Tuesday, December 29, 2009

To err is human!

To err is certainly human, however, to continually err is also primarily a human trait.

I recently picked up a copy of the December 09 edition of the Arabian Business International that had the words "25 smartest banks" noted on its cover. I wondered, would people consider it an oxymoron? Would the publishers have it there to generate interest or controversy? Would the reasoning be the lowest common denominator, more sales = more $'s?

I think about the financial sector and contemplate the same about the Auto Industry and try to dissect what has happened. I remain conflicted!

As a realist I must confess, I understand the logic behind the bailout's and the safeguards in places for these behemoth's, however, as an academic I remain at odds. The humanist in me would support saving these white elephants to ensure the people associated with them do not lose all they have, however, the economic theorist and philosopher in me would talk about self-correction or quite simply, the survival of the fittest.

The capitalist economy is built on self-correction and as we continually see the rise and fall of a variety of companies, industries and ways of doing business, so should we in these cases, right? If the organizations do not cater to the needs of the here and now, would it be any better to invest further into them, when I would suggest their fall may pave the way for a better more agile organization?

I would go as far as even proposing that saving these corporates keeps the economy stagnant as their change making capabilities would be insignificant in relative comparison to the current economic climate. This would basically dig us further into a hole, as we would have leveraged the public sector into a private sector black hole.

The humanist in me quarrels with this ideology as it wants to see people safe in their homes and then I ask, are we being fair? Large failing corporates are being provided with financial support, saving at the very least a %age of the jobs that could have been lost due to their bankruptcy; what about the countless others, SMB's and home businesses alike, that have had to shut down due to a limping purchasing capacity. Are we to decide who's life is worth more saving? Yes, I do recognize there are tax cuts and other such financial aids being introduced simultaneously, however, when does it filter down to the common man or woman?

Self-correction in the economy is required. It is the way this economic profile has been built. To try and bolster it with monies, only prolongs what we already know needs to happen. GM has started cutting itself down, so has parts of the financial sectors with M&A's and overall integrated portfolio's, however, its slow. Would a quick shift over have been better? What would be the short vs. long term horizons for each?

There are a lot smarter people than I out there making these decisions, but to them I ask, if we do this now, what does that say about the foundations of an economic system that cannot self-sustain itself? Is it flawed as well?

And on that note, I do apologize for the unplanned hiatus, however, I hope to continue blogging, now that I can do so with my additional appendage, the infernal berry, of course!