The Wealth Of The Nation


Yes, and a suppression of criticism. Nothing like that is happening here, of course, but I would find it worrisome for the future of our society if it were monolithic in its viewpoints. It’s a healthy environment to have differences of views. In the early part of last year the administration seemed to be saying, “Let us all believe and pledge allegiance to the economic approach postulated by the administration,” as if it were the patriotic thing to do. The important consideration, however, is what will this new approach produce. If you believe the administration’s plans may not work out, then it is your duty and obligation to speak up.

I’m not going to ask you what’s going to happen in the short term. But taking the long view, where do you see us going in the 1980s?

I think there is some room here for hope and there’s room for questioning. Immediately ahead we are faced with an interim problem. We must disengage from the problems of the past, disengage from a combination of policies that binds us in a kind of sputterand-spurt economic environment for a while. Three or four years from now the setting probably is going to be better. At that time I think the oil problem will be even further behind us than it is today.

Why do you think that?

We have set in motion a certain amount of energy conservation, exploration, and productivity that is not going to be reversed. For example, there is a strong drive for energy substitutes for oil and for more efficient usages of energy so the system can operate with less oil. Also, three or four years from now, more of the current high defense expenditures should be behind us. Moreover, I believe that the young people who are coming into the labor force now are better prepared. The graduates are well trained in mathematics and the sciences, and many of them are quite ambitious.

But what do we face between now and the middle eighties?

We probably face a period of some subnormal economic growth, the same sputter-and-spurt type of economy that I’ve talked about. We need to be very careful that we don’t weaken the financial structure any further.

Do you think there’s a chance that the financial structure will become unraveled?

Of course there’s always a chance. What you’re really asking is whether we can have a repetition of the 1930s. If you had asked me twenty years ago, I would have said that the odds were a thousand to one against such an event. Ten years ago, a hundred to one. Now I would guess it’s now eight or ten to one. The odds are against it, but the odds are shrinking. The trouble in answering your question is that we in the economic and financial world don’t have the analytical skills to quantify the economic outlook completely. A Great Depression is an event that occurs at the most once in a lifetime, and therefore it is difficult to estimate the likelihood of it happening. We have to be very careful that we don’t further weaken the financial fabric of the business entity.

Are you surprised that business, financial, and governmental people turn to you as a sort of oracle?

I’m always surprised when there’s some market response to what I say. Why it happens I don’t know.

You also became known as a kind of symbol of gloom or doom.

The fact is that I haven’t always been pessimistic, and some day I may become optimistic again. Most of the time from ’74 to the present, the economic and financial patterns have not been good. Now the dilemma with being bearish is that it goes against human nature. In business and finance, objectives are set on optimistic assumptions. So bearish views are not welcome.

Do you think people have lost faith in the ability of the government to manage our economic and financial problems?

I’m not sure about that. The United States is different from Europe. Many Europeans are very skeptical about their governments and the environment in which they live. That’s why it’s such a great pleasure when I return to the States from a trip abroad. Americans by nature are more constructive, more optimistic, more outward going, more positive. Maybe it’s part of our heritage, part of our tradition, the wealth of the country, the size of the country, the diversity of our people. These are among the great qualities of the United States. I don’t think one can say, therefore, that Americans have lost their confidence in government. Even the election of President Reagan was a kind of a search for new confidence, for change, for a leader who would take us out of the morass we had fallen into.

In an era like the one you see ahead, what about a small investor? What is prudent and what is not for him?

I think when it comes to an individual coping with the environment, it is a matter of preserving his income stream. In most instances, an individual is preoccupied with his or her endeavor.

In other words, you should think of yourself as a set of skills rather than the owner of a set of assets.

That’s right, you are a set of skills.