I do not know who first said in reference to the current global economic situation: “This is too good a crisis to waste”. While making no such claim myself (I first heard it said at a meeting last month in Hong Kong), I do in principle fully endorse the statement and the spirit that lies behind it.
A crisis, whether of an individual, an institution or a country, is always a good time to reflect and, where appropriate, make the necessary alterations in behaviour. A heart attack encouraged me to stop smoking!
The blusteringly booming global economy of the last decades, with all its masses of liquidity, cheap credit, loose ethics, over-consumption and seemingly boundless range of business activities can be likened to something of an orgy. In that sense, the “crisis”, as inevitable as it was, occurred because of mismanagement and miscalculation of resources. The result is that the “orgy” can no longer go on because the bar is empty.
This moment, however, could be an excellent occasion not only for sobering up, but also for reforming in a very profound way. This is all the more the case in view of the glaring fact that while the “orgy” was going on, there were those who were able to gleefully and very profitably participate, while there were billions who were excluded and had to witness, in their misery, the hedonistic triumphal parade of capitalism. And while any sense of a global community of shared interests and mutual respect was being trashed, the planet was being remorselessly abused and its resources pillaged.
There were a number of voices crying in the desert, including the Evian Group at IMD, founded (in 1995) with the motto: Economic Order in the Global Era. Order refers to three essential ingredients: the imperative of rules, the institutions to implement them and the ethics to drive them. The three are indissoluble and only when they are robust can a market economy and a body-politic function properly.
Associated with the sine qua non of economic order in the global era, is the imperative of thinking and acting for the long-term. No one would seriously deny that a major cause of the current crisis is short-termism. We cannot claim not to know what the future is likely to bring, even if we cannot fathom how the world will evolve. We do know that over the course of the next few decades there will be roughly three billion more people on this planet and that, on the basis of current trends, some two billion are likely to join the four billion who presently live at the bottom of the pyramid. We also know the implications this increase in population and increase in consumption - especially as most of the new population will be urban - will have on resources, food, water, energy, and indeed oxygen!
At present there are very strong risks that both humanity and the planet will be significantly worse off in the next couple of decades.
In the past heady orgiastic pre-crisis years, we were not thinking of the future generations, because, well, there was an “orgy” going on, not a state conducive to sober long-term thinking!
What is happening now, however, compares less with a meeting of Alcoholics Anonymous than with a panic reaction to find more hooch to fill up the bar so things can continue as before. The point about this being too good a crisis to waste was that, while of course trying to put out the fire and limit the damage, profound questions should be asked about current behaviour and reform for a better future. This is not happening.
One indicator is all the money going into stimulating consumption and the pressure being applied to low consumption/high savings countries, such as Japan, Germany and China. Why?
Perhaps the most damning illustration of this seemingly inveterate consumption hedonism is the bailing out of the auto industry. Though it may be in order for the gradually emerging middle income earners in poor countries to aspire to owning their own automobile, on balance the planet needs far fewer cars - or perhaps very different kinds of cars - than is the situation at present.
If public money is going to be used, it should be directed at the kinds of enterprises and technologies that will benefit humanity and the planet in the long-term. For example, public money could be invested in the auto industry on condition that it be used exclusively to produce fossil fuel free cars that also dramatically decrease noise pollution.
An action of this nature would not satisfy the immediate desire for gas-guzzlers for the present generation, but could greatly contribute to a more civilised and planet friendly form of mobility for the next generations.
But there is a very fundamental matter that requires a great deal of reflection and reform, especially in a business school, and that is the whole issue of rules and ethics. When the Enron phenomenon erupted and critics of business hailed this as proof of capitalism’s underlying moral weakness, the business community - including schools, corporations and consultants - responded that a swallow does not make a spring and hence Enron was the exception that confirmed the rule of generally legal and ethical behavior on the part of business. Post Enron CSR activities among most companies were intensified in order to try to make this protestation more convincing.
But in reality we know - we, executives, professors and consultants - that businesses cheat a lot. And we are all in part responsible for this by hailing competitiveness and short-term performance. We deny or turn a blind eye to the reality that there is a lot of murkiness. The issue, is whether/when one gets caught. To cite one example that happens to be before my eyes. In the oil-for-food scam in Iraq under Saddam, it has been conservatively estimated that some 2,300 international companies participated and benefited, even if in the knowledge that the implications were more malnourished and hungry children.
The 20th century French author Antoine de Saint-Exupéry wrote: “We do not inherit the earth from our parents; we borrow it from our children”. At the moment we are robbing our children and we are doing so big time! So we need to reflect and we need to reform. We need to have much stronger rules, institutions and ethics to prevent business from cheating.
We need to reduce consumption in rich countries and among the rich generally quite dramatically, while re-distributing global income on a much more equitable basis. It may be tough, and it will demand sacrifices, but the alternative is truly awful. Acting on that basis will be the true measure of responsible business leadership in the 21st century. And it will ensure that this crisis was indeed not wasted!
Jean-Pierre Lehmann is Professor of International Economy at IMD (www.imd.ch) and founding director of The Evian Group. He teaches on the Building on Talent program and the Orchestrating Winning Performance programs.
