LIFE AFTER A BIG BLACK HOLE A COMPETITIVE OUTLOOK FOR 2009, AND BEYOND FACING GLOBAL CHALLENGES COPENHAGEN 8 SEPTEMBER 2009 PROFESSOR AT IMD AND AT THE UNIVERSITY OF LAUSANNE, SWITZERLAND, DIRECTOR WORLD COMPETITIVENESS CENTER
«THE TROUBLE WITH OUR TIMES IS THAT THE FUTURE IS NOT WHAT IT USED TO BE..» PAUL VALERY, 1871-1945
COMPETITIVENESS IS ABOUT WINNING GDP QUALITY OF LIFE ECONOMIC GROWTH MANAGING PROSPERITY PROFIT SUSTAINABILITY
A CRISIS IN THREE ACTS ACT I ACT II ACT III FINANCIAL CRISIS ECONOMIC CRISIS SOCIAL CRISIS VALUE DESTROYED GDP DESTROYED JOBS DESTROYED SHARES WORLD WORLD GDP WORLD WORLD GDP V- $50 000bn LOANS FOR SALE HOUSES V - 5% V- 50 MILLION SAVINGS ECONOMY EMPLOYMENT
ACT I THE FINANCIAL CRISIS
SOLVING THE FINANCIAL CRISIS THE STANDARD MODEL 1. FLOOD THE STREET WITH MONEY 2. PACK THE BAD DEBT AWAY BAD BANK 3. RECAPITALIZE AND TAKE PART OWNERSHIP 4. LATER, RESELL THE BAD DEBT OR THE SHARES
BAILING OUT THE WORLD $789bn $450bn $151bn $209bn $586bn $111bn $41bn $68bn TOTAL COST STIMULUS: $3 200bn LOAN GUARANTEES: $2 700bn
US BUDGET DEFICITS: THE LEGACY 1999: +$236bn 2009 - $1750bn - 13% OF GDP
1750 BILLION DOLLARS!!! 2 MILLION DOLLARS PER DAY 0 8 SEPT. 2009
THE EXIT STRATEGY? IT IS EASIER TO STAY OUT MARK TWAIN 1835-1910 THAN TO GET OUT!
IN ADDITION: AN OCEAN OF DEBT $11.2 tn $7.0 tn US NATIONAL DEBT + $ 3.7bn per DAY! $6.0 tn $5.0 tn $4.0 tn $3.0 tn 1990 2000 2009
DEBT IN THE G20 as a % of GDP 114% 106% 78% 2007 2010 2014 + $9,000bn
THE EMPIRE STRIKES BACK MORE GOVERNMENT POWER HELP! GOVERNMENT BUSINESS
A GOVERNMENT BIG ENOUGH TO GIVE YOU EVERYTHING YOU WANT THOMAS JEFFERSON 1743-1826 IS STRONG ENOUGH TO TAKE EVERYTHING YOU HAVE
ACT II THE ECONOMIC CRISIS
ITALY EURO AREA -4.6 UK -5.6-6.2-6 GERMANY SWEDEN SPAIN NL DENMARK MEXICO -4.1-5.1-4.4-5.9 AUSTRIA FRANCE BELGIUM -4.1 VENEZUELA COLOMBIA CHILE THE WORLD ECONOMY ANNUAL % CHANGE (12 month period) NOSE DIVING CH -2.4 OR LEVELLING-OFF? (compared to previous quarter) -3.8-10.3-2.4-4.5-2.6-0.6 3.7% -3.2% 1.4% JAPAN RUSSIA POLAND HUNGARY CZECH. REP TURKEY -6.4 AUSTRALIA THAILAND TAIWAN -13.8-4.9-7.5 KOREA -2.5-3.5-2.8-3.9 SINGAPORE SOUTH AFRICA MALAYSIA -1.0% INDONESIA -0.4% +1.3% -10.9 +20.4% INDIA BRAZIL -1.8 HONG KONG -3.8 2.0 ARGENTINA CHINA 7.9-7.6-3.4 0.4 0.8 Q1 Q2 Q2-3.9% 4 5.8
FOLLOWING EXCEPTIONAL YEARS! EXPORTS OF GOODS (bn$) 2008 2001 51 571 266 117 1465 1428 633 230 729 1300
RECESSION IN FOUR SIZES 1990 1973-2001
WHICH RECESSION? OR
THE ECG «U» RECESSION BEFORE AFTER
WILL STIMULUS PLAN WORK? REVENUES SPEND? SAVE? WEALTH CONSUMERS
QUIZZ (NO ANSWER ) 1. HOW MANY PRODUCTS IN A TYPICAL HOME? 2. HOW MANY MORE CAN YOU BRING IN?
