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Maurice R. Greenberg ’50 Discusses American Competitiveness in the Global Market

Maurice R. Greenberg ’50, chairman and CEO of C.V. Starr & Co., Inc. and former chairman and CEO of American International Group (AIG), the world’s largest insurance and financial services corporation, said the United States must save more, lower its trade and budget deficits, support innovation and risk-taking, and enact balanced regulation to compete in the global market of the 21st century.

Dean Richard A. Matasar introduced Mr. Greenberg by describing his life as “the classic story of New York Law School success” because his work was of tremendous benefit not only to his company, but also to a developing industry and society, as a whole. Mr. Greenberg, in turn, recalled his pride in receiving his law degree 56 years ago.

Turning his attention to the globalization of the marketplace, Mr. Greenberg said the U.S. faces serious challenges in the years ahead.

“Unless we get the deficit under control, the dollar is going to go down,” he said. “You can’t spend more than you’re taking in.”

Mr. Greenberg noted that the U.S. trade deficit last year was around $750 billion. The budget deficit is approximately $441 billion.

These are “big numbers,” Mr. Greenberg said, but the way to cut deficits is not through protectionism. Mr. Greenberg said he had spoken recently with New York Senator Chuck Schumer, who recently went on his first trip to China. According to Mr. Greenberg, before the trip, Mr. Schumer was advocating a 27 percent tariff on Chinese goods. After the trip, Mr. Greenberg said, Mr. Schumer appeared to no longer support such a move.

“I wish more of our legislators would go to China,” Mr. Greenberg observed.

Mr. Greenberg told his audience that the average annual income in China is only $1,700 yet the Chinese save around half of their income because they have no safety net. “In our country, we consume,” Mr. Greenberg said. “We don’t save.”

The advantage the Chinese offer global markets is very low labor costs, Mr. Greenberg explained. The advantage the United States offers is innovation.

It is, therefore, critically important that the United States develop policies that promote and nurture innovation and risk-taking, Mr. Greenberg said.

Mr. Greenberg listed a variety of areas that should be of concern to Americans, beginning with K-12 education.

“Other countries are doing a better job on K-12 education,” he said. “On the other hand, we have the best universities in the world.”

Mr. Greenberg said that even with the United States’ leadership in higher education, there was still a need for a greater number of students to concentrate in science and engineering to support innovation in the future.

He also said that excessive regulations and confusing accounting practices made innovation more difficult. “We need enlightened regulation, not strangulation,” he said.

Finally, Mr. Greenberg criticized the movement among corporate boards to nominate outsiders over insiders. He cited a number of studies that showed that outside directors did not improve the performance of companies and explained that when he began at AIG, almost all the directors were people from inside the company who were directly involved in projects.

“AIG became the largest insurance company in the history of the world so we did something right,” he said. “I could not build AIG today if we had to have an outside board.”

In answer to questions from the audience of students and professors, Mr. Greenberg said that he favored tort reform because while a person who was injured deserved some compensation, “it shouldn’t be a lottery.”

Mr. Greenberg also said he did not view China as a military threat and called for a constructive relationship. “Countries with good relationships don’t go to war with each other,” he commented.

Several audience members asked Greenberg’s opinion about executive compensation. He said that he believed “shareholder interest and executive compensation should be aligned.”

In response to a query about the role of the International Monetary Fund, Mr. Greenberg said he opposed giving the IMF any significant influence over the economy of the United States. “I hope we are capable of managing ourselves without them,” he said.

Mr. Greenberg advised today’s law students to find a company that is doing business in China or India and “learn some languages.”

“We are no longer the only game in town,” he said. “If I was starting all over again now, I’d probably move to China or India. Asia is going to continue to grow.”

Mr. Greenberg also advocated innovation and risk-taking as an integral component of leadership.

“It has to start at the top,” he said. “Timid leaders make timid organizations.”