The New Economy Needs Him

The New Economy Needs Him
Philanthropy is a waste of Mike Milken's talents.
BY CLAUDIA ROSETT
Thursday, March 22, 2001 12:01 a.m. EST

LOS ANGELES--The update on Michael Milken, the former financier turned philanthropist, is that staff members of his California-based Milken Institute are relieved he did not get a pardon from Bill Clinton. "That was a bullet dodged," says one staffer, who notes that had Mr. Milken ended up sharing the pardon limelight with Marc Rich and other Clinton family cronies, "it would have made it impossible to get any work done around here."

Instead, the unpardoned Mr. Milken has been free to devote himself this week to hosting his institute's fourth annual conference on the global economy. It's been a two-day brainstorming session, Tuesday and Wednesday, with more than 1,500 people attending panel discussions on everything from the wealth of nations to the health of mankind.

To wander through this confabulation of Nobel laureates, CEOs, money managers, entrepreneurs, consultants and creative eccentrics is to visit a trade fair of ideas about how the future of the global "new economy" might look, and why. Don't expect a bottom line, beyond the message that even among the brightest, there is plenty of disagreement. But do expect intriguing angles.

Among the most intriguing is Mr. Milken himself, a former master of the financial universe who took a mighty fall and, barred for life from the securities trade, has since been on a classic quest for redemption. After serving two years in prison and surviving prostate cancer, he has for a few years been in the business of raising funds for cancer research and fostering discussion on how to enrich the quality of modern life. In this sense, Mr. Milken is right in step with the new-era economy. He is concerned not only with how people earn money, but with components of wealth that are hard to measure in dollars--such spiritual riches as family, such physical assets as health, such elusive intangibles as happiness.

A staple event at this conference each year is a panel of Nobel laureates in economics, chatting about conundrums of the modern world, with Mr. Milken presiding.. This year's Nobel lineup consisted of Gary Becker and James Heckman, both from the University of Chicago, Lawrence Klein from the University of Pennsylvania and Douglass North from Washington University in St. Louis.

Mr. Milken's critics deride this sort of gathering as simply an attempt by the former junk-bond king to rehabilitate his reputation. If so, he's working hard for it. This year Mr. Milken added a second Nobel panel, bringing in four laureates in science to discuss the future, including the financing, of medical research. The honorarium paid to all these Nobelists is $5,000 apiece--low enough to suggest that they come not for the money but because they find the event interesting. Mr. Milken may be banned from the actual markets, but he is finding ways to promote an exchange of ideas--especially between businessmen and academics.

Which brings us to another intriguing matter, much discussed at this year's conference. What, in this brave new economy, is going on with the sliding financial markets? Or, as Andrew Rosenfield, CEO of the Internet education firm UNext.com, put it: "Every issue on the panels that I've seen is, is the world coming to an end?"

"Perhaps" might have seemed the obvious answer on Tuesday, to judge by the conference participants wrapped around their cell phones as the moment drew near for the Federal Reserve to announce its latest decision on the discount rate. Fact is, it's one messy job sorting out the roster of opinions and remedies. Some folks say we'll be fine; others wonder if we're in for a repeat of 1929. On a "global perspective" panel of businessmen, the CEO of Starwood Hotels and Resorts, Barry Sternlicht, said that "we're in for quite a correction" because "the Fed has been asleep at the switch." (Lest that sound too bleak, Mr. Sternlicht added, "Mexico is good, go to Mexico. Vicente Fox is a stud.")

Weighing in more concretely was a panel of CEOs of retail businesses, including Safeway's Steven Burd and Barnes & Noble's Leonard Riggio. With some glee, they described how brick-and-mortar firms could use high technology in the businesses to ride out the market wreck in high-tech stocks.

The Nobelists were able to afford broader perspectives, although they were perhaps too wise to clarify much about precisely what to do next. Predicting a "relatively short but sharp recession," Mr. Becker noted that for most people, the chief stock of wealth consists not of financial holdings but of their own human capital--the skills and knowledge that amount to productive assets. Seconding this, Mr. Heckman added that we've seen a real, sustained increase in the vital arena of productivity. Although, he added in an interview later, we don't really know what that increase amounts to. "We have an old-economy measurement system, which doesn't really capture the new economy."

Mr. North offered the pessimistic but astute view that political institutions are slow to adapt to rapidly changing economic systems, and that could spell trouble for the new-era economy, "a world we've never been in before." Mr. North said he has "a grave skepticism" that economic analysis alone can give us accurate projections of the future.

In various sessions at the conference, there was a fair amount of talk about Japan, and its collapse from global highflier of the 1980s to economic mud puddle of the past decade. Was this a warning for the U.S.?

And Mr. Milken, looking for a bottom line of the economic Nobelists' panel, summed up that we are going through a time of big changes that will need some good navigating: "Our small planet in a big universe has significant issues that are moving us toward destabilization."

Which brings us back to the earlier, intriguing matter of Mr. Milken. Three years ago, when I first attended this conference (as a panelist), he described to me how someone skilled in doing deals could go about restructuring the rubble of bad bank debt and sagging corporations in Japan. He talked with such passion, and in such detail, that it struck me what Japan needs is a Mike Milken--or someone similarly innovative and likewise in love with finance--turned loose to sort out the market and let the Japanese economy finally get underway once again.

And it struck me this week that while the unpardoned Mr. Millken may be offering something of value in his forums and philanthropic works, the world at this confusing juncture in the markets is getting short shrift. In his days of rapacious hands-on financial innovation, of his insight that there were efficient new ways to finance high-risk investments, Mr. Milken probably created more wealth for the country, more jobs, more choices and greater well-being for more people, than anything he could possibly achieve as a philanthropist, even if he now becomes one of the world's most virtuous men.

His conferences are always interesting. And the healthy recipes he is promoting in the interest of better living are--well, all right. But how much potential wealth is the world losing because Mr. Milken spends part of his day promoting tofu-based brownies? I don't know what he would devise were he turned loose in the market cross-currents of the new millennium. I do believe it is our loss that he won't be.

Ms. Rosett is a member of The Wall Street Journal's editorial board. Her column appears Thursdays on OpinionJournal.com and in The Wall Street Journal Europe as "Letter From America."