Future is a mission: Alternative development paths after recession

3. Future is a mission: Alternative development paths after recession

The world is not the same after the crisis. This can easily be seen in the development after the crisis in the 1990’s for instance. Not before 2015 the economy will be on the same level as before the recession. The path to a new rise of economy is found only by way of catharsis. Weak enterprises must be let go bankrupt or let them be merged in stronger enterprises. Transparency and moral hazard problems of financing companies must be taken care of. Earnings logic of the management must be changed away from blast economy which will then enable the use of the option system created by quarter economy. The future foresights based on the book The world after the economic crises (Juntunen, 2009).

We will have to reassess our values. In the near future, politicians will make strong appeals for the meaning of family, kin and immediate family as a source for security and immediate help. Discussion is more and more focused on true and right kind of caring of our fellow beings. Support and security given by a community will give the kind of security for the aged that a society no longer can offer in as large an extent as earlier.

The importance of money as a symbol of greed and guiding thoughts will lose its significance in the western world. For the majority, money will rather become a tool with which you can meet your daily needs. Many communal matters, culture and values of nature become more and more important to many people.

The importance of population development is emphasized in an economic crisis. Population growth continues to be strong in the Asian countries in particular. A growing number of the population needs more and more food. Population growth is uneven due to a very low birth rate in the old industrial countries. This is not enough to renew population equilibrium. Population gets older and creates fast growth in society’s costs of the care and health care of the aged.

In some developing countries, the growth rate is fast. There this will bring about famine and lack of clear water and this increases the likelihood of massive migrations. The most important factor of population policy is the increasing vast number of 20 to 30 year olds entering the labour market of the world. It is a challenge to get work to all these, challenge to both stability in a society and to secure livelihood for the young people.

(1) Where will the world go after recession? We can evaluate the future in the light of the present facts within certain limits. I don’t think that this is a short economic crisis but that it will last longer. After that a turn will take place gradually and gross domestic product will grow around 2 per cent. After the previous recession, starting was slow and looking for a direction both in Finland and in Japan.

It cannot be excluded that recovery measures, optimistic as they may be, do not bring about the desired result which could lead to a danger of a halt in consumption. After this, states will have an even heavier debt load. There is

The world after financial crisis

a danger that a debt is taken care of by weakening the value of the dollar causing a probable acceleration of inflation. The USA and other western countries must move from a fiscal focused to real economy. World economy will not improve before excess capacity of production has been removed from the markets, and there is a balance between demand and supply. There will be a redirection of production after a possibly sweepy structural development. Western countries should try to pull their societies back to an innovative stage from a wealth stage and speed up social development.

(2) Already in the 1990’s John Naisbitt anticipated that the globe is turning from a western to Asian pulled economic system. China and India as well as the Southwest Asian Tiger countries supporting their growth are all in a strong growth stage of the life span theory. In this stage a relevant area of growth is the industry based on raw material processing. In the national economies which are in a growth stage metal, machining, spin-off and car industries offer a natural soil for growth. At this stage, there is heavy use of energy and building of social infrastructure. In these countries, the dynamics of population development and educational know-how can be taken care of. A reasonable wage level attracts global business enterprises to cheaper markets. Excess capacity beats down prices which makes keeping production in the western countries expensive.

Asia benefits on its family-centred way of life and attitude towards life respecting work. In addition, these countries are crossing the line marking the rise of consumptive middle class. Markets open and grow gradually and inner dynamics on the area nourishes this.

At the moment, problems in Chinese economy lie in the real economy depending on declining western demand. They have invested extra state funds on US bonds. This way they have become the biggest supporters of the US economy. Collectively, state-run China can quickly focus its investment assets to the targets they want whereas the stray western private owners cannot. China can operate in a determined, strategic and quick manner. In case she wants to invest on developing her home infrastructure, she can quickly employ her citizens. Employment could be a necessity because otherwise disorder may emerge in the country. At any rate the country has plenty of infra targets which have to be built so that building them would mean investing to the future.

It is interesting to follow the development of culture in China and other Asian countries. In general, capitalism increases desire for privacy, selfishness and sticking to one’s own turf. Will the family and relative centred Asian culture be able to hold the fortress? If not, many harmful consequences may appear in these societies at the beginning of the development at least.

(3) Western countries are at the stage of accumulation and wealth where society is turning to a society of services. Social activity logistics is focused on services such as financial, entertainment, leisure, experience, travelling, welfare, health care and services for the aged population. This involves a risk that people cannot maintain their standard of living. Productivity does not get as high as it should and a reduction of wages will follow.

Batra has said, using the USA as an example that wage level follows the development of industrial production, but when the USA started to manufacture industrial products in third countries, this relation parted. He has recommended that it would be wise to have manufacturing industry also in the old industrialised countries. Due to their population development, western countries meet with many challenges in the field of services.

Welfare services may create productivity when these services can be turned to products and they can be sold to developing markets. Such services include, among others, fields such as education, old people, social services, health services, monitoring equipment, services developed in the medicine, various processes and plans, security services and social services. Operations on the beauty sector, geriatric services and other services dealing with youth and everlasting life have a growing audience among western population.

