February 27, 2009

By Paul Feinberg

"The trouble we're in is a crisis of leadership," said UCLA Anderson Professor Ed Leamer during the "Survive. Thrive. Yes We Can" panel sponsored by Anderson's Office of Executive Education. "The risk (to the economy) was never on Wall Street. It was always on Main Street."

Leamer emphatically asserted that the inflammatory rhetoric coming from governmental leaders in Washington convinced consumers to curtail their spending, which contributed significantly to the nation's ongoing economic crisis. Leamer was joined on the panel by fellow Anderson Professors Antonio Bernardo and David Lewin, along with moderator Frank Mottek of KNX 1070 radio.

While Leamer focused on how the crisis evolved (and continues to evolve), Bernardo and Lewin presented attendees with ideas on how to survive and even thrive in the recession.

Emphasizing a point he made in a recent Wall Street Journal editorial (as well as in a forthcoming book), Lewin suggested that companies faced with cutting jobs should instead consider reducing employee pay rates. "It boosts morale and it boosts trust (among employees)," Lewin said. "And when a recovery comes, these companies will be ready (to benefit)."

"A crisis is a terrible thing to waste," Bernardo noted, adding that there were potential opportunities to be found even during a recession. "Most business firms have a tendency to over invest in weak businesses and under invest in their strongest businesses. In good times, it's 'political' to do this. But when survival is at stake, companies must make tough decisions. This is a great time to disinvest in weak (areas of business) and focus on what firms do best. That way (they) can emerge stronger than they were before."

Referencing his recurrent forecast themes, Leamer stressed that the current recession does not look like previous, post-World War II downturns, which makes forecasting this recession more difficult. He believes, however, that the economy is undergoing a "structural adjustment" away from a consumer-driven entity, and that "the job ahead is to turn malls into factories."

"We need to stop shopping," Leamer said. "(And we need to) build more and export more."

For his part, Lewin noted that "It makes sense to consider executive education during a downturn."

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