(Continued from Part 1)
...And thus started the Economic Cycles as we now know it.
The elements were there. Taxes, Money and its supply controlled by the government. Products and Services becoming more and more complex as individuals became more and more interested in showing off their wealth; Art, Servants, Architecture, Fashion, Land, Timepieces and a whole host of things unrelated to living life came into play. Wants became more important than Needs. At this point, Premium pricing was natural. After all, how can you price something which people didn't really need? And it was socially "ok" to still want it even with people demanding unreasonable prices. Using Debt you could acquire something that was beyond your normal means and pay for it later. Debt was no longer used to address basic needs. It was used to address wants and gambling on investments (wanting more money).
Greed grew. Greed flourished. Greed trapped humans into a cycle of wanting and guilty pay back. In some, greed drove them to search for more riches to be made theirs. The Spanish set sail exploring crying "for God, Glory and Gold!
GOD: I've purposely omitted this can of worms from this commentary. It would have come into play back when I said the first Services industries appeared. Shamans being able to 'understand' the mysteries of life and educate the olden Warriors.
GLORY: Humans would have heard about the heroes who were kings. Heroes who were brave in the early economic wars. Rich people who lived their life in luxuries. They would want that for themselves as well. Their name to be in history (and there were still many places to be explored in the world then anyway)
GOLD: Need I say more? Sigh...
They colonised lands. Taking local wealth back to their kingdoms in triumph, as what their patrons expected. They then sent labourers and convicts to the new world as pioneers to establish the rules and lifestyles from the conquering countries. As if that wasn't bad enough, a worse phenomenon was that expanding businesses in home countries sent products to the new lands to be sold. They didn't care about the need / want / relevance of the product they sent. What businesses knew is that there is a market and products must be mass produced and sold. Increasing production, and thus profits. Managers were encouraged; given huge bonuses. So, managers rinsed and repeated this ad nauseum. They had to. It was the only way Investors (ie: People who were earlier patrons with lots of money, who wanted more money, and would have fired any management who failed to deliver) could be appeased.
The process repeated until all markets got saturated. Nobody wanted to buy and everybody saved money instead. No amount of pestering convinced people to buy because they had whatever they needed & wanted. Yup, ladies and gentlemen!! Supply had FINALLY caught up with Demand and there was excess supply, with factories still mass producing. At that point, production lines came screeching to a halt. Warehouses were bursting at the seams. Consumers switched to cheaper alternatives. Marketing budgets swelled to hide poor forecasting calculations. Wages were cut, even though workers were being paid overtime just days earlier. Eventually many experienced loss of jobs. Leading to further decrease in consumer Expenditure, and a vicious cycle ensued where at the end, the economy contracted.
In finance terms, a particular country's economy is said to be in recession if contraction happens for 2 quarters consecutively. 6 months. In my definition, I think the recession starts the moment EVERYONE is making insane profits. This means consumers across the board are hoarding; which then leads to the fact that VERY SOON they are going to stop buying. This is where companies still make mistakes. While they have very aggresive ramp-up strategies; No one thinks about phase-down strategies. Everyone says the other guy is going to bite the dust and I am going to take his share so I have to STILL ramp-up in a slump time. Besides, that's the only way I can keep the profits from last quarter going strong. Greed.
But, a phase down across the board is what is needed at that point. A PRODUCTION phase down. A sales TARGET phase down. A marketing BUDGET phase down. A managerial KPI phase down. And yes as counter intuitive as it sounds, a WAGE phase down across the board. Think about it, how can a company go into survival mode in a slump time if the people want to be paid as they were being paid in the boom time? Can you imagine a ship crew experiencing storm in the middle of the sea eating their rations at the same rate? The other alternative is of course to lay-off workers. But, this is a very irresponsible way for businesses to deal with the crisis. "For a few to continue eating as much as they did before the storm, we'd like the others to walk the plank into the middle of stormy seas" ?
At the least, they should get to a port and drop the excess crew off. A responsible way of retrenching staff. Leave them in a safe place where it's more feasible to look for a job. This is where Government I feel can actually help by having a rotation of projects. When the economy is going into a slump, launching a flagship project where the Government hires workers to work on it would be a great boost. Money would go straight into the hands of needy citizens and there would be a demand for daily products that arise from their employed pockets. Companies can make it easier by actually helping their employees find jobs in batches, with the Govt.
Of course, those who feel they are not interested can always do their own thing. Sadly people would do their own thing because of the ultimate need of humans. To live and to be safe. To be cherished and remembered. To be ambitious and leave a mark. They would try their hand at entrepreneurship / freelancing to make lots of money. Again, this is a situation that can be avoided if people did not need to buy what they needed. The developed economies have got the right track in mind by having Social Security schemes. Citizens unable to work are paid Social Security money by the Governments. They just haven't went on to the next step. Instead of giving people money to lift their burden of buying, the people should in fact given those items they want to buy for FREE; thus releasing more and more people from the need and "trappings" of money. I am not talking about abolishing the concept of money. I am talking instead about humans having enough to live. Then, having money would purely be for pleasure and the pursuit of happyness (pun intended!). People would then look at money as the tool it really is. Economic cycles would not dictate our livelihoods.
As beautiful as it may sound, we are unable to move towards this Utopian idea, even in small phases, at least until 2 things take place...
