secretary of State. How can we take the other parts of the equation, which is economic and social, and have them frittered into hundreds of agencies and not coordinated?

Heffner: Yes, but let me just ask this question: And it is, Lester, a kind of bating question, of course, because I’m making the point that you sound to me now like a New Deal planner. You sound like a Socialist planner. You sound like one of those people who say “No matter what it is, we’ve got to put it all together and we need an economic Czar”. Now, there’s a change, isn’t there, in your thinking?

Korn: No.

Heffner: No?

Korn: Not at all. First of all, when you have an economic Czar, if you were to name one, he would have to be, in my mind, someone who believed in the capitalist system and would…his main objective would be to encourage it and grow it, which is having a bit of sputtering problems at the time.

Heffner: Wait a minute, wait a minute. You mean someone who believes in free actions on the part of corporation as well as individuals?

Korn: Yes. Absolutely.

Heffner: Well, now does that fit into the notion of an economic plan and a Czar who’s obviously going to say, “You do this and you do that, and you may have this and you may have that?”

Korn: Well, you have to incentivize it. You have to give tax credits, you have to give capital gains treatments to…

Heffner: I see.

Korn: …if you, if you want to accomplish a true free trade zone in this country, you are clearly going to lose jobs. You have to incentivize the job industries that provide you with the higher income. The problem has been that over the last five years, and then I want to come back to another point, very quickly…the problem for the last five to…or so years, has been that the pattern has been to lower the scale of the jobs and to see more and more of them moved to service. That tide must stop. That you can incentivize and you can still let it be a choice in free capital movement. I mean that part I’m, I’m not concerned about. I don’t think that the labels that worked twenty or thirty years ago are going to work in the next ten or fifteen years, and you and I are both going to be here, so we’ll debate this, I’m sure, one or two more times. But I don’t believe for a moment that I’m espousing the Socialist viewpoint, or the Democratic viewpoint…

Heffner: I knew that would get you, Lester.

Korn: (Laughter)…Dick, because I don’t happen to think that those two programs work. Well, Socialism has already proven it does not work, just like Communism has. And I’ll leave it to the Democrats to prove what they can prove. But the republican viewpoint, small ”r”, has always been to allow people to create their own destiny. To allow them to see the opportunity. To allow them to reach for it. And to try and minimize the taxes.

Heffner: I suppose, Ambassador Korn, that that is as forthright a statement as we could possibly end our programs with, and this is the time for me to say we’ve reached this end. And, you know, a couple of years down the road we will be back here and see how valid what you’re suggesting is. In the meantime, thank you so much for joining me today on THE OPEN MIND.

Korn: Thank you, Dick, I’ll look forward to it, and thank you.

Heffner: And thanks, too, to you in the audience. I hope you’ll join us again next time. And if you care to share your thoughts about today’s program, please write to THE OPEN MIND, P.O. Box 7977, FDR Station, New York, NY 10150. For transcripts send $2.00 in check or money order. Meanwhile, as an old friend used to say, “Good night and good luck”.

Continuing production of this series has generously been made possible by grants from: The Rosalind P. Walter Foundation; The M. Weiner Foundation of New Jersey; The Thomas and Theresa Mullarkey Foundation; The New York Times Company Foundation; and, from the corporate community, Mutual of America.