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Last updated: May 19, 2012 12:20 am
In recent years, Howard Schultz, the founder and chief executive officer of Starbucks, has battled to change how we drink coffee. Now he is engaged in a much tougher mission. Last week in Washington, D.C., the charismatic Schultz took to a platform at a vast investment conference, and made a highly emotional appeal for political reform. More specifically, he repeated a call he first uttered last year – namely that businesses and investors stop funding politicians, unless the politicians pledge to break the poisonous gridlock that is now besetting Washington.
Will anybody listen? Don’t hold your breath. Last year, Schultz said that 100-odd executives were promising to follow his lead. Last week, I chatted with dozens of CEOs of American companies, who were in Washington for a forum. Nobody there seemed about to launch a funding strike. On the contrary, many of them were mulling where to send their campaign dollars, as lobbyists beat the drum.
But if you want to understand why Schultz’s comments matter, take a look at a survey recently carried out by The Conference Board for The Business Council, an industry body. This asked some 70 CEOs how they evaluated the current economic and political climate – and the results were striking. Most notably, when this group was asked which global institutions they considered most competent and credible, the body they put in first place was ... er ... themselves (about 90 per cent of these CEOs apparently think that “multinational corporations” have been “moderately”, “very” or “most” effective in handling the challenges created by the economic crisis and financial shocks). After this, the CEOs apparently admire central banks: almost 80 per cent deemed these “moderately”, “very” or “most” effective.
But the group that grabbed third place was the Chinese Communist Party leadership: it garnered a 64 per cent approval – or “effective” – vote for how it has handled political and economic challenges in recent years. This was way ahead of the US president’s ranking (33 per cent), let alone US congress (with a dismal 5 per cent vote). Yes, you read that right: American capitalist CEOs apparently think that “communist” bureaucrats have been more effective than democratic western politicians. Even though many of these same CEOs have presumably elected those unloved American leaders themselves.
This finding partly reflects the extraordinary rise of China, which has done an impressive job of keeping its giant economy growing since 2007. True, there is no guarantee this can continue: as recent political scandals show, internal tensions are rising. But what impresses some global CEOs, at least right now, is how the Chinese government takes a long-term policy view. “The Chinese have some policies we hate, but at least we know what those policies are,” the CEO of one multinational energy group explained, complaining that “the problem in the US is that policy-making is so short-term ... nobody knows what will happen next.”
The other side of the equation goes back to Schultz’s appeal. When The Business Council asked CEOs what they most badly wanted to see from their government, they put tackling fiscal woes and boosting economic growth first. But almost at the top – and way ahead of other issues such as energy or healthcare – was “leadership to end domestic political stalemates”. Those CEOs – like Schultz and Occupy Wall Street – are also upset about gridlock.
Now, if you want to be an optimist, you might view this as just a short-term phenomenon. America has suffered plenty of malaise before (think of the 1970s), and Congress is designed to have checks and balances. If one party sweeps the polls this November, gridlock might end: today’s rhetorical posturing might turn into a consensus for action.
But there again, it is possible to be much gloomier. Never mind that polls currently suggest the 2012 race will be a close call. What is more worrying is that Washington’s gridlock may reflect bigger social splits. In particular, as authors ranging from Charles Murray to the FT’s own Edward Luce argue in their new books, it seems that American society is now becoming more polarised in an economic, social and political sense. And that fragmentation is being exacerbated by the fact that powerful interest groups are using their cash to further their own ends.
This, of course, is precisely why men such as Schultz are so worried. But it is also why businesses are unlikely to go on a funding strike. As polarisation grows, they fear they must spend ever bigger sums to protect themselves (at last week’s gathering of CEOs there were endless – angry – complaints that the White House is now stoking a “class war”). It is a structural tragedy, in every sense. George Washington may yet spin in his grave. Or, perhaps, Chairman Mao might chuckle.
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