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Steve Forbes on Civility in Corporate America

June 23, 2011

The Carnegie Council's lecture series on civility is made possible with generous support from the Dilenschneider Group.

Introduction

JOANNE MYERS: Good morning, everyone. I'm Joanne Myers, director of Public Affairs Programs at the Carnegie Council, and on behalf of the Carnegie Council and the Dilenschneider Group, I'd like to thank you all for joining us this morning.

It is my pleasure to welcome Steve Forbes to our Breakfast Program.

Because of the increased attention paid to the issue of civility over the past year, the Carnegie Council, in conjunction with the Dilenschneider Group, have been hosting a series of programs that address this topic.

This morning we are extremely pleased to have as an addition to this series Steve Forbes, who has agreed to address us on the issue of civility in corporate America.

In recent years, the quality of discourse in America has declined dramatically. Without a doubt, the last 12 months have been tumultuous, especially when it comes to civility and how it has played out on the national stage.

Rarely in discussions of any consequence these days, whether in politics, the economy, the media, or corporate America, is there a respectful exchange of ideas. Instead, such interactions are either one-sided or full of ad hominem attacks or self-serving misinformation.

To many critics, corporate America's leaders seem shockingly out of touch, blind to the deterioration in public confidence in the business world. To the man on the street, it seems as if nearly every known check on corporate behavior, both moral and regulatory, has fallen by the wayside, as evidenced by a seemingly endless stream of bad news alleging widespread mismanagement and malfeasance, all of which chip away at the trust which is vital for a thriving economy.

The question heard all too frequently is, "What has happened to corporate ethics and civility in corporate America?" For this reason, and for his insights and business acumen, I would like to ask our guest how we can restore that trust that used to exist between the people and the business world. For the person who just might have the answer, please join me in giving a very warm welcome to our very distinguished guest, Steve Forbes.

Thank you for joining us.

Remarks

STEVE FORBES: Thank you very much, Joanne. Thank you, Bob [Robert Dilenschneider].

When Bob sent the invitation, he broadened it to say, "Make observations about politics too, since you once participated in it." Obviously, I was not a very successful participant, which is why I can come here this morning instead of inviting you over to my presidential library.

It is a great pleasure talking about civility. If I say anything that upsets you, I hope you've already finished your breakfast so you cannot throw anything at the speaker to express displeasure.

Let me first hit the political side and then I'll talk about what Joanne made reference to in terms of what's happening in people's feelings about ethics and fair rules in the economy and corporate America.

On the political side, obviously there is a feeling that civility has declined. You see it in the fighting in Washington, D.C. Since Watergate, it has been more ad hominem.

You saw it in terms of the attacks on Bill and Hillary Clinton, the attacks on Sarah Palin. Putting aside your views of these people, it certainly overstepped a lot of bounds.

You saw it starting in the Court fights, with Robert Bork in the late 1980s, with just trash and misrepresentation.

You saw a graphic example of it recently when Congressman Paul Ryan of Wisconsin came up with a proposal to reform Medicare. Whether you agree or disagree with that thing, it was a very thoughtful proposal. He knows a lot about entitlements. So sitting in the audience, the president of the United States gets up and trashes him, and then they run ads of a grandma being thrown over a cliff, even though the Ryan proposal does nothing to Medicare for the next ten years, and everyone who is on Medicare for the next ten years is not affected by his reforms at all.

People feel that things seem to be unraveling, and there are several factors at work on the political side.

I mentioned Watergate, where it went way beyond the specific facts at hand and got very personal. For some reason, Richard Nixon created very intense personal animosities. So it did become personal on both sides, and it was very much of a sharper edge.

We also live in a world, thanks to changes in technology and media, where the tools for discourse encourage loudness. You see it in talk radio, where you have call-ins—great for dialogue, but people can mouth off in a way that normally you do in a corner bar, and now you can do it over the airways.

The Web makes everything instant and makes everyone able to communicate with one another. So you have verbal inquisitions of candidates and office holders. Party purists can go after you in ways that would never have been possible before.

Another factor is we have many new voices. More new groups, more new people, are participating in the public square. One way you get heard is you raise your voice. So it's a reflection of the raucousness of our democracy. It's a high-tech version of what we saw with Andrew Jackson and the changes in politics in the 1820s, when a whole new slate of people got actively involved in the public square.

In terms of these new groups, they all want to do fund raising, and when you do fund raising you have to write your fund-raising appeals in an apocalyptic note—that coat hangers are coming back; Washington is going to knock on your door at midnight; you're going to be destroyed financially. So this apocalyptic vision also intensifies it. And because there's so much of it than before, we notice the volume of it in a way that we hadn't done before.

Another factor is the size of government. When you have big government, one of the things that comes in its wake, certainly in this country, is that in Congress, congressional staffs and offices get bigger. So even if you're a mere congressperson, you now have your little kingdom, your little fiefdom, your own little bubble. So even in the evenings, where you might have a drink with your colleagues—no, you're now off to fund-raisers.

The work week in Washington is very strange; it's Tuesday through Thursday if you're in the national legislature. You come back Monday night and leave Thursday night to go back and do constituent work.

So the normal ways of reducing the edges, of interacting with your colleagues, have been reduced. At committee hearings you're in and out. If you've ever been in a committee hearing, unless you've done something egregiously wrong and The Washington Post and others are interested in you, what you notice is you have one or two people there and everyone comes in and out, asks a question, then goes off to their next thing.

