Fareed Zakaria is taking the long view with our current financial crisis, which naturally impresses me. I am quite glad to read his take on the potential upside of the current financial crisis. His view is that we will finally correct some of our fatally bad habits and return to a more disciplined approach to management.
“The financial industry itself is likely to shrink, and that’s not a bad thing, either. It has ballooned dramatically in size. Curry points out that “30 percent of S&P 500 profits last year were earned by financial firms, and U.S. consumers were spending $800 billion more than they earned every year.”
The notion of 30% of profits coming from people who essentially charge fees to borrow money should have been worrisome. Then again, the idea of running your economy on consumers who were borrowing short of a TRILLION dollars per year should have sent us screaming into the hills.
As a result, most of our top math Ph.D.s were being pulled into nonproductive financial engineering instead of biotech research and fuel technology.
I love this point! It seemed for years that simply “being the best” meant a one-way ticket to Wall Street, not a genuine love or talent for finance. It was no wonder why – that’s where the best salaries and bonuses were, no matter what you did. Yes indeed, those brains would be a real help on all the rest of our challenges!
Capital expenditures went into retail construction instead of critical infrastructure.”
This would explain why my hometown of Rutland, Vermont shrank in population over the past decade (from 20,000 to 17,000,) while it received more than one million square feet of new retail space. The average age of the place is 57, most of our manufacturing and farming jobs are gone, but they put in a dozen new giant retailers. Only fundamental problems with the financial sector could have incentivized this.
I agree with Fareed Zakaria – we’re going to have the opportunity to kick some very bad habits! It sounds like instead of shuffling money through the financial sector, we’ll be more motivated to invest in bridges, solar panels, wind farms, factories, roads and things that will actually improve our future.
A silver lining indeed.
This is the official trend blog of Competitive Futures, a management consultancy that provides trend research and analysis for business and government around the world. Here, we update you on interesting trends we see as part of our work for our clients.
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