Anarchy in the UK, downgrade of the USA credit rating, panic about France and its banks, let alone the issues with PIIGS countries, the unrest in the Middle East, and the femine in the Horn of Africa.
The most interesting explanation for criminal behaviour in the UK I've seen was presented by a Sky News reporter, who recorded looting on his phone. "Are you proud of what you're doing?" he asked one young woman who was stealing goods from a destroyed store. "I’m just getting my taxes back," she replied. We all understand that this is a pretty foolish excuse for plundering.
The European Central Bank prevented an immediate Euro meltdown with its purchases of Spanish and Italian bonds, but there's little to indicate that governments have the ability to use all tools and time they've been handed to strengthen the Euro Zone. In the USA, the discussion remains firmly focused on fiscal issues, even as Treasury yields drop.
Risks are pointing overwhelmingly to the downside here, and if major central banks fail to react, the trouble will only grow. The British riots could point to similar risks in other European and U.S. cities as cuts start to bite. Record food prices will hit the world's poorest hardest, raising the risk of riots, export bans, foreign-owned farmland expropriation and further price spikes.
Free market economists would probably argue that governments have intervened in economies many times, espesially over the past several years, to protect established market participants, such as large businesses, systemic banks, pensioners and social weak. Much of these gains have come at the expense of market dynamics, which has translated into stagnation, unemployment, and deficits leading to austerity. Social unrest is the cost of these trade-offs.
I would love to hear your opinion on this issue and the broader implications of these events into the business life.
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Editorial additions. Relevant best practices and resources.
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Replies
Dear Boris
We all no doubt watch the same news, read the same newspapers and we are all seeming trying to figure out just how much damage greed can impact on the global economy and man’s ability to survive it. Whilst we are all grappling with what is happening in the ‘now’ it appears that our parents and grandparents experience the same and humans are probably the only living creatures that do not learn from past mistakes. My question is……is greed really so all consuming?
There really is little time to lose.
We have to get stuck into correcting macro-economic structural weaknesses that are causing the mayhem.
Join my PANEL of experts and help us to do that.
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Dear Boris,
Most business continuity plans should contain the following:
Market and Liquidity contingency plans should tie into the organization's capital plan.
Dear Boris,
Social Unrest should be in every organizations contingency planning including how operational, market, liquidity, credit, legal, and reputational risk are all impacted. We can't control our governments always, but we can control how we react to crisis situations. London should be a warning to all of us of the tension that is brewing worldwide. There are many consultants and experts that can help companies prepare for these type of situations. Companies should strive to be proactive.
Simple steps can be taken just using common sense. For example, if employees could be at risk (ie. London), what is the protocal for staying home and working. If the country you live in has a weak or understaffed police force, then there should be a third party contract to hire guards to protect the building and property. Physical safeguards should be heightened to protect data also. The goal should be to minimize losses, physical and downtime. Beth Pitzer
Balanced approach, honesty, ability to make sensible compromises for the sake of sensible public policy are all critical ingredients that are missing not only from political landscape but also from public discourses of common man (or women). While champions of a certain version of capitalism would like to paint all unions with one color (red?), the proponents of left wing ideologies don't seem to see reason with the perfectly reasonably logic that governments aren't known to efficiently spend people's money, and have some justification in their side of logic that complicated tax-codes are titled too much in favor of super rich so much so that mega corporations and multi-billionairs only pay a tax rate that is half or less than the rate that is paid by a teacher or a secretary or a janitor.
Once again, some civility in public discourses, some level of trust in fellow citizens who may (and most certainly always will) have slightly different viewpoints, and willingness to compromise and understand that the right solution of a government is not necessarily smallest that doesn't charge any tax (I like zero taxes, but I know I can't imagine a society with zero tax, neither would like to live in one (perhaps Somalia or some sub-saharan country with no-infrastructure or government services may be able to have no-government and hence no taxes). Even those places where there is no taxes, vulnerable population gets taxed by gangsters as the people somehow survive in constant fear.
On the other hand, it is also true that socialism is a failed system that only promotes incompetence.
Despite the fact that most sensible people of any political party or apolitical educated class completely understand that a reasonable middle ground is where the solution lies, and yes it means making some tough choices to cut deficits for the governments, but poorest of the poor can't be left to fend for themselves and the super rich must be ready to pay a fair share of their taxes to support a balanced level of government that we all benefit from.