Just about the only time people interact is at the gyms. We saw that—and this is the exception that proves the rule—when Senator Coburn of Oklahoma got to know then-Senator Barack Obama and established a relationship. It hasn't led to much in terms of a compromise or a grand agreement, but at least the president feels very free to call Coburn and lecture him on what he sees as the evils and ills. He does not do that to many other Republicans. He doesn't feel comfortable in picking up and mouthing off and saying "your party, blah, blah, blah."

The paradox though is, even though in the public square outside of the halls of Congress, the discourse is loud, raucous, personal, and often distortive.

Just one little side thing. The amazing thing is that in the House, the Senate, and the Congress itself, most of the time it is boringly civil. You don't say anything. That's not where the action is.

Whereas, in contrast, in the U.K., the rudeness on the floor of Parliament is legendary, and thanks to C-SPAN you can see this. Somebody gets up to speak and everyone says "You're a fool, sit down." They don't hesitate to interrupt. But off the floor there are civil rules that are observed.

In other countries, you see in South Korea and Japan they often have fist fights. You don't have to watch HBO for ultimate fighting. You see what goes on there. In Taiwan, the legislature is notorious, where they throw chairs at each other. So talk about ultimate wrestling.

But the real reason, certainly on the political side, which also spills over obviously on the economic side, is that while the tools and new voices are there, there also are very fundamental differences about many issues. When there are very fundamental differences and no real consensus—we have periods of consensus in America and then it shifts again—passions rise up, and human nature being what it is, when passions rise up, forget about normal civil debate; they often become casualties of it. When people feel that the stakes are high, passions are enflamed.

We all know on social issues such as the abortion issue—wherever you stand on it, it is passionately held. I've got scar tissue from that from my own presidential runs. People have passionate feelings about that and hearing certain words will make them go off. We see it playing out now on gay marriage. So on these issues where they are passionately felt, don't be surprised that you're going to get the kind of discourse that you don't think of in terms of Socratic debates and questions and answers.

The economy: What should be the size and role of government? For most of our history, the only action that people once had with the federal government was the post office.

Even in Europe, by contrast, if you look at the history of Europe, except for Britain, which was an exception, the rise of warfare meant that you had to have a stronger and stronger central government. So you had absolute monarchs in Spain and in France. The proof of it is when France had an uprising, the Fronde in the 1600s, the center won. Louis XIV never forgot it. He eviscerated the aristocracy, sent it over to do nothing in Versailles.

By contrast, in England they did not have a strong center. So when they had a civil war, the other side won. You had a restoration of the monarchy, but it was sort of a neutered monarchy. Parliament had the power.

In our country, even with the Civil War, where you saw a massive increase in government powers, after the war the income tax was repealed and things went back to what they were before. You saw it with the First World War. There was a massive increase in government powers, including nationalizing the Post Office and the telephone industry. After the war, they were denationalized, government was reduced, and during the 1920s the size of government was sharply reduced, national debt was reduced, and the income tax rate was cut from 77 to 25 percent.

We've had periods before in our history where there have been passionately felt issues. I mentioned the Civil War. You all know the story of Charles Sumner, senator from Massachusetts, a fierce abolitionist, who nearly was killed on the floor of the Senate by an angry congressman coming in with a cane and nearly beating him to death. Bleeding Kansas was virtually the prelude to the Civil War.

When people feel there are very strong moral issues, they don't compromise. In this country, more and more people in that period felt you could not compromise on slavery, southerners felt you could not compromise on what they saw as their way of life, and, as Lincoln said, the war came.

In the beginning of our republic, in the 1790s, it was probably one of the most vicious periods in terms of a lack of civility. We think of our Founders as wise people. They were. They were brilliant. But they were also very human.

After the Constitution was passed and we started our new government, everyone knew that precedents were going to be set on policies made. So therefore the stakes were very high and they were viciously, passionately fought.

Once upon a time, when we were taught history in this country, we all knew about the fight between Jefferson and Hamilton. Jefferson, for all of his virtues, had a very static agrarian view of society. Hamilton, was as Adams put it the "bastard brat of a whore"—that gives you how he felt about Hamilton.

But Hamilton, precisely because he was born out of wedlock, precisely because he came over to this country at a fairly young age—he was not attached to a colony, not attached to family—to him mobility was absolutely key, manufacturing was key, and he loved the idea of money. To him money was a way to mobility. It didn't matter if the patriarch in the town liked you or not; if you had money, that was the great equalizer. He was the antithesis of Jefferson.

So everything from the new financial system he put in, the national bank, the Jeffersonians thought was absolutely undermining this agrarian ideal, bringing in all the evils of cities and commerce. So it was passionately fought.

Thomas Jefferson was very adept at the poison pen and knew how to hire poison penners, including a fellow named James Callender, to trash his opposition. He had a falling-out with Callender. Callender got his ultimate revenge against Jefferson. He was the one who planted the story of Jefferson's relations with Sally Hemings, the slave, and that's what most people remember about Jefferson today, since we don't teach history.

So these things are not new.

In the 1930s there was a huge break in American tradition in terms of the role of government—I'm getting at this in a long way, but it's very important—that is still very much playing out today, in very sharply felt issues today.

The Depression was seen as if you left free markets alone, bad things will happen.

In 1929, even though that was over 80 years ago, the United States had the largest, most sophisticated economy in the world. Yet, in contrast to other developed countries in the world, the size of the U.S. government was only 3 percent of GDP, state and local government maybe 6 or 7 percent. It was very small by European standards, even small by British standards.

Small government was very much part of the American tradition and the Hamiltonian tradition. Government had certain things and then got out of the way.

