April 27, 2004
The best selling book The price of loyalty catalogues the career of Paul O'Neill as Secretary of the Treasury in the administration of President George W. Bush, from which he was asked to resign. An interesting feature of O'Neill's stay in this important cabinet post, one of the top positions in the government, was the relationship between himself and Alan Greenspan, the Chairman of the Federal Reserve Bank. These two men brought to their respective jobs a high level of dedication, expertise on the economy and above all an attitude that advice (and policy decisions) should be based on a careful analysis of the factual data rather than on any ideological predisposition. They both had a pragmatic approach to economic issues based on an intimate understanding of how the economy worked. This brought O'Neill increasingly into conflict with the ideologues in the White House on issues like the proposed tax cuts which he felt may not have been necessary or desirable.
One example of the dialogue between O'Neill and Greenspan was after the Enron debacle had led to a widespread post mortem on what had gone wrong and discussions of issues of corporate governance. O'Neill brought with him his considerable experience as Chief Executive Officer (CEO) of Alcoa and thus an insider's view of American big business. Their discussions ranged over the enormous powers that had been acquired by CEOs, the loss of effective control by shareholders and the inadequacy of existing accounting standards. A variety of ideas were considered including tightening the structure of responsibilities for the CEO, imposing as the standard of liability negligence instead of recklessness (the argument that this would lead to a flood of litigation was met by the proposal that only the Securities and Exchange Commission would be empowered by law to enforce breach of this standard), and raising reporting requirements in accounts. During a meeting in the large conference room at Treasury O'Neill burst out, reacting to a string of recent revelations about Global Crossing, Tyco and other companies "There's been too much gaming of the system until it is broke. Capitalism is not working! There has been a corruption of the system of capitalism."
Both men were deeply committed to the capitalist system but they recognised that over the decades there had been a decline in the standards of what was acceptable conduct and that radical corrective measures were needed. They had the insight and the commitment to suggest the remedies. Some reform measures did emerge though after strong countervailing pressures from CEOs of major companies, many of them substantial contributors to the Bush campaign, and from the ideologues in the White House they were considerably watered down.
Public servants in their highest reaches are there to offer advice to politicians based on their experience and knowledge. The politicians may or may not take the advice in particular circumstances. But that advice, that input forms a crucial part of good governance. The Secretary to the Treasury is of course a member of the cabinet. But what was remarkable about O'Neill was that at all times he sought to give the President objective advice based on his fund of experience in the business world, and also gained from working for previous Republican administrations. He took his job and his responsibilities very seriously, but in the final analysis the gap between his loyalty to the president and his programmes and the standards he believed in was too great.
He was primarily a pragmatist not an ideologue and found it hard to support programmes he felt were misconceived.
The restructuring and improving of our civil service has been on the agenda for some time but has tended to become bogged down because of bad industrial relations. In some cases, too, because of changes over the years due to emigration and other causes institutional memory has been lost. The fall in standards in the civil service, particularly in the upper echelons, would have contributed to the decline in the quality of governance.