Month: June 2011

Salient solution

Smoked meat (full-fat) at Schwartz’s.

This summer’s annual fall-off-the-blogging-bicycle was brought to you by Soho the Dog’s brief all-staff jaunt to Montreal and Québec. And also this week’s Boston Early Music Festival gauntlet. But mostly the trip north, during which we spoke French extremely badly but still ate extremely well. Très bien! The best restaurant music we heard was in Québec City, where, after hiking all day through St.-Roch, we wandered into the Cafe Abraham-Martin in the Complexe Méduse just as the owner put on David Bowie’s Ziggy Stardust—the whole album. *pompe le poing* (The worst was also in Québec City, when an otherwise lovely lunch at Laurie Raphaël was accompanied by this—in a remix that Went. On. Forever.)

Anyway, one of the happenings I missed was the announcement that the board of directors of the Detroit Symphony Orchestra had re-signed president Anne Parsons for another three years. Parsons was the face of management during the orchestra’s six-month strike—in fact, the deal was agreed to back in March, before the strike had even ended.

This sort of thing, it turns out, is something of a minor DSO tradition. Back in 1919, the pianist and conductor Ossip Gabrilowitsch gave the DSO an ultimatum: he would only sign on as music director if he got a new concert hall.

The directors of the Orchestral Association decided that they had no choice but to build a new hall. A hastily assembled building committee selected C. Howard Crane as the architect. Within two weeks the committee had purchased the site of old Wesminster Presbyterian Church and raised half a million dollars in building funds. Crane’s general contractor—prepared to work day and night to rush the building to completion—promised that it would be finished on schedule…. The contractor further showed his zeal by starting demolition of the church at a corner of the roof while a final wedding ceremony was still going on inside.

(Source.) Orchestra Hall—now part of the Max M. Fisher Music Center—is today one of the orchestra’s biggest financial headaches, the collateral on a $54 million balloon loan taken out in the face of what was revealed to be the financial bubble of the last decade. Decisions like that have not exactly reflected well on the prowess of the DSO board, and while the Music Center debacle predates Parsons, when that board expresses its confidence in her (“proven expertise in navigating challenging economic climates,” according to the board chair, who also runs a commercial real-estate company—hmmmm), it does create a bit of a with-friends-like-these situation. Hence the head of the orchestral committee calling Parsons’ contract extension “disappointing and puzzling.” (Definitely puzzling timing—was a change in management on the negotiating table? Outside supporters were calling for it, at least.)

A change of leadership would seem to be a common-sense move in Detroit, if only to clear the air of lingering bad feelings. But, then again, there are plenty of organizations—orchestras included—that are rife with bad feelings yet still hold up just fine. It might be a little more trenchant to say that a change of leadership is necessary based on a political-scientific analysis of European fiscal policy in reaction to the OPEC oil shocks of the 1970s. No, really! Well, maybe only kind of, but still fun to think about. Consider the work of Fritz W. Scharpf, emeritus director of the Max Planck Insititute for the Study of Societies. For a long time, Scharpf’s main research topic has been European integration and the difficulties and contradictions therein, but along the way, he’s come up with a nicely trenchant way of thinking about the relationship between varying approaches to economic policy and political legitimacy.

Back in the 1970s, the decision by OPEC to pump up oil prices put a severe strain on the then-prevalent Keynesian model of macroeconomic management—government spending and tax cuts to stimulate demand, spending cuts and tax increases to keep demand (and inflation) from overheating. As Scharpf explains:

Under these conditions, governments committed to Keynesian demand management were confronted with a dilemma: If they chose to fight unemployment with monetary and fiscal demand reflation, they would generate escalating rates of inflation; but if they would instead fight inflation with restrictive fiscal and monetary policies, the result would be mass unemployment.

What’s more—

In Germany and Switzerland, by contrast, governments were unable to reflate the economy because monetary policy was determined by an independent central bank that was unconditionally committed to the defense of price stability—in which case the bank’s tight-money policy would neutralize expansionary fiscal impulses…. Under these conditions, major job losses were unavoidable. They could only be softened if real wages were quickly adjusted downwards, which was true in Germany and Switzerland but not in the other hard-currency countries practicing an imported (and perhaps less clearly understood) version of the Bundesbank’s monetarism.

