Global economics

Inspite of the fact that the global recession has hit US and Europe particularly badly and China has continued to grow apace, Western based analysts cannot resist the temptation of criticizing China's attempt to restructure its economy against the steep fall in demand for their goods and services. Banks were instructed not to reduce availability of credit to Chinese companies. This has prevented lay offs on the one hand but has lead to rise in inventories. Analysts expect that this will lead to piling of bad debt with banks resulting in failure of the banking system as has happened in the west. This analysis stems from lack of understanding of the Chinese system of economic management. People are unable to figure out that how an export economy like China can continue to grow when the importing western economies are in a bind. They expect the Chinese economic bubble to burst in the future with massive global shock waves.
I somehow cannot subscribe to this theory. The Chinese policy making is based on realpolitik and has shown to be highly adaptable to changes. The change from a pure play socialist model of development to a command and control based capitalist model of development has happened seamlessly. New changes being implemented will result in greater and greater demand for goods and services in the Chinese domestic market space. The inventories will slowly be consumed locally and a new growth model will emerge. I am afraid western analysts fears on a Chinese implosion will not come true and they will have to get used to the Chinese economic resurgence in the future.

US-China and India competition

As the economy of the US continues to struggles, the public debate on outsourcing leading to service sectors jobs to India and manufacturing jobs to China is increasingly becoming strident. Sane voices of business leaders like Jeff Immelt of GE and others are getting drowned by jingoist talk. I just hope that the ultra nationalist sentiment does not get beyond a point that the political leadership in the US is forced to become more and more protectionist. Such a move will only increase bitterness amongst the emerging nations and the US which will neither be good for the US nor for the world at large.

US needs to become more competitive, it has to re-focus its growth priorities to more cutting edge technology rather than continuing to cling to old manufacturing areas like steel. Change is a continuum and the faster one is able to adapt to it the better it is for the country.

I am confident that Barack Obama will be able to steer his nation on a middle path of global collaboration based growth.

Growth imbalances and recession

The economic bubble that was waiting to burst in Dubai has finally burst and the Dubai ruler owned Dubai world has defaulted on debt payment. If one was to closely examine the development model of the region it is not too dissimilar to a Ponzi scheme. A a false sense of well being is artificially created by fueling growth by putting in more and more funds into grand projects that are exclusively the preserve of the rich. In the recession hit world the rich have become cautious and are not willing to consume as before. No wonder the bubble has burst.

The economy of the entire region is resting on a single petrodollar leg. Human capacity of indigenous people has not been built and the economy is sought to be created through expatriates who come in to the region for attractive remuneration. A diversified asset base that is built on the strength and innovation of the local people with support from experts from outside has not been created. It is high time that the Gulf region rulers start thinking on recreating a model that is more sustainable and maybe less jazzy but brings all round prosperity to the people of the region. It is also a lesson to both business and nations who need to look at their growth models more closely.

Increasing business footprint

Most corporates realize that business does not look up in spite of making investments in building a large sales force that knocks repeatedly on customer doors to sell products. We do not get the expected results because the business strategy, the offering be it a service or a product, the marketing pitch are not aligned to each other.

Some invest into consultants to help them identify problems, opportunities and help re-structure business.

The solution perhaps in having a highly experienced broad spectrum business advisor who can help refine business strategy on the one hand, position the offering, deploy their network of contacts and deliver results. But most such people are sitting on company boards and are not willing to invest time for others.

In today's age of specialization where experts have built skills in niche areas like re-structuring, financial management, process specialists, visioning, business strategy etc etc. getting broad spectrum macro business advisors is the challenge.

How India's poor saved the country from recession

As demand for good and services plummeted in the US, global exports got impacted and the world rapidly spiraled into recession. The Indian economy was jolted too but the social sector schemes aimed to provide employment to the poor suddenly appeared from nowhere to keep consumption and demand for everyday goods and services up. The poor continued to buy his daily quota of bread, oil, lentils and other consumer goods. Naturally the factories kept producing and profits continue to come.

This brings to us a new form of development growth model where the need of the poor nourished the welfare of the rich and the industrialized. I had never looked at social development from that angle.

To business this gives another opportunity to support social development not for the sake of charity but because this makes good business sense and is good for the shareholder. This calls for a re-alignment of corporate business strategy, focusing on this new market segment and taking advantage of it.

US military interventions impact on global business

The US is the largest economy of the world and the financial cost of Iraq and Afghanistan wars is still small in percentage terms. The quagmire in Afghanistan can lead to a prolonged US presence in the region not unlike that in Korea except here the shooting will continue. The financial costs will continue to rise as it seeks to douse one fire after another. History has taught us that ultimately wars take their toll on nations.

Smaller economies like those of China and India are increasingly becoming more and more independent in their thinking, hitherto small businesses of these countries have begun acquiring parts of US global corporations and manufacturing and services locations are moving East.

Global businesses world over will be forced to revise their business strategies. Entrepreneurs and other decision makers who are able to read the events early on will benefit, those who continue to wait will one day find that the best deals have gone to competition, costs have risen and profits have dropped. These are ones which will fade away and disappear into history, the visionaries will survive.

Global shifts in business alignment

Many political economists believe that in future business alignment will be driven by a strengthening of the China US business to business relationship. The rationale behind this thinking is that the export driven Chinese economy driven by US IPR and US business operating from China will drive in self interest towards greater alignment and synergy between the two countries.

I have partial disagreement with this US China world view. Chinese like all other nation states are driven by self interest. The ongoing global recession has been exasperated by the rapid drop in US and European consumer demand. China is bound to re-align its business model to focus more on domestic growth from the existing export growth. The two most populous regions of the world India and China, inspite of their political differences will bury the hatchet and start working together to strengthen business to business ties. Africa and parts of Asia that are resource rich will increasingly get aligned to economies of India and China who will increasingly become the major customers of commodities being produced by them. While North America and Europe will continue to be major global players but business to business global re-alignment has begun.