One of the most resounding slogans heard during the last two years is ‘change’ but the idea of change and its importance as a process is not something novel. Heraclitus, the Greek philosopher said that no man ever steps into the same river twice, for it is not the same river and he is not the same man. Change, whether arising out of a catastrophe or a plan, can be the beginning of a better tomorrow and in that context it is wise to welcome change.
The underlying theme in this article focuses on how the current global economic crisis can lead to a more positive tomorrow if we work with change as opposed to resisting it.
In 1999, it took two earthquakes to bring Greece and Turkey. Fashionably called “earthquake diplomacy”, the disaster gave the two sides a chance to ‘help thy neighbour’ – leading to a new political era of peace after decades of mutual hostility.
Similarly, this shared global financial vulnerability gives nations an opportunity to move away from confrontation towards more collaboration. This change is visible already. At the recent meeting of the G20, one could say that the leaders from the top 20 world economies were at odds on a variety of issues. Some were driven by practicality, while others had ideological differences. Some sought long term commitments, while others eyed short term cures. But the very fact that the G20 summit superseded the G8 in terms of importance for the first time in many years, presents a sign of hope. This inclusion of a greater number in definitive policy making may well lay the necessary groundwork for a new age of peaceful coexistence.
Black Swan theorist, Nassim Nicholas Taleb, recently said: “People who were driving a school bus blindfolded (and crashed it) should never be given a new bus”, with reference to all the economic establishments, academia, regulators, central bankers, government officials, various organizations staffed with economists, that brought the global economy to this state. The lesson there is equally applicable to responsible selection of political leaders. Hence, if global citizens apply the same principle when choosing political leaders, which progressive and pro-reform people should do, then one can expect this recession to at-least beget better leaders.
In the years preceding the financial crisis questioning the basis of our economic transactions was to invite contempt and mockery. As long as the economies were booming, the cost of changing their inherent defects seemed far greater than their perceived gains.
With fault lines now glaringly obvious, restructuring the philosophical foundation of our economic system is not just possible but also inevitable. Call it moral capitalism or a socialist market, structural changes seem to be on the cards. The present financial crisis gives us a chance to rethink how we should go about doing our business and, more importantly, put our focus back to where it should belong, that is, the real sector.
Small economies have fared better than the larger ones during this recession. Their resilience is akin to grass which is more likely to weather a storm than a tall tree. In that sense, this recession presents the idea that locally driven small clusters of markets are better than a hyper globalised monopolistic transnational structure.
This shared global financial vulnerability gives nations an opportunity to move away from confrontation towards more collaboration. This change is visible already.
The rising underemployment and unemployment is naturally disheartening but it forces more people to start businesses of their own since the opportunity cost is either very low or zero. Creating self-employment will eventually, as the markets recover, lead to having more players in the economy thus resulting in a better ‘perfect’ market system.
At the corporate level, the recession presents more reasons to discover efficient ways of doing things that should remain in effect but are overlooked during the boom periods. History shows that time and again innovation has thrived in hard times. Learning from the current mayhem, perhaps this generation of intellectuals, can direct their energies towards making things more productive and longer lasting than credit default swaps and fancy technological gadgets.
Another positive aspect of the economic slump is that it gives good employees a chance to shine. During a boom most employees look good because the business is coming in anyway. But a slowdown allows employees to prove their mettle.
During the financial boom stock prices of even fundamentally strong firms seemed inflated to many savers. But with the crash trimming those bloated values, many stocks now look much more attractive and many are within the investment budgets of small savers. There is almost no better time to jump into the market, of course, after due research.