We thrive on the ability to achieve whatever our goals are at the moment. That's why capitalism has prospered in the
past. Once government gains control, we become mired in red tape. Taxes paid by all peoples need to "visually" result in better education, opportunity, health, roads, bridges, etc. Unrest occurs when money is misappropriated, and people
become frustrated because it appears that the government is not listening. If the people have to cut back on frivolous purchases, then those in the role of government should also reevaluate their expenditures.
America prospered on the ingenuity of its immigrants and their attitude towards education and the "hard work ethic." The idea that a person from any social demographic strata can be successful is fundamental to American progress. To stay with Global progress, American children need to excel in science, math and computer technology. Teachers need to be honed into these essential new skills in order to move America forward. Tenure needs to be eliminated. Unions
have made the price for any job too expensive. We need to evaluate outdated or overreaching systems like the unions. The globalsystem can work, but it must have balance. Greed, aggression, and power plays must be thrown out.
As technologies supporting internet infrastructure mature, the natural trust models are more cleanly mapped to the technology world (that disconnect between the way individuals are identified and trusted in the real world and how easily such trust relationship is faked by malicious imposters in the internet world has been behind many profoundly important social-economic behaviour changes), Information exchange that is the medium of transacting business between people and enterprises, is made secure not just by half-baked and desparate point solutions, but by transformational technology updates that takes this basic human trust model to heart, I am hopeful of better days ahead.
But for now, hope is all that we are left with, given the unprecedented challenges and inadequate tools to meet those.
I believe if most people just started from the positive mindset of hopefulness and acceptance of the fact that solutions to socio-economic problems at macro level require reasonable compromises and innovative thinking outside of hardened pre-conceived positions, we will be able to get out of this mess in a very short period of time, and then it will remain a history that hopefully our children will learn from.
For me some of the key factors that have led to the current global troubles are:
1 governments of all nations believe they have more power than they have in fact
2 global mega-businesses are effectively beyond the reach of government control and can play one against another
3 at the global level criminals are almost entirely beyond the reach of enforcement bodies
4 the internet has brought information (not necessarily knowledge and even less so wisdom) into the hands of the masses, regardless of any individual goverment's policies on "freedom of info", "protection of privacy"
5 with few exceptions the wealthy gain their wealth at the expense of the rest - by exploiting labour, by overpricing products, by mis-selling, through the effects of inflation, etc
6 in 'the west' the illusion of wealth and wellbeing has been sold as a right of everyone regardless of input
7 globalisation has broken the normal bonds of society based on trust, which developes as a result of co-operation and mutual support that grows out of personal contact with fellow citizens including neighbours and those with whom one does business.
Of all these the internet has the greatest single impact. Unfortunately its newness coupled with its mass impact means we have no tools to manage it so we have returned to 'the law of the jungle'. Every politician in the free world, and arguably those elsewhere, along with every thinking citizen should be working overtime on rebuilding trust. And that, unlike so much else, is something that cannot be faked.
As George Osborne said this afternoon in the UK partliarment, the road to recovery is going to be very hard and painful. As job losses continue to be on in the increase, discretionary spending will go in the opposite direction and this is where it bites businesses. Libor is on the increase and banks would not lend businesses either. In the UK, public sector salary has stagnate for over 2 years, inflation has gone up, VAT has gone up, utility bills have gone up, everything that can go up has gone up and on top of that we are now expected to pay more for our pension. Effectively, those who still have jobs are getting poorer -safe some bankers who still get bonuses at the expense of taxpayers money for bailouts- can this be justified?
The way out of this quagmire is to create income generating projects where people can work and spend, it may not be the quickest way to recovery but a faster way to the current options of deep cut in the UK and now being adopted in the US
I believe our tools at the disposal of various (western) governments, and various models of governance, however tried and tested, and the very foundational ideas of capitalism aren't in a position to effectively address the challenges we face today. The deficit of confidence in our economies, the system's inability to address the basic concerns of poorest of the poor amongst us, and disproportionate influence of politically active minorities that hold extreme views about role of government and tend to see the world in black and white rather than in shades of grey that it really is.
Political leaders are doing all they can to head off major disasters (many are rightly also worried about their own careers), businesses are holding back or defering major investment decisions and everyone's hoping to get on with "normal" life after the storm subsides.
Perhaps that's the right thing to do, for, the volatility is unsustainable and it must subside by its very nature. Perhaps then will be the time to reflect upon all that must change, the new tools that must be developed to equip our world to handle such situations in a better way.
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