A funny thing happened to the Ford Motor Company's chief economist, William A. Niskanen Jr., when he advised his bosses late last year that government-imposed quotas on Japanese cars wouldn't solve Ford's problems: He got fired.
As Robert L. Simison explained in an absorbing Wall Street Journal story, Niskanen wasn't telling the management what it wanted to hear. Battered by competition, the company had decided to abandon its free-trade stance, and to beg for help from Washington.
"In the meeting in which I was informed that I was released," Niskanen said, "I was told, 'Bill, in general, people who do well in this company wait until they hear their superiors express their view and then contribute something in support of that view."
Niskanen's dumping is not unique. It brings to mind what happened to Gary Shilling when he was manager of the economics department for Merrill, Lynch -- the brokerage firm that is "bullish on America."
Shilling made the mistake in 1969 of producing an accurate forecast for a sharp recession at a time when most economists were looking for a continuation of a long boom. When his forecast broke the stock market the day after Christmas 1969, Shilling says his bonus was slashed, and shortly thereafter he was squeezed out of a job.
Now head of his own economic consulting firm in New York, Shilling told me that he agrees with Niskanen that business economists face a disturbing occupational hazard, as corporate America puts on its economic blinders.
"Everyone likes good news," Shilling said, "so any time an economist predicts anything on the downside, he does so at his own peril. As a group, economists are about as no-risk a herd as you can find. They'll tell the boss what he wants to hear."
For most of last year, he adds, bearish forecasts were acceptable, because policy-making executives had convinced themselves that a 1979-80 recession was inevitable.
In any event, Shilling says there's no percentage for an economist for a U.S. manufacturing corporaton to go out on a limb with any sort of innovative analysis.
"If he takes a major risk, and his boss doesn't like it, he'll be out," he said. "But even if he makes a bad forecast, so long as he's with the herd, he's safe.
After all, it's only enlightened self-interest: The economist wants job security like anyone else." (the same timidity, he feels, exists in government.)
The chief economist for a major Wall Street house (not Merrill, Lynch) confirms Shilling's blunt comments.
"Look," he said, I have a great deal of independence here, and I consider myself uniquely positioned. But when I talk to various boards [of directors], I hear lawyers make economic judgements, and mostly they don't know what they're talking about. But I can see them [the managers] take Lawyer A, Lawyer B, Lawyer C and yours truly, divide by 4, and come up with an economic position."
Remember that, when you get your next market letter from a brokerage house.
To come back to the Fork-Niskanen case: Last week, after posting a $735 million loss in North America in the second quarter (whittled back to $468 million by profits abroad), the company asked the International Trade Commission to impose sharp limits on Japanese cars.
The ford petition, supporting the complaint originally filed by the United Auto Workers, charged the Japanese with launching a sales campaign here "without apparent concern for the serious injury being caused to auto employment and investment in the United States."
There is no question but that the U.S. auto industry in general -- and Ford in particular -- is suffering. But how did it get into the mess, to what extent are imports a factor, and how much help would be gained b the protectionist action now before the ITC?
Niskanen lost his job at Ford because he told the people who hired him that they themselves were more to blame for declining sales than were the Japanese. tIn the Wall Street Journal interview, Niskanen estimated that import competition represented only about one-eight of the loss of Ford business over the past two years.
The bulk of the industry's problem, he suggested, came from two things: recession and structural changes caused by skyrocketing gasoline prices. In Ford's case, Niskanen added, "bad product decisions" compounded the problems. f
Ambassador Reubin Askew, President Carter's trade representative, observed the other day that there is a rising protectionist tide. The new Ford petition is only the latest bit of evidence of it. And Askew is surely right that resort to trade action is a poor substitute for appropriate government economic policy. A compounding and equally foolish corporate response is to blame the messenger when bad news arrives.