The Bundesbank—Germany’s central bank—was long marked (pun—ha) by its devotion to monetarist policies: basically, focusing on maintaining price stability via control of the money supply rather than aiming for full employment by stimulating demand. It’s supply-side, rather than demand-side policy, the kind of thing that can lead to massive deficits (e.g., Reagan-era US) or massive unemployment (e.g., Thatcher-era UK). In Germany, though, it worked pretty well for a lot of the 1970s and 80s. How come? In a talk he gave at the London School of Economics last month, Scharpf sums up:

[The Bundesbank] took great pains to explain, to the government, the unions and the public, how coordination by monetary policy would not only ensure price stability but also produce economically superior and politically justifiable macroeconomic outcomes. Once rampant inflation was brought under control, it would precisely monitor the state of the German economy and pre-announce annual monetary targets by reference to the current “output gap”. Maximum non-inflationary growth would then be achieved if fiscal policy would merely allow the “automatic stabilizers” to rise and fall over the business cycle, and if wages would rise with labor productivity…. In other words, responsibility for the management of the economy would be assumed by the “non-political” monetary policy of the independent Bank, whereas non-inflationary fiscal and wage policies could be conducted with a low political profile.

In Scharpf’s analysis, Keynesian policies have high political salience—because they directly involve taxes and government services, they tend to produce strong and immediate political reactions. Monetarist policies have low political salience—they’re pretty technical and behind-the-scenes, so there’s some insulation from the churn of the political surface. But monetarist policies require that such low salience be maintained—which is why the Bundesbank did so much legwork getting everybody on board, ensuring low salience down the line. (Compare with the period of German reunification, when the Bundesbank was pulled into more highly politically salient waters against Chancellor Helmut Kohl, with resulting damage to the Bundesbank’s reputation.)

And now for the question that explicitly or implicitly comes along in at least 75% of posts in this space: So where exactly is this going? Well, it’s hardly an exact analogue, but orchestras respond to fiscal crises with policies that are more or less monetarist. While it might be fun to see what would happen if an orchestra tried to spend its way out of a crisis in the Keynesian manner, it can’t really happen because orchestras can’t issue debt. Instead, they cut—they cut costs, they cut wages, they cut performances, &c. But, as in Germany, that only works in an atmosphere of low political salience—the exact opposite of what the DSO has managed to achieve. Even if you happen to think that managerial brinkmanship was the DSO’s best plan, if we borrow Scharpf’s ideas, it fairly guarantees that there’s no way to get back to a low-salience situation without either a change of management or a change of orchestra—severely curtailing the possibility of any further monetarist solutions to any subsequent crises. (Again, perhaps not an exact analytical fit, but pointing in an interesting direction.)

High political salience really brings out a lot of the more curious organizational aspects of orchestras—for instance, the way the players are not just employees, but also the product, and a crucial political constituency. It also points up that boards and, by extension, management, are not always terribly accountable—high political salience demands such accountability in governmental situations, but boards are largely self-governing. This is not to say that all boards are untenable; some boards, at least, appreciate the value of low salience. This is, again, a pretty fancy justification for what would seem to be common sense. But it does hint at how, if this kind of non-profit doesn’t happen to have either an institutional history or a managerial interest in maintaining deep, representative, competent governance, it can be pretty hard to get that to change, even when the need is obvious.

Detroit’s Orchestra Hall and the bit of land it sits on—the corner of Woodward Avenue and Parsons Street—has some interesting accountability karma. Woodward Avenue runs along the original Saginaw Trail. The plot was originally one of the so-called Park Lots, created in 1806 when the U.S. Congress authorized the “Governor and Judges’ Plan,” an appropriation of land that was previously a common. The lots were supposed to be distributed to settlers who had been displaced by the massive fire of 1805, with the remainder to be sold to raise money for a courthouse and jail. Instead, officials repeatedly dragged the process out, in order to squeeze out the original inhabitants, buy up lots for themselves, and fuel a speculative real-estate boom. Silas Farmer, Detroit’s 19th-century city historiographer, was rather elegantly sarcastic about it in his History of Detroit and Wayne County:

The Governor and Judges, first in charge, undoubtedly assumed unlawful power in giving away lots to various churches and societies, and exceeded their authority in many particulars. None of these powers were included in the Act creating the Land Board. The ease with which their sessions changed from land-board to legislative, and from legislative to judicial, as the exigencies of the case seemed to them to demand, was something marvellous even for that time of transition.

Only twenty years after its 1919 construction, the DSO vacated Orchestra Hall, the financial pressures of the Depression being too much to handle. The city seized the hall in 1941 for non-payment of taxes, then sold it to Ben and Lou Cohen, who already owned a chain of theatres; the Cohen brothers re-opened the Hall as the Paradise, which played host to some of the biggest jazz acts of the time. When, in 1970, the structure faced demolition at the hands of the fast-food hamburger chain Gino’s, a concerned-citizens committee was able to buy it and begin restorations.

The Orchestra moved back in 1989—which means that Orchestra Hall has only housed an orchestra for well less than half of its existence. On the one hand, the Hall is a tribute to the DSO’s perseverance; on the other hand, it is a fount of cautionary tales. But the board seems disinterested in learning from the past, once again throwing a wedding while knocking down the church.