Tuesday, October 14, 2008

No need to panic? (2)

Today there was good news on Wall Street, but the jury is still out as to the long-term effect of the bail-out package through 2009. Macro-answers are needed to macro-problems for a quick fix, but long-term health is going to depend on other criteria, one of which is international relationships. Nowadays there is discussion as to whether increased international connectivity lessens or heightens the risk of global financial collapse. I suggest it could do both.

It should be no surprise that certain large multi-nationals attempted to profit off the least advantaged in the US. After all, western multi-nationals have been using the same tactics for years in other countries. Consequently, no outcry was made when these same policies were put to work in the US. Previously, the countries of origin of such multi-nationals, were able to keep the unhealthy economies abroad at arm’s length, even profit from the situation by demands for excessive interest and the like. The plight of citizens abroad did not concern such companies, and apparently the plight of the least advantaged in the US did not concern them either. Perhaps it had to hit home for executives to realize the real impact of their actions.

We have to hope this lesson is learned, because now increasing connectivity means no-one can ’seal off’ a market or country in crisis. Even if we wanted to return to the past, we cannot do so. International connectivity is only going to increase with technological advance. Consequently, we have to plan for the future, ensuring the long term health of countries and markets in which we do business. The maxim, “Do to others as you would have done to you”, seems to apply well. Just consider the potential. If a very poor community or country is introduced to growth opportunity, its purchasing power will also increase dramatically. If you exploit that country or hold large interest payments over its head, it will never achieve such power. The greater number of stable markets and economies in the world, the better the world will be able to withstand the collapse of one.

I believe the best hope for the US economy in the 21st century, is to invest in international markets - and particularly in Majority World countries. I’ll develop this more tomorrow.

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