Last November, president George W. Bush, in an interview with Fox Business Network, summoned his inner high-school cheerleader. "We have a strong dollar policy, and it's important for the world to know that," he said. "And if people would look at the strength of our economy, they'd realize why I believe that the dollar will be stronger." Since then, the greenback, which had been slumping against foreign currencies for years, has wilted like spinach in a sauté pan at the Olive Garden. Given that the typical audience for Fox Business Network could comfortably fit into Rupert Murdoch's downtown Manhattan loft, it's no surprise the world failed to get the message. The greenback last week hit new lows against foreign currencies. The dollar is so sad, we should consider renaming it the dolor.
At some level, the dollar's woes reflect the world's collective verdict on the ability of the United States—businesses, individuals, the government, the Federal Reserve—to manage the global financial system and the world's largest economy. Lately the verdict has been two thumbs down. Countries that outsourced their monetary policy by pegging domestic currencies to the dollar are having second thoughts. Kuwait last year detached the dinar from the dollar, and Qatar government officials last week said they were considering doing the same. International financiers are unnerved by the toxic combination of "misplaced assumptions about housing, a lack of necessary regulation and irresponsible use of debt with sophisticated financial instruments," said Ashraf Laidi, currency strategist at CMC Markets.
Dissing American financial management is an affront to national pride tantamount to standing in Rome and asking, loudly, if Italians are able to make pasta. For the United States invented the concept and practice of running large, complex systems. Along with baseball and deep-frying, management is one of our great national pastimes. The world's first M.B.A.s were awarded by pioneering yuppie factories like the Wharton School at the University of Pennsylvania. (Wharton's founding in 1881 was quickly followed by the first time-share summer houses in the Hamptons.) Henry Ford's revolutionary assembly line was the gold standard in global manufacturing for decades. Contemporary American institutions stand for excellence in managing everything from supply chains (Wal-Mart) to delivery services (Federal Express and UPS).
Americans' ability to manage complex systems has been the ultimate competitive advantage. It has allowed the United States to enjoy high growth and low inflation—a record we haven't hesitated to lord over our foreign friends. The shelves in the business section of a bookstore in a mall in Johannesburg are stocked with the same volumes you'll find in a Barnes & Noble in Pittsburgh: memoirs by cornfed paragons of capitalism like Jack Welch, wealth-building advice from American money managers, large tomes on how Andrew Carnegie and John D. Rockefeller built global businesses from scratch.
But today? Not so much. Thanks to widespread incompetence, American management is on its way to becoming an international laughingstock. Faith in American financial sobriety has been widely undermined by the subprime mess. The very mention of the strong-dollar policy now elicits raucous bouts of knee-slapping in even the most sober Swiss banks. (How do you say "schadenfreude" in German?) Earlier this month, as oil hovered near $100 a barrel, President Bush complained to OPEC about high oil prices. OPEC president Chakib Khelil responded acidly that the crude's remarkable run had nothing to do with the reluctance of Persian Gulf nations to pump oil, and everything to do with the "mismanagement of the U.S. economy." Since Bush's plea, oil has gushed to $110 per barrel. (How do you say "schadenfreude" in Arabic?)
Americans abroad are constantly taunted by perceived failings of American management. America's aviation system is now the butt of jokes because 9-year-olds have become accustomed to removing their Heelys before boarding a plane. As my family and I passed through the snaking security line in Cancún's airport last month, we were harangued by a security guard who encouraged tourists to sing along with him: "Please. Do not. Remove. Your shoes."
The concern extends beyond airlines to America's industrial complex at large. Leery of the ability of provincial American executives, with their limited language skills, to negotiate today's global business environment, the boards of massive U.S. firms like Coca-Cola, Pepsi-Cola, Alcoa, and insurer AIG have hired foreign-born CEOs. Carl Icahn, the 1980s corporate raider, has reinvented himself as a borscht-belt comedian/activist investor, who delights conferences and reporters with jokes at CEOs' expense. On a recent "60 Minutes," Icahn complained to Lesley Stahl about the incompetence of American management. "I see our country going off a cliff, and I feel bad about it."
Icahn is moping all the way to the bank. The market's recognition of management failures gives him the opportunities to acquire companies on the cheap. But those of us who aren't billionaire corporate raiders—which is to say pretty much all of us—must manage through this management crisis on our own.