But in 1929 the Depression came. What happened here was a huge break from the past. Hoover is often portrayed as a do-nothing president. He was actually a very activist president. He didn't have good spinners and he was terrible and stiff in the public square. But in terms of doing things, no president had done more than he did. And Roosevelt put that on steroids.

But what animated the response to the Depression was the experience people had in World War I. There was a progressive tradition in this country and the feeling that science should be brought into politics, that experts could run things better than the masses of ignorant people.

They got a really heady experience in World War I, where for an intense period of time, government took on massive amounts of power to wage the total war. People felt, including Franklin Roosevelt, who was then running the Navy—even though he was assistant secretary of the Navy, he was effectively running the thing—this was a heady experience. The feeling was: "If we could use the powers of government to win a war, we have science at our fingertips, by golly we can lick this depression and not have the old way where you step back and let the thing heal by itself. We're going to take a very activist approach."

So you had an enormous peacetime increase in government powers. You saw it most especially in the National Recovery Administration, which was almost statist, fascistic, in its sweep, where they had business people get together in each industry and write codes on what prices you could charge, what working conditions you would have; and if you violated those codes, there are cases—a tailor went to jail because he charged only 30 cents to press your suit instead of 40 cents, which was in the code.

There was a notorious case of a chicken plucker who was supposed to sell chickens. You were not supposed to be able to pick out a live chicken; you had to do it blind. This guy let you pick them out. They arrested him. He was put in jail.

Eventually, the Supreme Court threw it out in 1935. But the idea of the government taking an activist approach to keep an economy on keel in a modern economy took root.

So from that, in the late 1930s the government started to decline a little bit. Then came the Second World War. In total warfare governments must take on massive amounts of powers.

After World War II—we forget—government sharply declined in this country. But then came the Cold War and everything revolved around warfare. Even building the National Highway System, which Ike started in the 1950s, was seen as a national defense measure. The government now had to get involved in education—not because education is just good, but because, by golly, we had to have an educated work force to compete against the Soviet Union. So government grew.

Conservatives had the paradox: They didn't like big government, but if you wanted to wage a war, cold war or hot war, you had to accept a big government, which we should have learned from the absolute monarchies in Western Europe.

So even after the Cold War, government had achieved the size and the scope. The debate became very passionate: How big should it be?

Ideology takes on religious fervor. We always wonder, how could they have these inquisitions, burn people at the stake? We don't do it physically today, but we do it verbally when you stray from a certain viewpoint, and no quarter is given.

So you take the health care debate. That again gets to the thing that goes right back to the response to the Depression: What should be the role of government? Some people have the vision of one source of government, in effect a one-payer system for everybody—"By golly, it works in Europe, why can't it work here?" Others feel that this is just postalizing health care and will just lead to horrors and it will lead to a decline in health care research.

You see it in education. Those who believe in government education see it as egalitarian, making sure you have a properly educated work force. Philip Howard, whom you've heard from in part of this series, talks about how in terms of public education today it's almost as bad as the IRS Income Tax Code with all the rules and regulations teachers and administrators have to go through. So you have those who say "don't touch it; leave it alone; or just give it more money," and others who feel they want more charter schools, more choice, open it up, and try to create more accountability.

By the way, on that debate it's being raised again in a very civil way, but he makes a very hard point—Joel Klein, former chancellor for New York City department of education, wrote a very interesting article in The Atlantic, where he said the education system, certainly in New York and some other area systems he's familiar with, is about the adults, not the children. That is very telling.

Those things take on very, very fierce debate. Anytime you try to tamper with education budgets, by golly, passions rise enormously.

And you see it in terms of the economy itself.

Energy—should the government in effect guide us to what they think is a good way to use energy? This has now been encapsulated not in a person but in light bulbs, in terms of mandating what kind of light bulbs we should use. But that's a symbol of a fierce debate about where we should go on energy.

You see it too in the management of the economy. John Maynard Keynes really felt that wise people could manage an economy. He was oblivious. Whatever brilliance he had, he was oblivious to the fact that in government you have politics, and people will weigh in in terms of what they think should or should not be done or who is helped and who is not helped.

The Federal Reserve believes that it can guide the economy. Others passionately believe that the Federal Reserve just gums things up. So liberals again see free markets as inherently unstable. Conservatives believe, with sensible rules of the road, if the government gets out of the way, free markets work.

So there is no consensus—no consensus on energy, no consensus on social issues, no consensus on entitlements—and a huge debate coming up there. So it should be no surprise if passions get inflamed.

You see it graphically in Greece, where I was a week ago, at a hotel where we had tear gas in the lobby. We don't quite have that yet in this country. But you saw in Wisconsin and elsewhere, when these things are put to a fierce debate, by golly, you're going to get fierce passions.

One of the things—and this gets to the feeling that the economy has become morally unhinged—is something that is the most boring subject in the world. So sip your coffee and tea. But I just want to make a quick point on this.

That is when the value of money becomes unhinged, it undermines people's feeling of social rules, of guardrails, and of fairness in the marketplace. John Maynard Keynes got this one profoundly right. He said the most destructive social force is when the value of money is debased because it brings about all the forces of social destruction. He says not one in a million people understand the process. He said Lenin understood it, which is why he trashed the ruble, to destroy the old order.

But you see it in this country. You saw it in the 1970s. Americans became a nation of consumers. Why? Because savings was for suckers. You put aside money for an annuity; the real value of your annuity was destroyed. And even though that inflation was conquered in the early 1980s, the aftermath of it was still being felt.

