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Management is about Effectiveness: Not Race, Gender, or Ethnicity
By Byron A. Ellis – May 23, 2009
It is interesting, and somewhat amusing, to read the comments by some Americans regarding the appointment of General Charles Bolden to head NASA. General Bolden is a retired Marine, an astronaut with four space flights, two of which he commanded. And, after the Challenger accident, he was named chief of the safety division at the Johnson Space Center and was responsible for overseeing the safety of return flights.
Some, however, have commented that his appointment is an affirmative action appointment; implying that affirmative action means that the individual is not qualified for the position. Affirmative action, however, was a response to employment bias, not lack of qualification. Nonetheless, how much more qualified should General Bolden be? Or, put another way, would his qualification be appropriate for heading NASA if he was not black?
We do not hear similar comments attached to the qualifications of those who plunged the United States and the rest of the world in an economic recession and foolish wars.
Thus, it is interesting to raise the qualification question regarding the former administration, the Federal Reserve, heads of the American auto and banking industries, and so on.
We now know, unambiguously, that the GOP led former government performed as if they were not qualified to govern; we also know that U.S. auto and bank executives failed their fiduciary responsibilities. In essence, their failure to perform would indicate, after the fact, that they were not qualified to lead or manage.
Should we assume now because most of the executives that performed poorly were whites, whites are unqualified? Such assumption would be totally invalid and without merit.
Could we have predicted that their performance would be poor and that they would put the nation’s economy and security in jeopardy? It is difficult to accurately predict performance. However, often their previous behaviors provide a window of future behaviors. For example, if a governor of a state is a death penalty enthusiast, dispatching 152 prisoners to their death in eight years or 1.6 executions per month. It should not be difficult to conclude that if elevated to the presidency of the U.S., the propensity for violence would continue. Likewise, if an individual is given the task to select a vice presidential candidate and selects himself, the tendency for opportunism and self-centeredness are clear.
Similarly, we could look at the mission of the Federal Reserve (Fed) to assess their performance. According to their mission statement, their four general duties are:
 | Conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates. |
| Supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers. |
| Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets. |
| Providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system. |
Based on the performance of the economic and the banking system, it is clear that the Fed failed to achieve the above-mentioned duties.
Now should we conclude that the Fed failed because whites manage it? Such conclusion would be completely illogical. We could, however, say that the individuals managing failed because they did not apply proper macroeconomic theory and they lacked foresight. We could also say that the country needs individuals at the Fed that truly understand macroeconomic theory and have keen foresight. And, finally, we ought to acknowledge that skin color, gender, or ethnicity will not guarantee excellent performance; preparation and robust discipline are better guarantors of good performance.
The Fed when faced with a significant rise in the price level (inflation) of energy and food discounted the effect of the price level rise on the demand for real money balances. As a result, they did not increase sufficiently the nominal money stock to account for the fall in consumers’ buying power. For instance, if the consumer has $100 and the price of gasoline is $2, the consumer can buy 50 (=$100/$2) gallons of gasoline. However, when the price of a gallon of gasoline rises to $4, the consumer would need $200 to buy the same 50 (=$200/$4) gallons.
If the money stock does not adjust upwards to reflect the increased demand for real money balances, then the supply of real assets will exceed the demand for real assets. And, that is exactly what happened in the asset market, which includes housing.
The Fed in hedging against inflation failed to appropriately increase the nominal stock of money. Such failure caused the real money supply to decrease significantly, lowering the real (income) purchasing power of consumers. Thus, consumers consumed less goods and services, which reduced demand and caused inventory accumulation. When inventories accumulate producers and service providers need fewer workers, and hence the vicious cycle of layoffs begins.
Clearly, if we are somewhat rational and understand that efficiency enlarges the pie, our concern should be about how well (effective) individuals perform and not about race, gender, or ethnicity. Additionally, we should be laser focused on the management of the money supply by the Fed, because the adequate growth of the money supply influences the level of employment and our standards of living.
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