When the size of the solution doesn't match the size and urgency of the problem, the problem will more than likely get worse.
Let’s apply this leadership lesson to what will likely happen in the month of November with some of the leading economies of the world based on how heads of state are responding to really big problems.
The EU and the EURO
A few weeks ago, I went on record with a prediction that the demise of the Euro will be because the cultural differences of the member countries will drive their individual economic behaviors more than the rules of the European Union will. Now Alan Greenspan weighs in on the same point in an interview with CNBC. “The effect of the divergent cultures in the eurozone has been grossly underestimated," and as a result, the divide between north and south dooms the EU to failure. Read full article here>>>
In this case, the core problem with the Euro is cultural in nature and therefore will not be sufficiently addressed by any sized bail out. A loan and debt reduction deal does not fit the size and scope of the cause of their problem. Their approach to fixing the Euro problem is not unlike thinking you can cure a cancer by putting a band-aid on it.
The US Dollar and the Economy
Not to be a bummer, but I’m also on record predicting that the political leaders who make up the congressional super committee won’t be any more successful at creating sufficient cuts in federal spending than the entire Congress was. Instead we’ll be presented with yet another example of an undersized solution that doesn’t address the underlying cause of the problem. Once again, politics will trump leadership.
My prediction is that their failure will lead to another downgrade in the US credit rating. Like the last time, this downgrade won’t be given because our ability to pay our debt is any worse. It will happen because our leaders will once again demonstrate they don’t have what it takes to apply the right sized solution to the real problem. I’m reminded of the advice my Dad gave me when I was a kid learning how to cut a piece of wood. He would always say, “Measure twice. Cut Once.”
Here’s the Deal
Great leaders know how to correctly define problems before they ever begin trying to solve them. The fact is size does matter. The short-sighted nature of the decisions some world leaders are making has me starting to believe that in political language, “Too big to fail,” really means, “Not on my watch.”
© 2011 Joe Caruso and Caruso Leadership. Reprints available with permission.