Sunday, October 3, 2010

The Survival of the Safest

CORPORATE managers struggling to preserve their companies and protect their core employees have inadvertently contributed to a vicious cycle of rising unemployment and plummeting national morale. If we are to break out of this downward spiral, we first need to understand the problem, then deal with it on a huge scale.

It’s no surprise that business confidence has been shaken over the last few years. Executives are unwilling to take on new risks, and people in all walks of life are nervous about trusting in one another. In a broad sense, damage to morale — which John Maynard Keynes called “animal spirits” — surely ranks as one of the most important reasons for the American economy’s persistent weakness.

Yet professional managers throughout the business world see it as their job to keep work-force morale high. But, paradoxically, the actions they take for their own workplaces often make the overall crisis more severe.

A remarkable book by Truman Bewley, titled “Why Wages Don’t Fall During a Recession” (Harvard, 1999), provides insights into the current situation, even though it focuses on the recession of 1990-91 and the long “jobless recovery” that followed it.

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