Then, eight years ago, our own Federal Reserve, for its own reasons, started the money printing again. Other central banks around the world have to follow suit. So the euro and the pound did it. So when you have this excess creation of money, what it eventually leads to is a profound belief that the rules of the game are gone by the boards.

Now, when you have that kind of inflation, what happens is money goes to commodities. Why? To preserve the value of what you have. It goes to physical things.

So you get what are seemingly unfair profits in the oil industry. You saw that in terms of windfall profits in the 1970s, "evil oil" again today, the feeling that these people are not playing by the rules, they're shafting us.

You see it on Wall Street. Wall Street could not have had those outsize profits if the government hadn't created too much money. You could never have had the housing bubble without that excess money.

So traditional flows of capital become unhinged. People feel that the rules of the game are stacked, that people are getting too much for too little effort, that there is no real link between reward and effort. Keynes was right on this: when that happens, people feel unmoored, and that raises fears, which raises passions.

It has a populist tinge to it. Whether you're going after bankers, Wall Street, evil oil company executives, businesspeople in general, the feeling is that just reinforces the old caricature of businesspeople. As you know, in Hollywood movies business executives have killed more people than serial killers. You know the caricature: either very heavy, with jowls going up and down, pleasure at the misery they're causing; or they're like Scrooge, very scrawny and skinny, with long fingers, plotting to poison the water and kill your pets. That sort of thing.

Yet this gets to something very important, and why both government and the private sector have got to get this thing right, and that is in terms of the value of money. When the value of money becomes unhinged, it does play to these worst instincts, because when the free markets are allowed to work with sensible rules of the road—and James Madison was absolutely right. Madison, the father of our Constitution, said if we were angels we would not need government, and if angels were ruling us we would not need checks and balances.

But manifestly we're not angels. Maybe our grandchildren are to a certain age, but the rest of us are not. So we do need rules, we do need laws, we do need government.

But the question is: What kind of rules of the road? That's the fierce debate today.

In terms of the inflation, activities take place where there is no seeming connection between effort and reward, innovation and reward. People then feel that the thing is rigged and passions again are inflamed.

But in terms of free markets, a couple of quick things to keep in mind, and then we'll get to the questions and discussion.

To succeed in a free market, you succeed by providing a product and service that somebody else wants or needs. It's all about meeting the needs and wants of other people.

Whether it's anticipating people's needs—if, for example, 12 years ago you had said the word "iPod," people would be wondering, Is that a remake of an alien movie, pod people? No. Steve Jobs figured, playing on the old Sony Walkman, which should have evolved to the iPod—but he took it to the next step. Suddenly, we decide we can't live without these things. Same thing with iPhones, iPads, and everything else.

I'm old enough to remember when Xerox copiers came along and suddenly we decided we could not live without those.

You go to dinner parties today. Half the people have their heads down, looking at their instant fix and need to be in touch.

So it is about meeting the needs and wants of other people. In a free market, if you don't meet the needs and wants of other people, you fail, you don't succeed.

This breeds its own kind of civility. We think of markets as greedy, as impersonal, as trying to euchre you out of your hard-earned money.

But if you keep in mind what it does without us knowing it, it forces you to pay attention to other people, to know your customer. If you don't know your customer, you might get in trouble. So it breeds these ever-wider webs of chains of cooperation without our knowing it because nobody's in charge.

Just one example of how complex supply chains have become in the world: I mentioned the iPhone. The iPhone comes from China. It costs $178 with the parts in it when they bring it in. Obviously, they charge more to you. But $178.

Out of that $178, only $6.50 of those parts are actually manufactured in China. The rest are assembled from numerous areas around the world, including Germany, Japan (one reason why Apple's stock took a hit after the Japanese natural disasters earlier this year was because a lot of those parts came from Japan), South Korea, and, amazingly, the United States.

So if you look at the $178, you would say, "Oh my God, the U.S. has a $178 trade deficit with China." If you look at the actual manufactured parts, $6.50 from China, $10 of those $178 of parts are actually made in the United States, shipped to China, put in the iPhone, shipped back to the United States.

There are ever more sophisticated supply chains, which means you need ever more sophisticated financial services. Banks have the scope they have not just because they're greedy and trying to control the world, but because they are meeting the needs of the marketplace and this absolute chain of specialization.

So the bottom line on all of this is that Adam Smith said markets are all about transactions. You go to the restaurant, you want the food; the restaurant wants your money; they give you the food; you give them the money. It's an exchange.

A lot of exchanges we don't like. Nobody likes paying rent. Nobody likes paying the electricity bill. But you do get something in return for it. Human nature being what it is, those who complain loudest about paying the electricity bill don't hesitate to go out and spend $200 on a pair of blue jeans that look like they came out of a dumpster. Go figure.

So in terms of free markets, they're imperfect because people are imperfect. But, just as with free elections, you don't throw out free elections because you have fraud. You deal with the specific problems, but the overall system is about as good as you're going to get in this world. So too in free markets—you deal with specific problems; you don't chuck the whole thing out.

Unfortunately, in this debate it seems to be either suffocating government regulation or anarchy. No. Again, sensible rules of the road.

So, thankfully, even though for the next couple of years things are going to be even more raucous, if that's possible, than they are today, there are a couple of things that are going to be working out.

One is we are eventually going to get it right on money. I'll give you a prediction. Five years from now—I say five years so you'll conveniently forget it, and if I'm right I'll remind you of it—the dollar is going to be re-linked for the first time since the 1970s to gold. We can discuss that if you want.

