How The Mighty Fall

If anyone really wonders whether the world can rely on the USA to continue to lead the way in the world economically, I believe this page gives the answer.

Washington Post Graphic on US Debt

When I looked at this data I was left concluding that we are in the middle of some seismic shifts which are going to fundamentally change the way the world economy works. Debt got the US in to its biggest troubles in 2008, especially caused by the vulnerability of domestic debt in the hands of private citizens who were already borrowed up to the hilt, seeking to sustain lifestyles that were really out of reach. As the economy came crashing first the Bush government, followed even more rapidly by Obama sought to ramp up government debt to ‘buy’ the economy out of the hole.

Now, there’s ample evidence that Europe is leading the world economy in to a new hole, but the ‘buying out’ solution will no longer be available to the US or any of the developed economy governments.

The riots in UK, my own country, are in my opinion the reaping of the price to pay for political pygmies over the last 15-20 years at least who have convinced the public that they can all live beyond their means without there ever being a price to pay. A generation (or more) of people believe they are entitled to government services and the right to ramp up personal debt to levels which are completely unsustainable. So, when a government tries to rein in the madness before it gets any worse, the ‘entitlement’ generation lashes out.

The coming times are going to be economically and socially painful. Regrettably, cynics will seek to blame globalization, despite the evidence that increased global trade was the one saving grace that stopped the pack of cards from tumbling far earlier! I also believe that global trade remains the best bet to lift the economy out of these challenges, whilst also enabling the unacceptably high levels of poverty in the world to diminish. One thing is for sure – the looters in London helping themselves to flat screen TVs and designer clothes are not, by any stretch of the imagination living in poverty. Most of them just need to take a job and get some self respect. I say this as someone who never collected a day of unemployment benefit in UK and who always found a job (however humble) during my student days, summer vacations etc. whenever I needed one, regardless of the state of the economy. In one summer, around 1976 I approached over 100 companies before finding a summer job (in 4 days, on my bike!!) Everyone said there were no jobs and I would have to accept not working for the summer, but was not prepared to settle.

Somewhere we have a world vacuum of willingness for people to take 100% ownership for their own lives. Whilst the politicians are partly to blame, people had choices about whether they fell for all the rubbish.

One final thought – the rioters in England have all had access to levels and quality of free education that millions of Indian youngsters can only dream of …….. if they and their families have spurned those opportunities who is to blame?

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10 Responses

  1. True. The photographs in the newspapers show rioters loaded with wine, cigarettes, TVs, Pioneer decks etc. One poor soul was stripped down to his underwear by a miscreant. Have not seen even one looter loaded with food and essentials. Its not poverty but depravity that is pushing them to arson and loot.

  2. Fantastic article, thanks for posting.

    Mark any thoughts on how we can educate our children about the values of ‘living within your means’, ‘greed’ etc? Besides leading by example ofcourse.

    • Well, I think firstly you’re absolutely right about example being the number one tool at our disposal.

      Beyond that, I’m often reminded of the way Lady Diana used to take her two sons to visit soup kitchens, AIDS charity events, hospital wards etc. to ensure that their education encompassed all parts and aspects of society. From the school’s point of view, this was why we were keen to have SUPW activities that extended over a longer part of the year and happened locally – we want the children to be aware of challenges on their own doorstep.

      One of the other things that we’ve been doing more and more across the senior schools is finding as many opportunities as we can to give responsibility to the students. They grow to understand that you get to take out from the community because you have put something in.

      At home, I’m a big believer in the children having some responsibilities that are age appropriate that they do for no other reason than pulling their weight within the family. Ideally’ I believe there should be no remuneration or reward for it (no family member gets a ‘reward’ for cooking dinner!) and they shouldn’t be reminded or given detailed instructions on what to do/ when to do it. Simply, they have a list of their chores for the family for the day/ week/ month and only if it gets to a point where they haven’t done them do the conversations come up about not taking ‘their load’. of course, this can mean reducing the amount done by maids and servants. Where such people do work in the home, I’m personally very particular on ‘showing gratitude’. If the maid, whilst in for two hours in the day, picks up my son’s toys because he’s left them around, he thanks her. This also acknowledges that he should have done it himself!

  3. Nice. “Vacuum of willingness” , very well said. Thank you for such insights.

  4. Very insightful. What are your thoughts on where this leaves the Asian powers like India and China?

    • To me, the biggest lesson is that, going forward, both India and China have to avoid the temptations of mimicry or ‘us too’. Instead, the focus has to be on sustainable economic development with adequate ‘trickle down’. For that, i believe there should be very significant shift in expenditure towards development of human capital – both through academic and vocational development.

      Culturally, the ‘got to have it all’ consumerist mindset, if adopted throughout Asia will just about finish off the environmental damage started since the industrial revolution.

      It’s not always considered cool these days to quote Gandhi, but there’s an awful lot of sense in his “to each his need, not his greed.”

  5. Excellent, Mark.
    I can’t agree more to what you have mentioned.
    By the way, tomorrow I am going to deliver an important speech at a school during the Independence Day Celebration. One of the points I am going to say, and which I almost always say in my pep talks, is ‘100 % ownership of one’s life’. If you don’t mind, I would like to share your experience of getting a summer job after trying at over 100 companies.
    Best wishes,
    Dharmendra.

  6. Hi Mark,

    Read with interest your thoughts on the global economy. Living beyond means through excessive leveraging leads to an interneal haemorrhage, that festers unnoticed for a fairly longish period of time before it manifests itself to something that’s very difficult to cure. Only time will tell whether it finally gets cured or not, but the process itself will be very painful. Good politics unfortunatley makes for bad economics. The kind of economic policies followed in Europe for decades has actually led to the fantasitc phrase of yours, ‘vacuum of willingness’. Come to think of it, it is about a life cycle. Success of capitalism depends on inbuilt socialism – various social security measures, for example. Soon, with every political leader, in their effort of trying to outdo others start considering these measures to be the holy grail of politics. Result – more the merrier? The very thought of free lunch (there never was and there never will be one, since one’s free lunch will evenutally need to be paid for by one’s future generation) becomes intoxicating leading to the creation of the vacuum, which would result in the cycle peaking and then reversing. Europe and the US are in for a very very painful process of transition. currnetly it seems, India, and for a few more years, China will continue to be oasis of hope in the desert of doom.

    Warm regards,

    Kunal Kumar Kundu

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