DRIVERS OF ECONOMIC GROWTH REPLACEMENT ECONOMY FIRST BUY ECONOMY A PURCHASE REPLACES A N EXISTING PRODUCT A PURCHASE INTRODUCES A NEW PRODUCT «DRAMATIC» INNOVATION PURCHASING POWER
IS INNOVATION VALUE? EVERY YEAR US PATENT OFFICE DELIVERS 40 NEW MOUSETRAP PATENTS 4,400 MOUSTRAP PATENTS SINCE 1838!
ACT III THE SOCIAL CRISIS
AND THE TERRIBLE TWO JOB LOSS WORLDWIDE 2008-2009 50 MILLION
WHY INFLATION? IN FAVOR 1. TOO MUCH LIQUIDITY 2. STIMULATE ECONOMIC GROWTH 3. REDUCE DEBT AGAINST INVENTORIES...? OVERCAPACITIES...?
IN NEED OF A PURPOSE «A BUSINESS THAT MAKES NOTHING BUT MONEY HENRI FORD 1863-1947 IS A POOR BUSINESS!»
A NEW SENSE OF ETHICS BEING GOOD AT WHAT YOU DO BEING GOOD AT WHAT YOU ARE
THE POWER GAME IS CHANGING
WHO IS HAVING THE MONEY? Foreign currency reserves $1953bn $1019bn $385bn $305bn $256bn $205bn $204bn $767bn TREASURY BONDS ( Total: $3265bn)
NEW PRIORITIES FOR MONEY FINANCIAL ASSETS INFRASTRUCTURE GOVERNMENT BONDS LOCAL AND REGIONAL INDUSTRIAL ASSETS LOCAL COMPANIES EVERYWHERE AT HOME
A WORLD OF NEW BRANDS
GOOD NEWS YES
THE ORIGIN OF GROWTH? EMERGING MARKETS MIDDLE CLASS LIFE EXPECTANCY EMERGING «LESS POORS» NEW BUS. MODEL CLEAN TECH SUSTAINABILITY INCREASES 5 HOURS PER DAY AGE AND WELLNESS ANOTHER LIFE?
IS IT SUSTAINABLE?
VOLATILITY 147$ 16$ 70$ 75$ 1999 July 2008 NOW FOOD INDEX - 27% RECOVERY?
AND FROM THERE? BUT 300 LITERS OF METHANE PER DAY! 60% AGRICULTURAL LANDS ARE FOR ANIMAL FEED 15 000 LITERS OF WATER FOR 1 KG OF BEEF
ENVIRONMENT IS BIG MR FARADAY, WHAT IS THE USE OF ALL THESE INVENTIONS? WILLIAM. E. GLADSTONE I AM NOT QUITE SURE BUT I KNOW THAT ONE DAY YOU WILL TAX THEM... MICHAEL FARADAY
THRIVING THROUGH A BIG BLACK HOLE
WHERE WE COME FROM WORKING BETTER WORKING CHEAPER WORKING ELSEWHERE
THE NEXT FRONTIER: PROCESSES PRODUCTS e.g IPOD PURCHASING ORDER COST EFFICIENCY SATISFACTION
NEW: REDUCING COMPLEXITY «THERE IS NOTHING SO USELESS AS DOING EFFICIENTLY SOMETHING THAT SHOULD NOT BE DONE AT ALL» PETER DRUCKER, 1909-2005
A SMALL SECRET IN COMPETIVENESS THE IMD WORLD COMPETITIVENESS YEARBOOK 2009 DIVERSIFICATION OF THE ECONOMY NR 1. COMPETITIVENESS OF SMEs NR 2. EASE OF DOING BUSINESS NR 3.
CHANGING THE MINDSET COMPETENCIES AND SKILLS
THE BIGGEST DANGER «WE STARTED TO BELIEVE OURSELVES ALL THE GOOD THINGS THAT WE WERE TELLING TO OTHERS» ANONYMOUS CEO
THE SPIRIT OF COMPETITIVENESS POURQUOI PAS? JEAN-BAPTISTE CHARCOT 1867-1936 WHY NOT? MENTALITY