(Continued in Part 3)
...And thus started the Economic Cycles as we now know it.
The elements were there. Taxes, Money and its supply controlled by the government. Products and Services becoming more and more complex as individuals became more and more interested in showing off their wealth; Art, Servants, Architecture, Fashion, Land, Timepieces and a whole host of things unrelated to living life came into play. Wants became more important than Needs. At this point, Premium pricing was natural. After all, how can you price something which people didn't really need? And it was socially "ok" to still want it even with people demanding unreasonable prices. Using Debt you could acquire something that was beyond your normal means and pay for it later. Debt was no longer used to address basic needs. It was used to address wants and gambling on investments (wanting more money).
Greed grew. Greed flourished. Greed trapped humans into a cycle of wanting and guilty pay back. In some, greed drove them to search for more riches to be made theirs. The Spanish set sail exploring crying "for God, Glory and Gold!
GOD: I've purposely omitted this can of worms from this commentary. It would have come into play back when I said the first Services industries appeared. Shamans being able to 'understand' the mysteries of life and educate the olden Warriors.
GLORY: Humans would have heard about the heroes who were kings. Heroes who were brave in the early economic wars. Rich people who lived their life in luxuries. They would want that for themselves as well. Their name to be in history (and there were still many places to be explored in the world then anyway)
GOLD: Need I say more? Sigh...
They colonised lands. Taking local wealth back to their kingdoms in triumph, as what their patrons expected. They then sent labourers and convicts to the new world as pioneers to establish the rules and lifestyles from the conquering countries. As if that wasn't bad enough, a worse phenomenon was that expanding businesses in home countries sent products to the new lands to be sold. They didn't care about the need / want / relevance of the product they sent. What businesses knew is that there is a market and products must be mass produced and sold. Increasing production, and thus profits. Managers were encouraged; given huge bonuses. So, managers rinsed and repeated this ad nauseum. They had to. It was the only way Investors (ie: People who were earlier patrons with lots of money, who wanted more money, and would have fired any management who failed to deliver) could be appeased.
The process repeated until all markets got saturated. Nobody wanted to buy and everybody saved money instead. No amount of pestering convinced people to buy because they had whatever they needed & wanted. Yup, ladies and gentlemen!! Supply had FINALLY caught up with Demand and there was excess supply, with factories still mass producing. At that point, production lines came screeching to a halt. Warehouses were bursting at the seams. Consumers switched to cheaper alternatives. Marketing budgets swelled to hide poor forecasting calculations. Wages were cut, even though workers were being paid overtime just days earlier. Eventually many experienced loss of jobs. Leading to further decrease in consumer Expenditure, and a vicious cycle ensued where at the end, the economy contracted.
In finance terms, a particular country's economy is said to be in recession if contraction happens for 2 quarters consecutively. 6 months. In my definition, I think the recession starts the moment EVERYONE is making insane profits. This means consumers across the board are hoarding; which then leads to the fact that VERY SOON they are going to stop buying. This is where companies still make mistakes. While they have very aggresive ramp-up strategies; No one thinks about phase-down strategies. Everyone says the other guy is going to bite the dust and I am going to take his share so I have to STILL ramp-up in a slump time. Besides, that's the only way I can keep the profits from last quarter going strong. Greed.
But, a phase down across the board is what is needed at that point. A PRODUCTION phase down. A sales TARGET phase down. A marketing BUDGET phase down. A managerial KPI phase down. And yes as counter intuitive as it sounds, a WAGE phase down across the board. Think about it, how can a company go into survival mode in a slump time if the people want to be paid as they were being paid in the boom time? Can you imagine a ship crew experiencing storm in the middle of the sea eating their rations at the same rate? The other alternative is of course to lay-off workers. But, this is a very irresponsible way for businesses to deal with the crisis. "For a few to continue eating as much as they did before the storm, we'd like the others to walk the plank into the middle of stormy seas" ?
At the least, they should get to a port and drop the excess crew off. A responsible way of retrenching staff. Leave them in a safe place where it's more feasible to look for a job. This is where Government I feel can actually help by having a rotation of projects. When the economy is going into a slump, launching a flagship project where the Government hires workers to work on it would be a great boost. Money would go straight into the hands of needy citizens and there would be a demand for daily products that arise from their employed pockets. Companies can make it easier by actually helping their employees find jobs in batches, with the Govt.
Of course, those who feel they are not interested can always do their own thing. Sadly people would do their own thing because of the ultimate need of humans. To live and to be safe. To be cherished and remembered. To be ambitious and leave a mark. They would try their hand at entrepreneurship / freelancing to make lots of money. Again, this is a situation that can be avoided if people did not need to buy what they needed. The developed economies have got the right track in mind by having Social Security schemes. Citizens unable to work are paid Social Security money by the Governments. They just haven't went on to the next step. Instead of giving people money to lift their burden of buying, the people should in fact given those items they want to buy for FREE; thus releasing more and more people from the need and "trappings" of money. I am not talking about abolishing the concept of money. I am talking instead about humans having enough to live. Then, having money would purely be for pleasure and the pursuit of happyness (pun intended!). People would then look at money as the tool it really is. Economic cycles would not dictate our livelihoods.
As beautiful as it may sound, we are unable to move towards this Utopian idea, even in small phases, at least until 2 things take place...
(Continued in Part 3)
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