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Preprints & Reprints Doing IT! Fish do it, birds and bees it; in fact all animals, plants and humans do it and so it seems to our financial markets. Boom and bust is not an exception to the rule, it is the rule. All natural systems on and off this planet behave more or less in the same way. Predators seek out their prey and eat them to the point where they themselves start to die through a lack of food. Flora and fauna exploit the nutrients in the soil and overtake the natural replenishment mechanisms through rainfall and the natural decay of waste created by plants and animals. They may enjoy a momentary stability, but ultimately they reach a point where the population dies off, due to a lack of water and/or other life sustaining elements. Everywhere you look in biological (and physical) systems the pattern is the same, and it is one of cycles - boom and bust. Nowhere do you find steady state populations, they are always cycling, always tending to consume all the resources available to the point where a population has to reduce to survive overall. When we look at our manufacturing and service industries and the sustainability of human populations in large societies across all our continents, we should not be surprised then to see the same properties in evidence as those that have gone before with every other species and form of life. But unlike all our predecessors and indeed all the life forms around us today, we have the exceptional ability of understanding what is happening and, in principal, the mechanisms at hand to engineer steady states for our societies and prevent boom and bust economies. With the increasing use of IT and telecommunications it is extremely easy to create a boom and bust cycle as we have seen in the past 18 months. Looking back at our history over the past 200 years, it is plain to see that the ability of our technology and business systems to create exponential growth and wealth appears to be unlimited. Even World WWI, WWII, Vietnam and The Gulf War only created momentary glitches in the exponential raise of wealth, as measured by the stock market. We might not agree with the measures that were employed but they happened to be the only measures we have for now. What is remarkable is that after every serious conflagration the economy returns to precisely the same trajectory in a matter of years or months. The present downturn in the Stock Market may be at the front of everybody's mind today, but we can be sure that within two or three years the markets will have returned to the set trend and most people will have forgotten the fall of the dot.coms and the crash of the market. If we examine for a moment what is happening now it is clear that the depth of the present recession is not an entirely a natural occurrence. Just about every Giant Corporation on the planet is actually doing the same thing and working to the same rules, irrespective of the rightness or the wrongness. Why are companies suddenly seeing their profit margins plunge, their customer base disappear, and reacting with huge right offs measured in $Bns. Well, I think it goes like this. If a company is in trouble today and it's turnover and profits are down, it has to declare these to the Stock Market well in advance of posting it's quarterly returns, and in accordance with the GAAP (Generally Accepted Accountancy Practices) of that country. Such a posting will engender a reaction in the market that will be adverse. So why not take advantage of the situation and right off all stock and physical assets on a major scale and just suffer the pain once. In the next quarter or two as the market comes back up, and they are then in position to suddenly take their inventory and sell it for 100% profit. What a wonderful mechanism for success - write everything down (or off) this present quarter and hold it in store awaiting sales in the next two or three quarters. This is financial creativity unparalleled. Think about it, what is different between now and 12 months ago? Answer nothing, nothing has changed; the physical assets of this planet are the same now as they were 12 months ago and indeed the same as they will be in another 12 months. This recession is wholly the result of human activity. Alan Greenspan can twiddle all he wants, and Gordon Brown can continue to proclaim that everything is under control, but the truth is they have no levers to pull that counter correlated human greed. Boom and bust is something governments cannot control, they can only watch. But collectively we could have taken action to prevent the present recession, level it out and affect some stabilisation of the world economy. But everyone is driven by the same basic rules and desires to create more wealth by the same mechanisms. To be blunt, the dot.com failure was brought about by two principle forces, first of all, the failure of bandwidth provision in the local loop and mobile arenas, but indeed much worse, the basic human failure of greed. Getting rich quick seems to be more inspirational to more people than either doing the right thing, or creating sustainable futures. And the last time we did this? How about the industrial revolution when thousands of companies were born, collapsed and died in the same manner and for the same reasons. The big difference today of course is that we do it all in 5 years instead of 100. The alternate view, a perhaps a more chartable one, would be to suppose that the recession is now a much faster and cleaner way of sorting out what ever industrial or social mess we have created, rather than going to war, as we have done in previous centuries. I would like to think that we are sufficiently smart to use our technology, to model the economies of companies, countries and the planet to the point where we can take action to create sustainable futures. A future that is reasonably stable, with competition, without graft and with maximum benefit. We ought not to lose sight of the fact that industry, technology, communications and IT has been created for benefiting mankind and not exploiting it. For those companies, countries and individuals who are becoming incredibly rich through the use of technology there are ten times as many people who are suffering due to the exploitation. This planet has sufficient wealth to feed, clothe and sustain the whole of humanity. Our communications infrastructure and IT provides us with means of reasonable distribution and reward for effort. As a species, we do, more or less, understand chaos; we do understand that co-ordinated action by the few can cause grief for the many. When all companies and countries acting the same way, we should expect very deep cycles of disruption. The good new is that looking at the history of the chaotic action of economies brought about by increased communication, connectivity and autonomy we see increasing numbers of recessions, mini recessions, micro recessions occurring over far shorter and decreasing intervals. The present recession will probably be the shortest-lived to-date, but look out, another one is coming: it may well have more peaks and be shorter still. If we don't take action to correct these occurrences then we can rest assured that there will be some major cataclysm within the next decade. But we are smart enough to head this off and all it requires is for a breaking of the synchronic action within industry driven by the same measures and the same mind-sets employed by the markets. If we randomise actions we can break the chaotic cycle. But I fear are not learning anything (collectively) and we are just going to continue until we get some real damage and at that point we will pull together the wisdom to try and stop it. And the evidence for this, just look at events pre and post WW I and WW II. We've been here before, but not with instantaneous global communications and computing power. Word count = 1,370 |