Business lies to the world, and it lies to itself.
Business tells itself it depends on boldness, on revolutionary thinking, on the ability to take the unthinkable risk and make it pay off.
But business is – far more often than it likes to admit – a thing of timid habits. A thing of following trends (which are herds in the data-stream), of only doing something when someone else has proven it safe to do first.
The Makings Of A Tsunami
Business – and in fact, society, national and global sustainability – is facing a challenge right now unlike anything it has seen in the lifetimes of most of its biggest individual players.
Several factors are at play right now, creating a state of crisis. The environment is one. Increasingly urgent ecological conditions are challenging traditional business thinking of profit-making from natural resources. They’re demanding that a Greater Good be considered when decisions of profit, loss and economic action are made.
Politics is another. Several major nations in the world economy have gone from stable, leading influences just a handful of heartbeats ago, to avatars of uncertainty – the market’s nightmare – in 2020 and for the immediately foreseeable future.
But more than either of these things, the Coronavirus, and more particularly the measures that have been implemented to protect against the Coronavirus has the potential to unleash an economic tsunami. It’s a tsunami that will devastate business, society, national governments and global accords for a decade or more. The longer it goes on, the more that needs to be done to maintain economies while whole sectors are stunted, whole businesses, large and small, go careering to the wall. The longer it goes on, and whole chunks of the population are able to do only a fraction of the working and the spending they would otherwise do, the deeper the impact is likely to be. The longer it will take us to recover to anything like pre-Covid levels of prosperity.
The Starkness Of Forecasts
The International Monetary Fund (IMF) has forecast a contraction of the global economy of 3%.
In one year. 2020.
Followed by a likely reduction of around $9 trillion (£7.2 trillion) in global GDP loss between 2021-22. And the IMF announced this before any sign of an actual second wave had been announced. Your mileage, as they say, may now significantly vary.
What those numbers mean is potential calamity. The phrase has been put out there by the IMF that the wake of the Coronavirus pandemic will bring a Great Depression the like of which we haven’t seen since 1930. And facing the fact of human lifespans, there are probably only a handful of people left on the planet who can tell you what that was really like.
We. Are. Not. Ready.
We will not, in all likelihood, be able to simply deal with a Great Depression magnitude event.
And most crucially, doing the things we always do in business will not get us out of the path of the oncoming storm. More than likely, they will drive us right into the heart of the cataclysm.
The Thing We Always Do
Here’s the thing we always do.
We know most companies have limited liability. In itself, that’s a great tool, it allows business to build and grow far beyond their humble beginnings. But it also allows businesses to behave not only like people, but like the kind of people you don’t want to be stuck with in an emergency situation. The kind of people who would throw you out of the lifeboat without a moment’s hesitation to save themselves.
In business terms, limited liability lets companies think firstly, foremost and often only of themselves. So when they see forecasts of heavy weather ahead, most companies with limited liability would, as a first precaution, lighten the load. Cut jobs. Release the ballast of human livelihoods from their basket of responsibilities, so that when the weather hits, they can negotiate it while having less weight on board. It’s practically alien for companies to regard the staff they cut as any responsibility of theirs. The staff are released, a financial settlement is reached, and the company as a whole is better able to ride out the storm. If, along the way, a business spies competitors who have gone under as a result of the weather, it will asset-strip their carcases for whatever might help the company live to see another day.
The Multiplication Effect
That’s what we always do.
That approach will be of no earthly use to us as we prepare to weather a storm the size of the 1930s Great depression.
Here’s why. Have you ever seen It’s A Wonderful Life? Do you have any notion of how a run on the banks works? Heck, have you ever seen footage of an avalanche, come to that? The principle is that small effects…multiply. And they do it fast.
Say one company with limited liability cuts jobs to make ready to weather the storm. Then another follows suit. And another. Before long, what you have is an economy cutting jobs to an absolute minimum, confirmed in the knowledge that this is the right thing to do, because everybody’s doing it.
What’s the result?
The result is lots of people with no wage, no income. Debts can’t be paid. Mortgages and rents accrue. Investment and start-ups atrophy in the atmosphere of zero confidence.
There’s no money left for frivolous purchases.
Then there’s no money left for essential purchases.
For the bread lines of the 30s, think the food banks of today. Except the food banks of today are already at critical supply levels, because during lockdown, people reduced what they were able to give.
Why? Because lots of people who were previously able to give were no longer able to do their jobs, and were on government furlough. Less money, less giving, more need.
And so, the system collapses.
The Thing We Need To Do
When we’re facing the likes of a Great Depression, as Javad Marandi states, we need genuinely revolutionary business behaviour. What does that mean?
It means business stepping away from the practices of limited liability abuse that have been common since at least the 1980s. It means not doing the thing which seems most logical for the individual survival of the company. It means standing between staff and the storm, holding our nerve, maintaining as many staff in employment as we possibly can. We can do that for any reason you care to name – because it feels good, because we care for our staff, sure, absolutely, and kumbaya while we’re about it.
Bottom line, we need to ignore the bottom line for a while.
Keep people employed, because the tsunami of a Great Depression begins with unemployment. Unemployment, like a rash or a run on the banks, can be a panic reaction for businesses which know their liability is limited.
Businesses As Barricades
Right now, we need to put that limited liability to use for people. Because by maintaining as many people in employment as we can, we keep money flowing through the system, through the economy.
People with a wage can buy food (so long as inflation doesn’t go wild and crazy). They can pay their bills. Their mortgages. Their taxes. They can keep the basics of the system of prosperity in place, rather than seeing those basics swept away beneath their feet and landing us in the 1930s again.
If the 30s hit us again, here in the 21st century, the climb back to prosperity will be long and grim, especially in a hyper-connected, technology-driven social media world.
The Choice To Be Brave
We’re facing tough times. We need revolutionary business behaviour to face them well. And that revolutionary behaviour is to act not just for the good of the company, or the shareholders, or the bosses.
It’s to act for the good of the people, the staff, and the whole structure of a prosperous society.
Can we be that brave?
Let’s find out.