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Strategy and our common future II

Published by under Articles,Politics / Management categories on May 10, 2011

Fish in small tank and smaller fish in bigger tank looking each otherHistory demonstrates that when in crisis we must be creative and leave the non working recipes. If we abandon our fear of the unknown and work together for our common destiny, if we take responsibilities upon our own shoulders instead of leaving them to others, the future will not cease to be bright…Let us now debate possibilities within the frame of the globalised market. How can we innovate where it seems all has been done? By Joaquim Duarte.

Indeed, economy appears to be at fault for almost a decade now, short of solutions or even the will to start afresh. Economists and politicians have been easy prey to the ever so complex web of information and theory surrounding global barter. For starters there’s the unpalpable mechanism of speculative transactions, playing hide and seek with his elder brother, productive economy, by gambling on value and demand. In fact, speculation could well be presented as a form of finantial cannibalism, hyperinflating prices and diverting the regular flow of funds that should be invested in people.

Investment banks and stock exchanges play an important role on this huge Monopoly game by subjecting value to ramdom moods and speculative gambling. But there are also the other finantial institutions bullying sovereign debts (e.g. rating agencies), cornering States and simultaneously demanding increasingly more funds (or requiring temporary nationalisation) so as to maintain liquidity. These funds will then be used in putting more pressure on national debts in the form of loans at usurer interest rates. Along the way dividends are payed and money is withdrawn from real economy.

Now we come to States and it is where politics enter. The progressive establishment of liberalism worldwide inhibits countries from trying to refrain this autophagic monster. A lot could be said about corruption or the democratic process and its inevitable perversions, but let us focus on another fulcral aspect of the debasing of States: Public Wellfare vs. Privatisation and the Free Market. Combine these with an exaggerated concern over deficit and inflation, there you will find the recipe for havoc. When a country relinquishes its control over a few strategic sectors of national economy and simultaneously tries to keep low deficits as well as inflation what happens is a strangulation on the middle classes by the withdrawl of social benefits and raised taxation. As the private sector is not designed for social sustainability, it exerts pressure on governments to flexibilize labour laws and allow for longer working schedules and (or at) lesser pay (specially minimum wages). Unemployment ensues, adding steam to social tensions and eroding a meaningful part of the middle class.

When public Wellfare becomes progressively privatised or overdemanding and free markets impose their prices, poverty rises and millions of citizens are removed from the productive dynamo, unable to consume or invest in personal education. So States lose important revenues from taxes and social security contributions. Parallel markets develop and tax evasion becomes a nightmare for fiscal administration. Similarly, enterprises demand lower taxes so as to remain competitive in the global market whilst increasingly recurring to offshores where money is, once again, subtracted to the real economy and redistributive public policies.

Thus we find a trap for feeble nations (strong ones will have their day too) which cannot finance themselves essentially within the confines of their national borders. So loans become incredibly frequent and interest rates soar. Meanwhile governments bet on exports to balance things, hoping that its growth will provide further jobs and tax revenues. But we can’t all export and grow at the same time, even more so when currencies cannot be politically manipulated into devaluation. Stagnation and recession become recurrent, people despair as promises of a better time fade away under the rules of the Free Market. Younger generations become restless as they perceive to be worse-off than their parents and social turmoil mounts. Like before the two World Wars riots begin, minor parties grow to influence national politics (some dangerously so), migrations explode causing border clashes and international tensions. The prospect of revolutions becomes palpable and repression hardens at that possibility. It happened before, it has been studied and constitutes a warning for future days.

This is where solutions must come and we are bound to innovate if we want to avoid the risk of intense suffering. How, then, should governments act to escape this infernal wheel? I shall present a few simple suggestions which only take political will to materialize.

In order to avoid the decaying of internal demand, governments must create funds to encourage everyone’s private iniciative and the growth of self employment. The atribution of these funds and bonus loans would in turn oblige companies to reinvest on treasury notes for which a specific Exchange would be assembled. Private Banking can take partnership in these funds injecting liquidity where the State will warrant all the risks and retrieving a fixed percentage of revenue. This will promote innovation, I&D and generate new clients for banks as well as investors in public capitalization. All the while, Micro-MBAs should provide professional tools to applicants, tuition fees being covered by personal loans at progressive rates, so as to allow companies their breathing space.

This takes time and is not a miracle solution, but it redirects efforts into professional education and the requalification of workers. Revenues from taxation will have a small boost on a medium term, reinforcing national treasuries, thus generating an upward spiral which would enable positive redistribution of wealth and dignity to all involved. It goes without saying that fiscal reform is imperative, the strict regulation of speculative investment, the termination of offshores in exchange for special benefits to investments in specific industries or locations. Tax codes must be made clear and straightforward and labour regulations flexible but also fair to workers. One counterpart of unemployment compensations should be the attendance of the micro-MBAs (when applicable) or bonified installments in exchange for social volunteering mainly in child and old age care services provided by the State.

Urban reabilitation of houses is another facet of this plan. Instead of promoting intensive construction there must be a part of the housing market reserved for renting at controlled rates preferably destined to youth and poor families, who will be left with larger budgets that will trickle to the real economy instead of concentrating on fewer branches of it. It may also come to cover for tuition fees whenever education or professional requalification is in order. That is achieved through renewing what is already standing, at lower costs.

Education, then, must be an ongoing effort. Internship, for example, must be a component of academic education instead of a way of having free labour indefinitelly. Introductory History and Politics/Law must enter all curricula for they raise awareness and knowlegde of what not to do or repeat. International work exchange must be fostered as a means to levelling working conditions and pay. Europe and the USA are ready for such changes and cannot afford to wait. Reviving the global economy starts here, it will raise the expectations higher, extend them to countries that compete on an unfair basis, exploiting their workers and pressuring advanced democracies’ workers too.

New, different commercial mechanisms must be agreed, based on educational exchanges and political transparency. People must know every aspect of international commerce and be equally responsible with their consumering. The levelling down to poor (often undemocratic) countries and the complete liberalisation of our economies is doing us harm. There’s no need to end up in surgery when all you need now is a band aid. We are a part of it. Let’s innovate!

By Joaquim Duarte, writer expert in history and strategy.


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