When you start to get a global system of stable money again, you're going to start to see commerce thrive again, you're going to start to see more prosperity, and that's going to lower the temperature enormously when people feel that there is going to be a re-link again between effort and reward. A properly done system provides both stability and, surprisingly, despite history clichés to the contrary, also provides flexibility. So that's going to help.

Another thing that's surprisingly going to help, which will sound very strange, is that nationally our political system actually helps keep this country together politically, even the much-maligned Electoral College. To win national office in this country you have to put coalitions together of people who may not much like each other, may not even share a lot of common ground.

To just give you one example of it, in Iowa, the Republican Party there overall—there are numerous exceptions—are very concerned with social issues. If you're not right on social issues, you don't compete very well in Iowa.

New Hampshire—same country, same language, same party—for the most part they don't give a hoot about social issues. You'll find more pro-lifeism in New Hampshire among Republicans than you will almost in Democrats in New York. As long as you don't tax them and take their guns away, they're fine on social issues. They really don't get much concerned about it. Economic issues yes, but social issues no.

Same country, same language, same party, but two very different focuses. And yet you put them together for a political party. You cannot win high national office in this country without putting together seemingly disparate groups of people.

That leads, paradoxically, to sometimes watering down to mush. But it also, though, makes sure you don't get—only one time it failed, because of a profound moral issue, the Civil War—but most of the time it keeps this heterogeneous country functioning together. So you have these political parties that may share some broad generalities, but their focus is very different around the country. And yet it keeps them together. The only way you're going to get elected is by putting all these disparate groups together around the country, or else you don't succeed, with the way the Electoral College works.

So I think we will in the next five years see a re-emergence of a new consensus. We can debate what that consensus will be. But this country always has had a knack for taking periods where there's profound disruption from economic change or how people view the world, and then somehow it gets melded together, and somehow life goes on again and the country holds together.

With that, let me say again thank you very, very much. Out of this period of incivility and seemingly instability we will revert again. On the economic side, at least in the broad sense, we'll get it right so people don't feel that the link between effort and reward has been disrupted, that the markets are unfair. On the political side we'll hash these things out.

Bismarck
was right. He said there are two things nice people should not see being made: One is sausages and the other is laws. Now, because of transparency, everyone is involved in making laws, so it's a very messy process. But it will sort itself out.

With that, thank you for my free breakfast.

JOANNE MYERS: You said that there was a lack of consensus. However, I think there is an exception, and I think most people in the room would agree that you gave a wonderful talk. So I thank you very much for that.

STEVE FORBES:
Thank you.

Questions and Answers


QUESTION: Good morning. My name is Ed Reilly.

I'm fascinated by the notion of returning to a gold standard. But what do you see as the process, the series of political events that would lead to basically Federal Reserve unilateral disarmament in some source like that?

STEVE FORBES: In terms of gold, gold is like democracy: There are numerous systems and various gold standards; there's not one gold standard. We tend to think gold is the system that emerged from Britain in the late 19th century, but we've had numerous variations of it over the years.

What will begin to bring it about is what you're starting to see already, even in economic circles, which is the idea that you need a stable money. In a global economy, the only way a global economy works is if you have a global currency. Imagine what this country would be like if each state had its own currency. We would still be eating corn from Pilgrim days. There wouldn't be much of a higher standard of living.

In the 19th century, the effective global currency was the British pound. It was linked to gold. Other countries followed Britain's example. So you didn't have to worry about currency; you could trade easily across borders. That led to massive increases in global trade.

In the 20th century, after a very turbulent period after World War I, where the pound went down, the dollar came up, but we weren't willing to assume the mantle of leadership. The dollar was the effective global currency and still is today. That's why, when the dollar is weakened, as it was in the 1970s, it is profoundly disruptive, because people really don't have another choice.

The euro is not there yet, the pound is a shadow of what it once was, the yen doesn't have the financial markets that we need. Even the euro—I mean you float a euro-bond, it's for a specific country or a specific company. It's not like this country, where you have a $300 million market. In Europe, it's still very fractured. So that's why there's so much angst among countries.

Among economists you can see some of the writings—just to put in a plug for forbes.com—on our op-ed section. We are purposely gathering people who are leading the debate on this and how it could be done. If you have any interest, if you are a total insomniac, go to that. But also, one name who explains it very well in some of the writings he has done for us is Nathan Lewis. He has done this in a very simple and understandable way.

But circumstances are pushing to it. What the Fed is doing is not working. This is the slowest recovery we've had from a severe downturn. People are reexamining things.

The turbulence of the 1970s led to deregulation, and the upending of the Teamsters in trucking led to deregulation of the railroads. It saved the American railroad system. The Staggers Rail Act of 1980 turned America's bankrupt railroads into the most dynamic freight-moving system in the world—absolutely underappreciated. Circumstances enabled Reagan to get elected and do things that would not have been done previously.

Circumstances here—the increasing severity of the crisis, what's happening in Greece and the turbulence there—people are starting to say, "We cannot continue doing what we're doing. We've got to make a change."

Ideas are beginning to percolate up. There's a crisis atmosphere. So a new system will emerge.

The system that will emerge will be different from previous gold systems. That is, you won't have the traditional one where you have a pile of gold and you issue currency depending on how much gold you have.

What you'll see emerge is a system where the dollar will be linked to a price of gold—I'll pick a number, $1,500 an ounce—and everyone will know that if it goes much above $1,500—and you can take a 30-day moving average, or 90-day, whatever details you want to write in—but what will happen is that if it goes much above $1,500, everyone knows the Fed will tighten until it goes down to $1,500. If it goes much below $1,500, everyone knows the Fed will loosen until it gets up to $1,500.

