Tuesday, August 16, 2011

Getting the Right Leader

This article explains how the most important issue to voters is money.  This article explains how the most important job in the country is the manager of the economy.  The only creators of wealth in any country in the world are businesses, especially new, innovative businesses.  Therefore, the biggest creators of wealth are entrepreneurs.

This Lawyers article explains how we usually get the wrong leaders who do not have enough focus or skills on:
  • creating and growing businesses, or
  • quantitative matters, such as fiscal policy.
It also explains that we need CEOs/Entrepreneurs to be leaders of the country.  Ideally, CEOs who were Entrepreneurs and have studied economics or worked as an economist as well, would be the best leaders.

We will explain here one way to get these types of leaders.

As mentioned in the Lawyers article, CEOs make far more money than the leader of the country.  Hence, the first change that needs to be made is to increase the compensation of the leader substantially to attract CEOs.

Secondly, the leader's compensation package should be structured similarly to the compensation structure of CEOs.  This would include a nominal base salary plus performance bonuses.  The base salary should be close to what the current base salary is for the top CEOs.  The performance bonuses, based on achieving targets, should be substantially more than the base salary.

Most governments run deficits during recessions and still run deficits when the economy is expanding.  This is the cause of our huge debts and is unsustainable.  This Fake Economy article explains how sustainable government budgets should work.  It should run surpluses when the economy is expanding and if need be, run deficits during recessions.  Therefore, the leader's compensation should be deducted if the leader runs a deficit during economic expansion.  In addition, there should be a performance bonus tied to the percentage increase of budget surplus during economic expansion.  The more surplus our government has during economic expansion, the more it can do during recessions.  Therefore, we want to motivate the leader to build as much surplus as possible during economic expansion.

Since the most important issue to voters is money and the economy is what brings money to voters, the leader's performance bonus should be tied to the change in the GDP.  However, any costs to the environment eventually reduces the GDP.  Therefore, the performance bonus should be tied to the change of the well being of the country, where the well being is calculated by taking GDP and subtracting any cost to the environment.  (This well being may be difficult to calculate at this time, in which case we would default to the GDP.)  If the well being expands, the performance bonus is increased.  If the well being contracts, the performance bonus is decreased.

Every Sales Rep or VP of Sales has targets, such as 5% increase in sales and 4% increase in profits.  Similarly, the leader should have targets, such as:
  • Well being (or GDP) growth of 3%
  • Budget Surplus of 2% during economic expansion
  • Budget Deficit of 2% during recessions
A non-partisan group consisting of staff from the economic and human resources functions should set these targets, based on previous statistics.

The target income for the leader will be based on the leader accomplishing all of the targets.  The target income should be higher than what the top CEOs currently make.  This way, the likely or expected income for the leader will be comparable to what the top CEOs make.

With this system implemented, we can easily gauge the performance of our leaders.  Voters will easily be able to see how well the leader has done to determine if the voter should re-elect him/her or replace him/her.

Then, as explained in the Democracy: Cause of Debt Problems article, we should do this:
"...the first problem we have is that we urge everybody to vote when many do not care about politics, do not know the difference between deficit and debt, do not know that we will make our country poorer in the long run or do not know that we are stealing from children.  We do not allow people to drive a car unless they take lessons and pass tests.  We do not allow people to sell stocks unless they take lessons and pass tests.  We may not be able to be so draconian as to force voters to take tests before they are allowed to vote, but we should urge voters to get a minimum level of understanding of our finances, fiscal situation, economics and how we are stealing from children, before we urge them to vote.  This should be the first and minimal step that we take to fix the problem with democracy."


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