Brainforum

There is no alternative to regulation

The collapse of Lehman Brothers in midst of September 2008 made people become sensitive towards bonus payments in the investment banking sector.We all know that they are different from the ones in middle sized or big companies.
Of course, everyone was aware of the fact that investment bankers receive an especially high remuneration – but until the beginning of the crisis, it did not matter to anyone but a few people outside the sector.
With the collapse of Lehman and the start of the financial and economic crisis, lots of credit institutions had to get back to governmental interventions in order to not break down Lehman style.
It was then that the public realized what the bonus system in the investment sector really was about and how it worked.

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Sustainability sucks!?!

Sustainability sucks? At least that´s the impression we get when thinking about the social, economic and ecologic problems we are facing and the things people do or don´t do to change the way the world moves.

Even single persons struggle with integrating sustainability into their daily life. Public transport to get to the office? Recycling? Car-Sharing?
When it is not even possible for private persons to make the step towards sustainable behaviour, how should this work out for a global company? Even more: Do we then have the right to demand this kind of attitude?

When looking at corporate homepages, the first thing that comes into view most of the times is a big and shiny button screaming “Corporate Social Responsibility”. The flash video next door talks about sustainability. In my opinion, these two terms seem to have evolved to the new and hip gadget in the world of corporate communication. The true motive rarely is an altruistic one, but the fear that some day society will deprive the company from taking action and drift over to competitors.

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“Blindfolded – The future of our children”

“The future of our children” – The title seems to affect all of us, no matter which generation we belong to.
For the old generation, the future is connected with the fear of having depreciated the things they achieved.

Our parents in contrast feel fear and hope at the same time when thinking about their children´s (which means our) future. They guide us hoping that we´ll some day find our own way and they are scared that we won´t be able to cope with all the requirements of today´s society.

Our generation on the other hand is confronted with many feelings and influences at the same time. We are torn between the pursuit of professional success and self-realization.
So is there anyone among us thinking about children? We all know that some day we want to have a family, but this day seems so far on our journey throughout life´s suprises. We conduct this journey blindfolded without knowing whereto and why. And while we are travelling, the pressure to perform and the run of information increase and our future is becoming more uncertain with every second that passes. And that scares us!?

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The consumer’s power

The concept of a flashmob might be known by lots of people, as there have been many of such gatherings lately.

One great and widely recognized example during election time in Germany was the flashmob called “And everyone goes Yeah” that was organized by the online community during a speech of Angela Merkel, where the people present shouted “Yeah” after every sentence she finished. Merkel was pretty disturbed at the beginning and the initiative even made the evening news.

But while flashmobs are often criticized by certain people and characterized as being senseless, the alternate concept of smartmobs is making positive headlines. One sub-category of the smartmob movement is the one of carrotmobs. The initiative’s name derives from the image of a donkey longing to eat the carrot someone is wagging in front of his nose. In our case, the donkey stands for the business sector and the person holding the carrot is the conglomeration of customers. For organizing a carrotmob, it therefore takes a group of customers that are linked throughout some device (most of the times an online community) and a group of companies competing for the carrot which symbolizes the consumer’s spending power.

How Organized Consumer Purchasing Can Change Business from carrotmob on Vimeo.

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What about this financial and economic crisis?

Right now, in February 2010, hysteria and fuss which were created by the global financial crisis throughout all social ranks and countries worldwide has nearly subsided. You can even hear people asking: Does the crisis continue or have we left turbulent times? Optimism is surfacing again.

But what exactly happened since the downfall of Lehman Brothers? Several meetings of the heads of states, discussions about a global regulation of the financial sector and stimulus packages in all sizes have come over us so far. Time has passed and some concerns have not come true. But huge imbalances in our financial and economic system are still existing. Nevertheless, efforts to commonly and globally fight for a sustainable, stable and equitable economic system after two years of crisis seem to be pretty hushed.

So will we continue as usual, as if the crisis was merely a bad dream? If so, same difference there. Another crisis won´t wait to arise.

We observe an increasing acceleration of global economic processes. This acceleration, if it is not guided – this is our task -, will lead to cause and effect chains that are hardly traceable anymore. If you want to put it that way, it will lead to steadily more complex and chaotic economic processes which will especially provoke short term actions.

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Are traditional forms of credit bound to be renewed?

The German consumer climate is supposed to decrease for the fourth time in a row in February according to the report of GfK (Gesellschaft für Konsumforschung).