So you don't have to worry about runs on the bank. If you want to buy gold, you can call up your merchant. You don't have to go to the Federal Reserve.

So you don't have to worry, is there gold in Fort Knox? I don't care where the gold is. We know it's out there. You can't destroy it. And you do have functioning markets. And again, with moving averages, you can get out the daily fluctuations.

That basically is a very simple system and not the kind of brittleness that you had after World War I, when they tried to resurrect the 19th-century gold system. The circumstances were not favorable to it. But they did not make the adjustment, so it fell apart. But the modern one can work.

QUESTION: Neil Mehta.

My question is: What sort of appetite do you think we as an American public have for the more cerebral civil debate? Fox News and MSNBC could swap out some of their more provocative figures and put in kind of a PBS News Hour type of figure into those roles. I'm just not convinced that as many people would watch it. So my question to you is: What is the appetite, what is the demand of the consumer in terms of how they're receiving their news?

STEVE FORBES: Depending on what your passions are, you are going to want to hear from those who reinforce your enlightened thinking. That's very natural. People's attention spans are short.

But what's an amazing paradox of today is that, even though newspaper readership is in decline—on the local level it has held up, by the way, but traditional papers are in decline—is that, because people are addicted to their handhelds, they end up getting more bits of news than they did in the old days when you didn't have the handhelds. So, amazingly, in terms of at least factoids, or facts, there is more out there now.

I'm old enough to remember in the early 1960s, late 1950s, if you went outside of New York, most of the newspapers, to use a French word, sucked. You had a few wire lines. You should look at these things. They weren't very informative.

Now, today, you've got the whole world at your fingertips, depending on how far you want to go on this, link into it, and everything else. So depending on what your appetites are there, it is endless.

But in terms of a civil discourse, it won't mean you won't have sharp debates. Abraham Lincoln, if you read the Lincoln-Douglas debates, was very, very sharp—he knew how to use elbows—but there was also a sense of what the rules of the game were.

One of the things that happens when you get a thing like the great inflation is that there's a feeling that the rules aren't there. So you can go out on the football field or the tennis court, play hard, play vigorously, try to psych out your opponent, but you know there are certain rules about how the thing is scored, when you're in, when you're out, and that sort of thing.

What leads to incivility is the feeling that you don't have those guardrails there. That's what inflames the thing.

If you want to see what happens ultimately if you trash money, which is a disaster, just read a book that has been reissued. It was originally written 35 years ago. It is about what happened in Weimar Germany. The title of the book is called When Money Dies and how profoundly it changes people's psychology, unhinges people's sense of bounds of civility. We all know how it played out there.

But it played out in Russia. It played out in China in the 1940s. We got a little dose of it here in the 1970s. We got a dose of it here in the last decade, where people did things—Wall Street did things they never would have done under a previous stable regime.

Each person has their own appetite. But the key thing for civility is having a sense that there are things you do and don't do, but within the rules you can fight very, very vigorously, but there are rules of the game. Right now the feeling is that there are not rules of the game, which makes people very uneasy.

QUESTION: Ernest Rubinstein.

I wonder whether "civility" is the right word. When I hear the word "civility," I think of "please" and "thank you." Most CEOs, except for the George Steinbrenners of the world, know how to say "please" and "thank you."

The issue is integrity in carrying on business and financial institutions. As Joanne alluded to in her introduction, it is hard to pick up the Wall Street Journal or The New York Times on a daily basis without finding some example of serious misconduct by American business, American financial institutions. It is part of our daily diet. I think that is the real issue, not "please" and "thank you."

I wonder whether it's worse now than it used to be or whether there is simply more transparency, that we just know more about what's going on, more of it comes to light, more of it gets prosecuted.

I practiced law privately before I retired for 43 years in a large business-oriented law firm. Once in 43 years did I have a client who made a decision contrary to his financial self-interest based on some ethical principle. I have asked many of my lawyer friends, most of them in the large firms representing American business, "Can you think of any example in all your years of practice where you've had a client who made a decision contrary to his or her economic self-interest?" Not one of them could think of such an event.

STEVE FORBES: To answer part of your question, there is more transparency so we see more. But there is also a feeling today, whether you call it pushing the edge of the envelope, doing things you wouldn't have done in the past. And again, it gets down to the breakdown of what is acceptable and unacceptable.

Precisely because we are not angels—the law is supposed to not just be telling you want to do and not to do, but it is also supposed to be a teacher.

Just take the subprime mortgage. Before the unhinging of the dollar, once upon a time, subprime mortgages could work. It was risky, but if you did it right in terms of reserves, knowing you were going to have higher writeoffs, and done in a proper, careful way, it could work.

What you had in the 1990s and then particularly in the early 2000s was, in the name of home ownership, the old bounds went by the board. Why were once upon a time mortgages considered triple-A? Everyone knew the rules were 20 percent down; the rules were 20-year mortgage, not a 30-year; the rules were you couldn't get a mortgage for higher than four or five times your household income. Those rules worked. That's why you had only one half of 1 percent. People already had equity in their houses so they would strive mightily to make sure they could keep the thing even if they suffered a financial setback.

Well, along comes the combination of "We must have more affordable housing, you must drop your standards, you must meet certain quotas," and then came the unhinging of money. So it looked like, By golly, this is alchemy at its best; you can turn trash into gold by putting them together, by using sophisticated models that supposedly told you what your risk was, models based on the old 20-year model and 20-percent-down model, not the no-money-down.

