And a few others while he is at it.
Bill
The Pitt Principle
By PAUL KRUGMAN
NY Times, November 1, 2002
So Harvey Pitt decided not to tell other members of the
Securities and Exchange Commission a small detail about the man he had
chosen to head a crucial new accounting oversight board, after turning
his back on a far more qualified candidate. William Webster, reports
Stephen Labaton of The Times, headed the audit committee at U.S.
Technologies. Now that company is being sued by investors who claim
that management defrauded them of millions.
And what did Mr. Webster's committee do after an outside auditor
raised concerns about the company's financial controls? That's right:
It fired the auditor.
Mr. Pitt's response when this story broke beats anything a
satirist could have imagined. "Pitt seeks probe of himself," read one
headline. Honest: Mr. Pitt's own agency will investigate how he chose
Mr. Webster.
Meanwhile, what was Mr. Webster thinking? Nobody thinks he's
corrupt; but having failed so spectacularly to police executives at a
single, small company, how could he imagine himself qualified to
enforce honest accounting for all of corporate America?
Yet it's no accident that Mr. Pitt picked the wrong man. Mr.
Webster was chosen over better candidates precisely because accounting
industry lobbyists --- a group that clearly still includes Mr. Pitt
--- believed he would be ineffectual.
Let's call it the Pitt Principle. The famous Peter Principle said
that managers fail because they rise to their level of incompetence.
The Pitt Principle tells us that sometimes incompetence is exactly
what the people in charge want.
In this particular case, ordinary investors demanded a crackdown
on corporate malfeasance --- and Mr. Pitt pretended to comply. But
this administration is run by and for people who have profited
handsomely from their insider connections. (Remember Harken and
Halliburton? And why won't the administration come clean about that
energy task force?) So he picked someone with an impressive but
irrelevant background, whom he could count on not to get the job done.
This principle explains a lot. For example, the Treasury
secretary's job is to pursue sound fiscal and economic policies. So if
you don't want that job done, you appoint a prominent manufacturing
executive with little understanding either of federal budgets or of
macroeconomics. He'll be just the man to preside over a lightning-fast
transition from record budget surpluses to huge deficits. He'll even
cheerily declare that "the latest indicators look good" just days
before consumer confidence plunges to a nine-year low.
The attorney general's job is to uphold the Constitution and
enforce the rule of law. So if you don't want that job done, you pick
a former senator who doesn't have much respect either for the law or
for the Constitution --- particularly silly stuff about due process,
separation of church and state, and all that. He'll be just the man to
respond to a national crisis by imprisoning more than 1,000 people
without charges, while catching not a single person who has committed
an act of terrorism --- not even the anthrax mailer.
The same principle can be applied at lower levels. Intelligence
and defense experts should realistically assess threats to national
security, and the consequences of U.S. military action. So if you
don't want that job done, you place it in the hands of prominent
neoconservative intellectuals, with no real-world experience. They can
be counted on to perceive terrorist links where the C.I.A. says they
don't exist, and to offer blithe assurances about fighting a war in a
densely populated urban area when the military itself is very nervous.
But the most important application of the Pitt Principle comes at
the top. The president's job is to unify the nation, and lead it
through difficult times. If you don't want that job done, you appoint
an affable fellow from a famous family who has led a charmed business
and political life thanks to his insider advantage. He'll be the kind
of guy who sees nothing wrong in seeking partisan advantage from a
national crisis, even going so far as to declare that members of the
other party don't care about the nation's security.
That way, a great surge of national unity and good feeling can be
converted, in little more than a year, into a growing sense of dismay,
with more and more Americans saying that the country is going in the
wrong direction.