The world after financial crisis

The other side of population aging is what will happen to creativity, innovations and product development. Will the critical mass of the young people be able to make new product innovations? Investing on welfare services could mark beginning of a stage of sunset for society unless no investments are made on renewing the society.

(4) Globalisation seems to work clearly towards a direction where economic differences between countries and areas will decrease. Turning point can be seen in fading old sectors of economy. China and India as countries of growth stage will snatch industrial production. In western countries, long employment contracts have become more and more rare and have been replaced by temporary work. Public sector is facing an irrevocable structural change. How to combine work and wellbeing in the family?

Old industrialised countries have to give the possibility to the developing countries to become wealthy. Within areas, there have been so far extremely large income differences like in China or Brazil. It is likely that in the future, people’s sense of justice does not tolerate large differences.

(5) Economic crisis is followed by severe structural changes of economic structures due to a development stage of accumulation and wealth society that I have already mentioned. Worldwide free competition drives enterprises close to their markets. Factor costs largely determine also where the enterprise is placed.

Structural change proceeds in such a way that western enterprises tend to cut their excess capacity by closing manufacturing plants. They also make giant mergers and this way try to cut excess capacity of the world production. After that mergers or real company acquisitions by the Chinese or Indians take place with which they secure their entering to the market and the know-how. Such development is taking place right now in forest and car industries. There is more to come.

This development reflects logistics of free competition which finally ends in a monopolised enterprise and competition structure. Large companies can regulate and divide the markets. It is possible that enterprises in growth or investment stages in wealthy western countries move to Asia. Such fields include forest, metal, energy, assembly and derivates industries.

Some examples have been seen in the past years how enterprises have outsourced their background work such as book keeping to India. Also call centres can work from India where they have low-cost labour. Private economies have been able to buy governess services from an Indian governess. Term used of this is the flatness of the world. These kinds of phenomena take services away from the western countries.

(6) It is often said that an enterprise will thrive when it invests on product development, research, training and innovations. Aging population is not the best possible ground for innovating new products for the young people in growing market areas. Product development goes near the markets where new trends and flows can quickly be displayed. Keen and able workers can be found there and their wage level is also low.

(7) Many western enterprises have been in the Asian markets and have returned to mature markets. They have chosen a safe straightforward market area such as the so called Baltic Sea and Russia strategy. It will become more difficult and expensive to get to the markets when markets mature.

(8) The roots of economic crisis are in deterioration of values which is a part of development stage of economies in an end stage of their life span. After an economic crisis, plenty of various ethical pressures for a change focus on societies and politicians have to take these into account. The greedy and unconcerned way of collecting by companies and their management is not entrepreneurial activity or market economy but a blast. Demands of equality become the focus of matters to a larger extent than before. Local culture and operating mode have to be known and they have to be respected. Workers have to be taken into account better than before just like customers’ opinions, likes and dislikes.

The world after financial crisis

(9) To be able to understand values, it is important to see how the different religions confront each other. Population growth rate in Muslim countries is fast and population is young. The age structure in western countries however is getting old quickly. Development differences between the countries aggravate conceptions of the other country. Differences in educational levels may maintain prejudices between people which are not made easier by the fact that fundamentalist way of thinking has been spreading to a worrying extent in religious spheres in developing countries but also in the USA.

(10) Environmental questions will be an important assessment ground in the future. In case the area of focus of production moves to Asia, pollution of the globe may increase at the beginning, but environmental matters are gaining importances all the time. Climate pollution and global warming as well as carbon footprint will get concrete contents. Things become concrete when getting pure drinking water is becoming more and more difficult. It is everybody’s interest that food production flows without disruptions and is low-cost.

(11) China’s activities with the developing countries are long-span, active and take into consideration her own interests. China has a good chance in developing Africa, because China has a long tradition of her nationals’ overseas activities and becoming established in totally foreign and even dangerous markets. Chinese have gone to Myanmar, Cambodia and Vietnam. Chinese families rule the business life in almost every Asian country. The Chinese do not mix politics or religion in business making, but they operate in a very pragmatic way.

(12) In globalisation, the world becomes even more clustered. Metropolises grow larger and the number of population living in the countryside decreases in relation to the number of urban population. Finland seems to become a country of one metropolis and of some 5 to 7 regional centres. This has already been rather heavily supported by thesis written in legislation. Other signs of this can be found in markers such as centralization, eco-effectiveness, coal footprint, level and availability of services, climate change, development and quality of life. Centralization is taking place on all sections of life: population, industry and markets.

(13) Growing and spreading of criminality is the clearest consequence of globalisation, because it will profit from expansion of borders and controlled area leading to loosening control. Confidence of society is a fine target for criminal activities. Criminality has potential to network easily to different countries. A large number of educated young people are entering the labour market, and they know how to use computers. If they cannot find a job, their expertise will also be of interest to criminal organisations that can operate under cover of legislation in many countries all over the world.

(14) Another matter that is related to this developing of structures in the coming years is flexible social decision making. Are innovative and far reaching decisions possible to be made when the majority of decision makers are old age pensioners? Will we understand the conditions for entrepreneurship and internationality? Will we curl up into our own businesses, care, security and social welfare services and there will be no more innovation? This kind of age structure will soon be true in many countries and also in the majority of municipalities in Finland.