So standards declined. For a while, people thought, "Well, maybe this is the new way you do things." Those were liar-liar loans, undocumented loans.

The attitude became for a new mortgage: Why have an income? It did not matter. The price of the house was always going to go up, so therefore, even if you couldn't pay the thing, there was not much of a risk.

And so yes, the ethics went down. That, again, is why you need an environment where people have a real feeling of what is acceptable and not acceptable.

One of the things that happens when these things become unhinged is it brings out the worst in people. It wasn't just Wall Street; it was Main Street; everybody got caught up in this.

You see it playing out in Greece today. They are outraged that they are going to have to cut back. They are railing against the Germans for leading the charge, pointing out how nasty the Nazis were in 1940. That was 70 years ago. But because they were nasty in the 1940s, by golly they should give us bailout money and allow us to continue to do what we're doing.

That's why there's no social trust in Greece. They're wonderful people, very warm people, but none of them trust each other. They all know you pay to get ahead. So there's a feeling the whole thing is corrupt, rigged, and it leads to what you see playing out there. That's an extreme example. Greece has its own particular history in this regard.

But it happened everywhere. It happened here. If you could find metrics, that behavior was worse in the 2000s than it was in the 1960s, 1950s, 1940s, or 1980s. Human nature being what it is, you always have people doing things they shouldn't do. But the feeling that there are effective guardrails went by the board, and when that happens it's not a pleasant sight to behold.

This came in a period where we still really hadn't fully recovered morally from the unhinging of the 1970s and early 1980s. So monetary policy may be boring, but in terms of money—money is ultimately created by you doing transactions with each other.

In the old days we had barter. If I sold an ad in Forbes 3,000 years ago, how would I get paid? Maybe a herd of goats, maybe a few camels or trees. I'd have to figure out how to take these trees and goats and exchange them for PCs for our writers. It was a very, very cumbersome process.

Money is a facilitator. But if the standard is changed to where, to make it simple, you sold your wine for four loaves of bread and suddenly you notice you're only getting two, you feel that's not fair, they're putting a thumb on the scales. So it brings out the worst in people.

So yes, the metric is everyone's standards fell down—in the government, everywhere—and we are now trying to clean up the mess from that.

QUESTION: Naidan Stoyanov.

Now that the Republican panel for the presidential election is largely known, what is your prediction for the level of civility we are to expect at the election next year? Also, are you jumping in again?

STEVE FORBES:
The answer is no, I'm not jumping in. Our youngest daughter here, Elizabeth, has a smile on her face, even though I'm embarrassing her. She doesn't have to worry that her inheritance is going to go to bumper stickers and radio ads. I've done it twice. I'm not going to try it a third time. No, I'm trying to be an agitator educator. I was chatting with Joanne about that earlier.

But in terms of who's running, I don't think the field is quite complete yet. We have to see whether Governor Perry of Texas is going to run.

Maybe Governor Christie of New Jersey, where I live, will run. He has said repeatedly he's not going to do it, but who knows? Circumstances may push him in.

I like Congressman Paul Ryan of Wisconsin. I've known him for 20 years. He does not want to do it, but he may get pushed in.

So we don't have a complete field yet.

In terms of civility, there's a huge difference between civility and vigorous debate. As long as you have rules of the road, I want vigorous debate. I was very disappointed in the New Hampshire debate that Governor Pawlenty did not challenge Governor Romney on health care. There are very serious differences and they deserve to be discussed and aired, not only in the debate but in other forums as well. I don't think that's uncivil, even though they may throw barbs at one another. I want that thing hashed out.

Again, vigorous debate should not be confused with ad hominem attacks and trying to destroy a person. I want to know what their principles are in this thing, what their policies are.

In terms of the seeming weakness of the field today, the process will produce a strong candidate. Don't ask me who it is yet.

But just a little reminder. In 1988, a governor of a small state, called Bill Clinton from Arkansas, made his national debut at the convention of Democrats in 1988, and his speech was a disaster. He spoke on and on and on. The cameras panned audiences doing this [making throat-cutting motions]. The only applause line he got in this interminable thing was when he said, "In conclusion."

So you'd think, with an introduction like that—young governor from a small state, nice try, over, showers for you; who's next?—and yet, four years later he wins the nomination and unseats an incumbent president.

One thing you have to keep in mind is that individual candidates cannot control the universe. Circumstances are often beyond their control. Sometimes they can be favorable; oftentimes unfavorable.

Take Barack Obama. In 2004 he gives a rousing speech. It was a great national debut. Everyone said, "Boy, that kid has a great future. He's probably going to be the next senator from Illinois, and maybe someday, ten or 15 years, he might run for the big one, may be a vice president, but maybe even the big one." No one would have said in 2004 that this state senator was going to be president of the United States, and the one who least thought he was going to do it was Hillary Clinton.

And yet, four years later he wins the nomination. Again, circumstances beyond his control, but you have a financial collapse. Some people said, "This guy will wreck the economy." People said, "Oh, it's pretty wrecked right now." And people were willing to take a chance on him.

So keep that in mind. The process will produce a candidate, and circumstances plus the process may create a condition where the Republicans are going to win, even though today it looks like "Oh, my God!"

It reminds me of the old Bob Strauss thing. In the early 1970s, Bob Strauss, a great Washington figure, served a stint as chairman of the Democratic Party. This was when Nixon was president. In 1972 Nixon was running for reelection. Strauss famously observed, "We Democrats could beat Nixon in a landslide if we didn't have to run anyone against him." [Laughter] We Republicans nod our heads, "Ah, yes."

