Matt HealeyFriday,2 November 2012

The Snap:

I just finished a book called “Fault Lines: How Hidden Fractures Still Threaten the World Economy” It was by Raghuram G. Rajan who was the chief economist with the IMF from 2003-2006. I thought the book was very good and exposed how the world has become so unbalanced that the fault lines will pose serious threats in the future. The responsible countries are the developed economies and the developing economies, so, well, everyone.

The Download:

While I thought the book was very good, and did an excellent job of assigning blame to a variety of countries, I was also struck by my thought that one of the worst executives to have ever lived from a world economic health perspective was Jack Welch. My reason is the intense focus on growth, and specifically, top line growth. I am not saying that growth is a bad thing, or that companies should not be focused on growth, just that the myopic focus combined with the assumption that every market has to grow has disastrous consequences. It has become so much of a focus that Tyler Durden was driven to say “working jobs we hate to buy shit we don’t need”

Lets take a look at two examples of this. The first is from “Fault Lines”. One of the problems that Raghuram highlights is the desire of emerging countries to grow though exports without the use of foreign capital. This drive, born from the harsh memories of the contractions in the late 1990’s due to the Asian currency problems, resulted in a surplus of goods that were looking for countries that would consume beyond their ability to produce. They found a debt fueled economic expansion in the US and the EU that eventually lead to a crash. The second is the increase in obesity rates in the US. In 1961 the total number of available calories per person in the US was around 2000. By 2003 it was over 3600. Why? Because people like Jack Welch instilled an ethic that required growth. Which means that food producers must encourage more consumption so they can show top line growth. So yet another case where the drive towards growth causes suboptimal results for the majority of people. I think we need to focus not on economic growth but on improving the lives of the citizens.

Hat Tips:

Obesity Fault LinesMy Calories CountTyler Durden, Image Credit: Wikimedia Commons

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