Friday, December 12, 2008

Regulation and beyond....

Here is a nice article from the McKinsey Quarterly, which lays out a case for a new way forward for companies, looking to deal with regulation post 2008 crisis.

It makes a few interesting points, but they would only be interesting and refreshing, if one only had an American view of the firm and corporations. Some of the multi-stakeholder type models they talk about and the socioeconomic approaches they feel would work, or, are and would be revolutionary, are already being done in Europe--Germany and Sweden, to be exact. The Coordinated Market Economy, works just fine in Germany. I know for a fact. Also, they are in the top five of the largest economies in the world--3rd to be exact with a GDP of just over $3 trillion USD-- the largest in Europe.

One note in particular about this model and it is the idea that in a designed capitalist society, like the USA, with a fundamental underpinning of self gratification first and society second, an approach like this would take years to accomplish through regulatory implementation--if it happens at all. Perhaps it may be for nothing. People may not take to the new regulations and find ways to avoid it or corrupt the system, is it is not something they feel would be a necessary issue to take into serious consideration. The CEO of Kingfisher (as you will read in this article) believes that incremental changes in regulation, would take too long and do no good. He advocates for sweeping governmental changes, to deal with such crises again and build a new national and international commercial network for better business. Perhaps the CEO of Kingfisher should be the WTO chairman. Pascal Lamy (current WTO chairman) needs a break, in any event.

I would have to say, however, that there are countless examples of paper laws on the books--laws, which are in fact laws, really good ones too and very good for the society, but are not practiced to the letter and direct interpretation of the law. Will this "new" regulation, the McKinsey quarterly talks about, be something that is worth the time and effort to implement--at the same time scare the wits out of the market actors, who always hate new regulation? What kind of CEO is that guy at Kingfisher, anyways?

Another issue I find strikingly idealistic with this article, is that it assumes that a new model like this, is in fact wanted by everyone after the 2008 crisis. As bad as the 2008 year was, crashes are innevitable--regardless of the society. It's like slash and burn and putting your field on fallow. Sometimes, you have to take a break. This article also takes, for example, not only the CEO of Kingfisher, but the Chairman of Nestle, to suggest that there would be industry wide support for such regulatory changes. However, both companies are European--so too is the other company they mention in the article; Unilever. While I find high virtue in the Euro zone model, they patterned it after the US capitalist and industrial model post war and always, wait for the USofA to make a move before they make a move. They are not leaders in the market and if left up to them, we would be back to the days of stagnant royal kingdoms where we would have to have revolution all over again, for liberty and freedoms, we alaready saw take place in France and America centuries ago in their revolutions.

While it may be a factor that their management styles, may have impacted by management practices and experiences through exposure to the "Social/Know your role peasant" Europe, where the father royalty takes care of his loyal subjects (nothing much has changed). Again I ask, is that what "America", the greatest nation on earth, wants? Even with every day people and not exclusive to the hot-shot wall street power broker. A model like this, and McKinsey says it quite candidly, will have to be a model built on trust and transparency. Companies would have to share industry knowledge and techniques with the open public through government. This would undermine the base of capitalism in America and America itself at its core essence. It takes away the element of surprise, makes the system much less serendipitous and will strip away particular and niche intelligence components for innovation out of the market. These qualities, bring countries out of an economic slump faster, just as much as overdoing it, creates a bubble and a resounding crash. Take a look at the world recovery and then tell me which countries will rebound faster and better than the others--the USofA and Britain a close second. Germany, while I like the Coodinated Market Economic model, will take a late hit and have a very slow 2009 if their export partners decide to spend closer to home--something it would take consumers in both the USofA to come around to. Germany also has a strong Euro zone and emerging markets in eastern Europe, to sell German goods to.

No one country is averse to crashes. I would prefer, while not dissing the Euro strategy at all, to keep it they way it is to some degree and for the government to find a way, instead, to make companies stop inflating prices under ridiculous premises. Instead of sharing technologies, the government should take care of the consumer first and foremost. That's the kind of regulation people, like me and you, need.

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