The Most Important Election in the World
By
Timothy Lutts, Chief Investment Strategist and Editor of
Cabot Stock of the Month ReportFrom Cabot Wealth Advisory 3/24/08
Sign up for free Cabot Wealth Advisory e-newsletterI recently spent a week on vacation in the Dominican Republic. The weather was beautiful, as expected, and I returned well-rested and recharged.
But while I was there, I couldn't help wondering, "Why is this country so poor?"
(For the record, the GDP of the Dominican Republic is just over $9,000 per person, while the U.S. GDP is $46,000 per person.)
After a little research, I found my answer.
It's not because the country is so small. Though it's approximately the size of New Hampshire and Vermont combined, I can name smaller countries that are far richer. It's not because there are few resources; the country has abundant water, sunshine and minerals. And it's not because the people are lazy; in fact, I found them quite industrious.
The reason the country is poor is that it's been only 12 years since voters in the country booted out Socialist strongman Joaquin Balaguer and adopted a true representative democracy modeled on that of the U.S....and change takes time.
Now you would think that countries around the world, having noted that the most successful economies are those with representative democracies, would be rushing to follow their lead. But politics is a complicated business, dirtied in no small way by the tendency of men (and women) to enjoy power.
Which brings us to the United States presidential election.
In a little more than six months, we will determine the successor to a man who (to put it kindly) failed to live up to the expectations of his party, a man whose approval rating, at 31%, is nearing that of Congress, which hovers in the low 20s. Yes, the process is overly long, but that may be appropriate considering its global importance.
What most of us want, though we may not have articulated the thought, is a great president, who can lead us out of our troubles and forward to a renewed role of world leadership.
What we don't want is another leader who fails to live up to our expectations, and lord knows there are plenty of examples of those, in both politics and business.
For example:
There's
Eliot Spitzer, who failed to live up to his own code of behavior.
There's
William Lerach, bane of corporate managements, who was recently sentenced to two years in federal prison for (in part) paying plaintiffs in order to induce them to sue.
There's
Melvyn Weiss, who agreed last week to plead guilty to similar charges, and faces the possibility of 18 to 33 months in prison and a fine of $10 million.
There's
Fidel Castro, who for 49 years led his country nowhere.
There's
Hugo Chavez, who has embarked on the same course with Venezuela.
Closer to home, there are the geniuses at Bear Stearns, Countrywide Credit and Carlyle Group, who forgot about the importance of ensuring that assets exceed liabilities.
The value of these failures to us today is that they provide lessons on how not to act...if we pay attention to them.
They remind us that the person we choose for the most difficult job in the world needs to be intelligent yet be humble; needs to be resolute yet open to change; needs to have principles yet be ready to compromise. But above all, that person needs to lead.
I'm not asking for a Washington or a Lincoln or a Jefferson. I'd settle for a Reagan, or a Truman, or a Roosevelt (either one).
If we do our jobs right, we'll select a person who can help keep the U.S. at the forefront of the world for many decades to come, not just because power is so very nice to have but also because our values are worth defending...and promoting.
But the job is harder now that it ever was, in large part because the two parties in Congress are so divided.
(On that note, I felt a ray of hope last week, when I read that Stanford University professor Lawrence Lessig had launched a Wikipedia-style project named Change Congress that aimed to use transparency and the power of the people to overhaul Congress. I wish him success.)
Meanwhile, over in China, which has over four times our population, economic growth is running at 10% fairly consistently. That growth has been a great tonic for investors in China, and helped make
Cabot China & Emerging Markets Report the #1 investment letter of the past 12 months. But it means that eventually (though not soon), China could eclipse the U.S. in power, and we better hope that by then their values have evolved to be far closer to ours than vice versa.
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