Human beings go through a number of stages when confronted by a major change such as today's Crisis. As first described by Elisabeth Kübler Ross, the process starts with:
• Denial that any change is taking place
• Then Anger at the implications of the change
• Bargaining to reduce its magnitude
• Depression as reality begins to be confronted
• Finally Acceptance of what has happened
Last week's EU Summit reinforced the blog's belief that Kübler Ross' work is a good guide to the evolution of today's financial Crisis. It seemed to mark the end of the Denial phase amongst Europe's political elite.
For the past 20 years, they have been in the 'same bed, (with) different dreams', as Reuters' Paul Taylor described it. Germany has wanted to push ahead with fiscal union, whilst France has argued to retain a key role for nation states. Foolishly, they pushed ahead with the euro project without resolving this key issue.
Along with other world leaders, they then went straight into Denial mode when the Crisis began. As the blog noted in April 2009, the G20's London summit failed to agree "a contingency plan, in case the global economy does not begin to recover". Instead, they increased debt levels via massive stimulus programmes.
Fast forward to today, and there are few excuses left. In Europe, the leaders had been able to blame Silvio Berlusconi, the former Italian leader, for lack of progress. Now he has gone, the UK's David Cameron has taken his place.
Of course, the UK played its hand in the negotiations very badly. It is never clever to stand laughing outside your neighbours' house whilst a fire burns. And it was particularly stupid not to check whether the wind might soon blow the fire in its direction.
But that is really a sideshow. What is clear is that EU leaders are no longer in Denial mode. They have moved on to Anger, and want to blame someone for their mistakes.
This could have major implications for world trade, as the chart suggests. Angry politicians faced with mounting job losses amongst their voters will find it very easy to blame other countries for their own mistakes.
Companies need to monitor political developments very closely indeed over coming months. Protectionism may not be far away.
Comments (2)
This is a sobering assessment, Paul. Probably your boldest yet. Certainly the leaders of the free world's countrys want to avoid the inevitable pain of moving to the New Normal. Their constituants demand that behavior. I know you have made recommendations for how businesses should function in the future in catering to the new demographics. Maybe I have missed it, but do you have specific guidance to these leaders for helping them through the current difficult times? Really, transitional help. Thanks for your service!
Posted by Bart Moodie | December 15, 2011 7:18 AM
Posted on December 15, 2011 07:18
Bart
Thanks for your encouragement. Yes, we do continue to outline ideas to policymakers about how they should respond. And it is fair to say that in our discussions, some policymakers are certainly starting to take our arguments seriously, particularly around the problems in commodity markets. The second half of the book, from chapter 7 onwards, is also dedicated to presenting potential solutions.
Our point is really a simple one - that we are where we are, and one can't change the demographic profile. But if we stopped the futile attempt to turn back the clock, then we could instead begin to focus on the opportunities that lie ahead -particularly in meeting the needs of the over-55s in the West, and the millions now emerging from poverty in the East.
Perhaps the simplest way we have found of getting across this message is to point to the fact that very few companies are targeting the over-55 market, and yet this sector is now 29% of the Western population. Equally, governments have not developed any new policies to meet the challenges this has created. Trying to increase growth, whilst ignoring a sector of this size and importance, is like pushing a stone uphill.
In the end, the Kubler Ross model suggests we will get to a Bargaining phase - we just wish it could happen sooner, so we could all start to move forward.
Paul
Posted by Paul Hodges
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December 16, 2011 5:54 PM
Posted on December 16, 2011 17:54