Editorial

Paradox of Lean

There is a Chinese saying that in bad times, we only make bad decisions.

This is a bad time.

The economy is tanking. Jobs are vanishing. Millions are unemployed. Everyone is nervous because of the ripple effects from the mortgage crisis, the selfish, foolish actions of Wall Street, the evaporation of credit and the decline in consumption.

And it is exactly at this moment that we all stop buying. It is called the Paradox of Thrift, when consumers stop consuming right when the economy most needs consumption. Economists have noted the phenomenon, which is common in recessionary environments and has plagued many economies, most notably Japan during its meltdown in the 1990s.

The paradox of the Paradox of Thrift is that one reason for the current crisis is that Americans are leveraged to the hilt. Credit-card debt, mortgage debt, auto-loan debt: Americans have been on a spending spree that has fueled the world's economy, just as their entire nation has been borrowing itself into greater and greater debt as well.

The solution being offered is that Americans need to start spending, but all of the tens of millions who have jobs, the holders of 92 percent of home mortgages who are paying them off on time, are nervous. We are holding onto our wallets, worried about tomorrow.

There is another paradox less noted, perhaps, which is the Paradox of Lean. American companies have been running lean for years. Under the influence of cutthroat competition and following the industrial philosophies of high-flying companies like Toyota, the cult of the lean has inspired an entire generation of business leaders. Doing the most with least in the most efficient manner has helped raise productivity and fuel the growth in the economy over the past 15 years.

But now companies are nervous as well. Even healthy companies with large cash reserves and strong competitive positions are laying people off. Exactly at the time when companies need to calm the nerves of the public and stabilize the job market, they are laying off workers. They may want to convince shareholders they are being vigilant, or they may be preparing for the worst they fear may happen. The end result, however, is that employers are contributing to the national uncertainty by laying off more and more employees -- that is, the consumers who they hope will eventually turn the economy around.

In bad times, we only make bad decisions.

The Church teaches that "work is a fundamental right and a good for mankind." It warns of the "profound negative consequences" of unemployment. Fear is understandable right now, but business leaders must realize that the widespread sacking of employees in an effort to drive costs down will, if conducted on a large enough scale, ultimately make the need for more layoffs and more downsizing necessary.

"Fear is useless. What is needed is trust." What is needed are good decisions.

Congratulations

It is a new day in New York. Archbishop Timothy Dolan, an old friend of Our Sunday Visitor and author of three of our books, a booklet, and one more on the way, has been appointed the next archbishop of the Archdiocese of New York. It is a daunting assignment, but Archbishop Dolan's gregarious optimism may be just the tonic for the Church in the northeast. We extend to Archbishop Dolan our warmest congratulations.