But the process will produce a candidate. Circumstances are such that some of it is going to be beyond their control.

After a campaign, everyone says you're either an idiot or a genius. But in life a lot of things are out of our control. It's humbling.

QUESTION:
Good morning. Kevin Greene.

First of all, I want to thank you for having run for president in the past and actually for keeping in front of a lot of people these very good ideas and common-sense ideas.

Secondly, I'm relieved but not surprised that you're on the positive side of technological change because our current president thinks we ought to abolish ATMs and EasyPasses. So I was relieved about that.

The question I want to ask is, currently we have very low interest rates. It seems to me as though that again is a hidden way that the government continues its march to become larger and larger. It's a way that most people don't really recognize or understand.

We are in fact seeing a pretty large wealth transfer from savers, retirees, pension funds, foundations, and endowments to borrowers. Those borrowers are twofold: obviously, the government; and secondly, very large corporations. So if you're a large corporation, you can borrow money cheaper than you've ever been able to. But if you're a smaller business, an entrepreneur, it's tougher and tougher to do that.

Because of low interest rates, we have a federal government that can borrow half of this year's budget.

I don't think many people have focused on the real dangers of these incredibly low interest rates. I'd be interested in your observations about that.

STEVE FORBES: What your observation gets to is precisely that when you trash your money and upset normal market-set interest rates, it has very real consequences in the marketplace.

The system we have today is heavily subsidizing the government debt. The interest paid on the marketable national debt is about $200 billion. If we had normal interest rates, it would be about $600 or $700 billion.

And you're right about companies. One of the things about today is most large companies have very good balance sheets. But those that want to borrow—because of the perversity of our Tax Code, a lot of companies have cash but it's parked overseas because if you bring it home you get a huge tax.

As an aside, when seven years ago we had a temporary holiday on that, had only a 5.5 percent rate, over $300 billion came from overseas back to the United States. The Treasury collected a quick $18 billion. But we don't want to do that again today. So the market money stays overseas.

That's why you get the paradox of about a year and a half ago, I think it was, Cisco, which has a huge amount of cash on its balance sheet, borrowed ten-year money. Why would they do that? Well, it was so cheap. And why pay a 35 percent tax or 40 percent tax bringing it home when you can borrow it so cheaply here?

Microsoft about a year ago issued a two- or three-year bond with an interest rate of 7/8ths of 1 percent.

So you're right, it skews the system. Even though rates are nominally low, if you're a small business, the money ain't easy. You can borrow, but it is certainly not going to be at 7/8ths of 1 percent.

If you're a homeowner, even if you put 20 percent down, even if you do everything they once did, at a lot of institutions it's extremely hard to get the money, which hurts mobility, which hurts job creation, because—"I've got a great opportunity out in Nebraska, I want to go to a university town there," you can't do it, you can't sell your house here. You're immobile.

So the system is profoundly skewed.

Again you mentioned savers. Once upon a time, when you retired you'd have a portion of your money in CDs. If you were smart, you'd ladder it—a fifth in one year, a fifth in two years—so you didn't have to worry about interest rates. If they went down, you knew in another year or so when they rejiggered you were going to be okay as long as you laddered the money. If you ladder the money today, it's a difference between ten basis points and 100 basis points—it's pretty paltry. So you do get punished, which again feeds people's sense of Something is profoundly wrong, it's not right. I want to hit out at it.

They don't quite know how to do it, so sometimes it's constructive, sometimes it's destructive. But when those unnatural things happen, yes, companies get an unfair advantage.

And then, on regulations, just to throw a thing in about Dodd-Frank, if you really wanted to reform the financial system, just rejigger the capital rules sensibly and make sure you can't put stuff off-balance sheet and you'd solve most of the problem.

But now the regulations are so onerous and so vague, that you have small banks virtually paralyzed. I was talking to the head of a small bank the other day. He said once upon a time he had a mortgage person. Part of that person's job of being in charge of mortgages was compliance, that was just one of the things he did. The same thing with loans and other activities. "Now," he said, "I have five full-time people just on compliance."

I read in the Wall Street Journal a couple of days ago that more and more bank examiners—I love this word—are embedding themselves in banks. Not just the big ones but in all size of banks permanent examiners have an office. Boy, that's a real wonderful, warm feeling when you want to lend or you know a borrower and feel you can take a chance on it.

Another banker had to hire four full-time compliance people. They both said that when somebody comes in, it's not the borrower or an opportunity; it is "How will this play out with the examiner?" So you might get the loan, but it's always looking over your shoulder. Like defensive medicine, you're looking over your shoulder. Not a good thing.

Unfortunately—I hope this will change in a couple of years—the rules are so vague or the language is so vague in Dodd-Frank, that it makes it very difficult for alternative institutions to rise up.

Normally in a free market, if the people with legacies get caught up, new players come in and scoop it up. Why aren't the new players coming in in financial services? Because you're already caught, even if you haven't participated before.

Just take the auto industry. Detroit gets bogged down with legacies, foreign manufacturers come over here, go into right-to-work states, pay good wages, $35-$45 an hour—this is not cheap stuff—but turn out automobiles that in a normal economy people are quite willing to buy. Workers do very well and the communities do very well because they can move in where traditional players have boxed themselves out.

But that's not happening in financial services yet. So you don't have that kind of moving in where if somebody gets bogged down, somebody can move in and provide that service.

JOANNE MYERS: I want to thank you for educating us on these issues and for agitating us to discuss them in a civil way. Thank you very much.

STEVE FORBES: Thank you.

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