Economics & Research Blog
Rumor: Ann Mulcahy to Replace Larry Summers, Why It Should, But Won't Happen
White House economics advisor Larry Summers will be leaving at the end of the year to return to Harvard.
By Dr. Joe Webb
Published: September 22, 2010
White House economics advisor Larry Summers will be leaving at the end of the year to return to Harvard. I won't go into the reasons why because the news media has all of that covered. What is interesting is that Ann Mulcahy, former Xerox chief, is being rumored as a replacement.
I know that no one of my economic thinking has a chance to be appointed in this White House, nor have any been in any White House, come to think of it, but Ann Mulcahy is an interesting choice.
It is doubtful that she will be appointed as this position usually goes to an academic or to a prominent financial industry executive who has some academic credentials in economics or finance.
There are some things in her favor. Xerox was a bankrupt company, but she refused to go down the bankruptcy path, and instead presided over a turnaround at the company that is still in process today. She made hard decisions about staffing that prior executives could not seem to do. She presided over a cure of a deeply flawed financial strategy. She won the confidence of Wall Street without slick talk, but with performance.
On the negative side, the company was doing stock buybacks which juiced their EPS at a time when the company was downsizing staff. I never trusted this decision which only appeases Wall Street when those funds could be used elsewhere in longer-term investments, or for more aggressively downsizing and compensating exiting employees. Supposedly done for the good of the stockholders, if that money is burning a hole in the corporate pocket, declare a special dividend and let the stockholders decide what to do with it.
My hope, however, is that despite Xerox' reliance on big financial, insurance, banking, and other organizations as a major part of their business, that the experience of Xerox' other markets, where they always sold to small businesses, including our industry, is remembered. A serious lack of understanding of the nature of small business, the constant tightrope that small businesses walk where seemingly tiny decisions for big companies are actually big decisions for small companies, is rampant in the administration. Rather than academics whose expertise is in macroeconomics, I hope that Mulcahy would bring a sense that economic statistics are the reflection of business decisions made by real people dealing with tough choices. All economic policy makers are lured by the idea that you can change the statistics alone, and forget about the actions that created them. Maybe having Ann Mulcahy around will remind them that small businesses do make decisions on the basis of how much money they keep after taxes, and that's tied up with family financial matters, not just business ones. The reality of real hard-nosed streetwise business is what is needed in that department, not some academic credentialed banking whiz, which is why I hope she gets the position. And that is precisely why her appointment is very unlikely. Let's hope I'm wrong.