Thursday, March 02, 2006

Summers' Fallout

William Stuntz in an article entitled 'Future Shock' written in The New Republic equates the difficulties that GM now finds itself in with a similar potential of the elite universities. Here are the first three paragraphs:

"Fifty years ago, General Motors was on top of the world--and knew it. GM dominated the American automobile market, and the American market dominated the world. Every year, another line of Chevrolets and Buicks rolled out, pretty much the same as the last, save for the shape of the tailfins. Millions bought them. Wages rose and benefits increased. If costs were higher, customers seemed happy to pay. What could possibly go wrong?"

"Plenty. Today, GM is on the brink of bankruptcy. The standard line in news coverage is that health care and retirement benefits were too generous, and there is some truth to that. But the roots of this soon-to-be corporate failure lie in the way GM handled its success. Instead of using its market share and cash flow to invest in innovation and greater efficiency, GM sat on its lead. It worked well for the managers and factory workers of the 1950s: They got theirs. But because they got theirs, today's workers are about to get nothing."

"Harvard is the General Motors of American universities: rich, bureaucratic, and confident--a deadly combination. Fifty years from now, Larry Summers's resignation will be known as the moment when Harvard embraced GM's fate. From now on, the decline will likely be steep. And not only at Harvard: Among research universities as in the car market of generations past, other American institutions will follow the market leaders, straight to the bottom. The only question is who gets to play the role of Toyota in this metaphor."

Living in a small GM driven town, the General Motors situation is a big deal. Living in the U.S., the university situation is also a big deal. Returning to sanity for both situations would be very, very good.

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