The main reason stated in the report is the threat of higher unemployment rates and the weak recovery of the general economic situation, which as a consequence means that private spending won’t be able to play a significant role in the economy’s pickup.
Especially the retailing sector is now forced to provide incentives to consumers in order to empty the stores and generate room for new products still to be delivered.
Thus, the existing discount battle is no surprising one. If the desired effects will occur is to be observed in the next couple of weeks.

Question is: What happens with small family led companies that don’t have high margins and are not able to realize economies of scale. At the moment, they suffer even more from the pressure applied on them by global companies.
It is not only the discount battle that forces them to take action, but also the unwillingness of the banking sector to support small and middle class entrepreneurs in a more flexible way.

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Does our society need growth?

One can answer this question looking at both sides of the income equals outcome equation.

I will try to treat the income side. Therefore, I´ll specify the question a little: do we need steady growth to guarantee a certain minimum life standard for all human beings?
The other rather philosophical question would be whether we need technological growth, resulting in more work efficiency, more comfort and also longer estimated life times.
Keynes wrote in his standard work that he expected us to nowadays live in a perfect world without any unemployment – he underestimated the rising human pursuit of comfort and luxury: despite the exponential growth of work efficiency, increasing human desires have resulted in not only constant but even rising unemployment rates.

To facilitate the question, I will divide up our society into two parts: the employees and the capitalists. All assumptions are based on a solow model with integrated work efficiency affecting technological progress.
Additionally, I will assume that our international economy is more or less pretty close to the stationary point: the accumulation of capital has pretty far reached its maximum.
As I want to answer the question whether growth is required and possible when the global economy is saturated, I will assume the following scenario:

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What western economic systems can learn from micro-insurance and micro-credit

The concept of micro-credit has been praised throughout the past years, leading even to a Nobel Peace Prize for one of the founders of a successful micro-credit scheme.

One of the recent discussions in the “micro” segment is the one lead about micro-insurance. Such models are supposed to provide affordable insurance for the informal sector in different areas such as health or agriculture. Most of the time, these insurance schemes are realized as group policies on a community base.

As one of the members of the BRIC states, India has reclaimed the “Health for All” aim.  Given that neither the private supply of health facilities nor the public ones have been able to significantly bridge the gap in health insurance for the poor, micro-insurance plays an important role for being able to achieve this goal.

Their trait of being community based implies that every action of a member has consequences for the group as a whole. The premiums of every member are collected in a common pot and used in the case of the incidence of risk. This requires a high responsibility of every individual involved. The concept not only enables insurance for a part of the population which was seen as uninsurable, but also weakens or even avoids aspects such as fraud, moral hazard or adverse selection.

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Are we completely free at the point of decision making?

As a professor for business psychology at the University of Cologne, Professor Fetchenhauer carried out a survey concerning the image of economists throughout the population.

He found that only 15 percent of the people asked believe economists to be credible. Worse off are only politicians and astrologists, who have a credibility rate of only three percent.

Prof. Fetchenhauer blames this result on the aspect that people think of economists as the ones predicting the prospective economic development. And most of the times, their predictions don’t become true. The focus on efficiency and rationality as main criteria in economic models therefore is questioned by some people. They argue that human beings are not always rational, and that they can’t be seen as one entity which behaves in the same way, no matter what.

As one possibility to strengthen trust, the research group tells economists to try to be a better communicator with their environment.

So far, these are no findings which disturb the world (except maybe the egos of certain people out there).

What strikes me most in the findings is the insight that there is nearly no difference in decision taking and the act of judging a situation between people who are experts and people who are not, and especially no difference for people with dissimilar education level. All of them took decisions on a gut level. At least that´s what the findings suggest. So are we only lead by our instinct or do other circumstances influence our behaviour?

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Crisis Demands

This Crisis changed the world. For sure?

The crisis catalysed thinking from years to months – even weeks. In this fast paced environment, drafting possible scenarios and thinking of how to react to them is essential. Disastrous consequences caused by an unstable financial system have been highlighted. Furthermore, the enormous interdependencies of our globally linked world have been shown. The setbacks in growth caused by this crisis had disastrous consequences for corporations and whole states as well as individuals. As response to that, economists, politicians and entrepreneurs try their best in order to revitalize economic growth. Cushioning the crisis’ impacts forced a dramatic increase of national debts. But, what happens with the augment of public debts all over the world? Are we navigating straight into a new heavy crisis, a crisis of states?

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