Last year was the insurance industry’s costliest year, caused in part by earthquakes in Japan and New Zealand, but also by catastrophic floods in Australia and Thailand, and hurricanes and tornadoes in the USA. It is, of course, difficult to be certain whether natural disasters, at least those related to climate, are becoming more common, or whether they are simply affecting more people as the population grows.
What they can highlight is the extraordinary fragility of many of the world’s supply chains. Economic and business changes over the past few decades have featured heavy concentration on specialisation and speculation. Global businesses source goods and services from highly specialised ‘clusters’ of expert providers, located in regions with the skills to support them. Speculation has been permitted to grow unchecked as part of a belief in the self-regulatory nature of deregulated finance.
Both were intended to improve operational efficiencies and living standards. There is much to say for specialisation; though rather less for speculation, as discussed previously on this blog. Specialisation makes logistical sense, but does create obvious vulnerabilities in supply, as a major earthquake or drought could cause serious disruptions in manufactured or agricultural products. The 2011 Japanese earthquake affected supplies to car companies around the world, for example.
Amid these major challenges, what is extraordinary in most western countries is the preference of political parties to discuss relatively minor matters. There is plenty of opposition to specialisation and speculation, but the only alternative put forward is state welfare and regulation. Yet the over-stretched, indebted western state cannot do much more than ameliorate poverty and provide health and education services. So the big issues are ducked.
Many commentators still try to force events into the ‘left-right’ spectrum, and they don’t really fit. Look at the issues that are omitted by this antiquated perspective: building businesses through stronger leadership; developing strategies for the long term on a range of issues from pensions and savings to conserving resources and environmental responsibility. Developing contingency measures for vulnerable points in global supply chains. The most important challenges we face, in other words.
Our political beliefs and parties are becoming as obsolete as the religious factions that tore Europe apart in the 16th and 17th centuries. As we write, political parties in the UK and Spain are furiously debating, respectively health service restructuring and deregulation of the labour market. These are close to being religious battles with each side saying ‘My sector is better than yours’. The divisions between anti- and pro-government factions are probably even more bitter in the USA. Economists argue furiously over whether state-run fiscal stimulus or a smaller state would most stimulate economic growth, yet have nothing to say whatsoever about the industrial leadership or business development that actually creates wealth in the real world.
These ideological ‘left-right’ wars are now part of the problem. They are certainly irrelevant to the biggest challenge of the day: sustainability.
- Case studies on sustainable business will be featured in New Normal, Radical Shift. For a sample, click here.