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Dr. Greenspan's outlook

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Alan Greenspan, chair, Federal Reserve (left) and Patricia Russo, CEO, Lucent Technologies (right). By Rose Lincoln

Alan Greenspan, chair, Federal Reserve (left) and Patricia Russo, CEO, Lucent Technologies (right). By Rose Lincoln

CEOs and the Fed chairman consider the job market

Federal Reserve chair Alan Greenspan capped off Boston College's annual finance conference, held March 12 in Conte Forum, by cautioning against protectionist trade policies as an antidote for job loss, and predicting that U.S. businesses would soon begin to create more jobs.

Nearly two million Americans had been unemployed for more than six months, he said, but neither outsourcing nor free trade had caused their woes. With his trademark syntactic complexity, he said that "although in recent years the proportion of our labor force made up of those with at least some college education has continued to grow, we appear, nonetheless, to be graduating too few skilled workers to address the apparent imbalance between the supply of such workers and the burgeoning demand for them. . . . Many of our students languish at too low a level of skill, and the result is an apparent excess of supply [of low-skilled workers] relative to a declining demand."

As evidence for this argument, he pointed to the dramatic rise in wages of highly skilled Americans and the stagnation in wages of Americans with lower skills. Instead of protectionist trade policies, which he called "a sure path to stagnation," the Federal Reserve chair prescribed more schooling to bring workers' skills up to the demands of new technologies, though he never specified who would provide and pay for the schooling.

Greenspan was the day's final and most illustrious speaker, preceded on the dais by a lineup of business heavyweights that included the CEOs Jerry Yang of Yahoo, Inc.; Patricia Russo of Lucent Technologies; Craig McCaw, of Eagle River Investments LLC; and Brian Roberts of Comcast Corporation. In a month during which job creation numbers continued to disappoint, a week when the Dow dropped by 3.5 percent, and a day when U.S. ally Spain was burying the victims of a massive attack by terrorists, most speakers struck a strongly optimistic, almost chipper note. During intermissions, the audience of 2,500, mainly businesspeople, stood around talking boisterously to one another or into their cell phones while soft pop tunes of yesteryear ("Poinciana," "Tenderly") played on the PA system.

In the conference's opening speech, Yahoo's Jerry Yang pooh-poohed the bursting of the late 1990s high-tech bubble, saying, "People think the Internet has . . . gone up and down when the reality, in terms of usage and in terms of global growth, is that it really hasn't stopped at all." Today's Yahoo users are "more active, more engaged" compared to users 10 years ago, said the cofounder of the famous search engine, and the applications the website provides them "are more critical to their lives." The bursting of the high-tech bubble, he continued, had only strengthened the Web-based companies that survived. Broadband penetration, Yang noted, is growing at a rapid pace, with up to 40 percent of U.S. households predicted to have broadband cable hookups by 2007. What's more, small businesses have found ways of "leveraging the Internet as an infrastructure not only to get in touch with customers they already know but to reach out to [new] customers"—good news for job seekers, Yang explained, because collectively "small businesses tend to hire a lot more people than larger businesses."

The day's next speakers, a two-person panel consisting of Russo from the communications hardware and software manufacturer Lucent, and McCaw from Eagle River, which holds stock in cellular phone companies, essentially took up where Yang left off, with McCaw even finding the silver lining of the outsourcing cloud. ("We all thought India would never turn around," he said. "All of a sudden, with a good education system, they can compete.") Both Russo and McCaw talked up the wealth-creating prospects of new technologies like high-definition video-conferencing and the "bundling" of services such as voice mail, e-mail, telephone, TV, video games, and so on, delivered over a single cable or wireless handset—"a common platform," Russo called it. According to McCaw, the operating system sold by U.S.-based Microsoft and the country's Internet protocols "dominate the world," and English is the lingua franca of international business, all of which puts U.S. companies "in a position to dominate" the high-tech and telecommunications fields.

Jerry Yang, CEO, Yahoo, Inc. By Rose Lincoln

Jerry Yang, CEO, Yahoo, Inc. By Rose Lincoln

The first strong indication that all might not be well with the economy came in the day's other two-person panel, which featured a pair of ideologically opposed Catholic college alumni, Thomas J. Donohue (St. John's), president and CEO of the U.S. Chamber of Commerce, and John J. Sweeney (Iona), president of the AFL-CIO. According to Donohue the two have appeared together before, and it was easy to believe, considering the practiced way they fired off points and counterpoints. While Sweeney said the country is "in the middle of a jobs crisis," Donohue shot back that Americans are wealthier than ever and the unemployment rate—then 5.6 percent—is "much, much lower than in periods following previous recessions." Blaming job loss at least in part on the outsourcing of service and manufacturing jobs, Sweeney called for trade agreements that "address core labor standards," presumably to promote higher wages and better working conditions in the countries that Americans buy cheap goods from, which would in turn make U.S. manufactured goods more competitive. Donohue, for his part, predicted that the United States "would lose 40 percent of its economy if it backed out of the global system of trade" and downplayed the effects of outsourcing, saying that U.S. manufacturing jobs have moved "to a country you've never traveled to, and it's called productivity." When Donohue pointed out that foreign-owned companies like Toyota provide millions of jobs for U.S. workers, Sweeney admitted that foreign investment does create jobs in the United States but not enough to make a significant dent in a worrisome trade deficit. Sound bites from both panelists drew applause, but the applause for Donohue's remarks was noticeably louder.

If Sweeney tolled a discordant note, it was quickly drowned out by the following speaker, Brian Roberts of the cable giant Comcast, who touted his company's growth (by a factor of seven in the last five years), its financial discipline, the "family feeling" in its workplaces, its managers' responsiveness to suggestions from below, and above all, its integrity, which Roberts called "the guiding beacon in our . . . credo." Roberts made news at the finance conference when he announced that Comcast, having recently and very publicly failed to acquire the Walt Disney Company, was going to keep trying. "When I look at the next generation of cable technology—things like video-on-demand, high-definition TV, and streaming media," he explained, it seems clear that "by uniting Comcast and Disney, we can innovate faster for the benefit of consumers."

After Roberts came Greenspan, the conference headliner, who spoke following a brief ceremony during which he received an honorary doctor of laws degree from the University. Toward the end of his talk, the sometimes dour Fed chief started sounding almost cheerful. Digressing from the worker education theme, he appeared to join Donohue in blaming the current joblessness not on something bad—a deficit in worker skills—but on something positive—"accelerated gains in productivity." Employment would pick up "before long," he predicted, "as [economic] output continues to expand."

David Reich


David Reich is a writer based in the Boston area.

 

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