In his opinion piece in today’s New York Times, “Time for (Self) Shock Therapy“, Tom Friedman argues that when President-elect Obama takes office he should gather the heads of the top 300 banks in the U.S. and set out a course of action of “shock therapy.” The President-elect should tell the bankers that the economic mess began with them and their lax lending standards and is prolonged by them by the fact that they are now unwilling to lend at all. He envisions the new President telling the bankers

Those of you who are insolvent, we will nationalize and shut down. We will auction off your viable assets and will hold the toxic ones in a government reconstruction fund and sell them later when the market rebounds. Those of you who are weak will be merged. And those of you who are strong will receive added capital for your balance sheets, after you write down all your remaining toxic waste. I am not going to continue rewarding the losers and dimwits amongst you with handouts.

(Friedman, Thomas, “”Time for (Self) Shock Therapy“, The New York Times, January 18th 2009)

I agree with Tom on this matter, but I would argue that the “shock therapy” should extend beyond just the banks but out to American businesses in general. Consider that Circuit City just announced that because it could not restructure its debt and because it failed to find a buyer for the company that it was forced to completely liquidate all of its remaining stores and go down the Chapter 7 bankruptcy path. Add another 34,000 jobs lost. Two out of three of the major American automobile manufacturers, GM and Chrysler, have secured $17.4 billion in loans from the federal government to help them through 2009 (“Feds give GM, Chrysler $17.4B bailout“, The Detroit News, December 26, 2008 ). Retail sales fell 2.8% during this past holiday season according to the National Retail Federation (“Store sales fell 2.8% during the holiday, National Retail Federation says“,, January 14th 2009).

This is not just about banks (although they certainly do provide much of the impetus for the current economic trouble). It’s also about a failure of American business to be competitive in a global landscape (in the case of GM and Chrysler — and to a lesser extent Ford) as well as the belief that we can continue to spend and spend as though tomorrow will never come and the bill will be due. As Americans we must refocus our perspective. We cannot continue to live with the idea that we should buy just for the sake of buying. As Anna Quindlen noted in her Newsweek piece “Why Stuff Is Not Salvation”

“I looked into my closet the other day and thought, why did I buy all this stuff?” one friend said recently. A person in the United States replaces a cell phone every 16 months, not because the cell phone is old, but because it is oldish. My mother used to complain that the Christmas toys were grubby and forgotten by Easter. (I didn’t even really like dolls, especially dolls who introduced themselves to you over and over again when you pulled the ring in their necks.) Now much of the country is made up of people with the acquisition habits of a 7-year-old, desire untethered from need, or the ability to pay. The result is a booming business in those free-standing storage facilities, where junk goes to linger in a persistent vegetative state, somewhere between eBay and the dump.

(Quindlen, Anna, “Why Stuff Is Not Salvation“, Newsweek, December 13, 2008 )

Americans must re-learn how to save money, to invest wisely (no more of these “get-rich-quick” schemes), how to make thoughtful decisions (fortunately, we will soon have a President who appears to be thoughtful in his decision making) and how to lead once more. This will not be an easy transition and it will require some tough choices, but we as Americans can do it but more importantly, we must do it.