EXPECTATION of unrealistic returns is the root cause of the current economic crisis.
Expectation drove the markets to unheralded heights barely 18 months ago. Expectation drove the price of commodities like oil and gold to unprecedented and stratospheric heights resulting in the precipice of an energy crisis a year and a half ago. It is expectation that we have to deal with, conquer, and rationalise, if we are to restore confidence at a global level.
As a nation, we have to muster every ounce of confidence to survive the recovery process of the global economic downfall.
However, it cannot be, in the words of Tengku Razaleigh Hamzah, arguably one of the architects of Malaysia’s economic prosperity, a hollow confidence. False confidence founded on irrational hope resulted in the collapse, disillusionment, and distrust of the global economy.
The long-term path to prosperity is through increasing income and expanding business opportunities through productivity and innovation. The world is essentially still the same. Blaming globalisation or capitalism as one of the causes of the current situation is a careless excuse. Globalisation did not evolve from a few decades ago. It evolved from the earliest of times when man learned to trade.
Globalisation expanded through every conquest by every empire in the history of humanity. From the East, the Silk Route transported the knowledge, cultures, and traditions of Asia to the West. The courts of the Roman Empire had representatives from Africa, the Middle East, and even India. Kublai Khan’s kingdom had envoys from Europe, the Far East, and Africa.
Everything changed in the last four decades, stimulated by the tremendous pace of activity and growth. The global population tripled in this period. It placed an intense pressure on the process of globalisation. Anything in the sphere of business that happened in one part of the world had an echo in another.
Let’s explore another supposed cause of the economic crunch: Capitalism. It is either the boon or the bane of the current economic delinquency. The US practised a managed form of capitalism – not a free economy, which, by definition, requires a free flow of information, resources, labour, and specialised skill sets.
We have inadvertently sacrificed growth for social equity, resulting in massive differences between middle and high-class incomes. This anomaly has been exacerbated by a shortfall in learning and changing, the stimulus for economic growth. The systematic behaviour change and knowledge acquisition has also stunted the growth potential.
But not all is lost. Recently, the people of the malnourished Ethiopia banded together to create a company comprising small leather and hand-woven textile producers. Collectively, and perhaps by sheer accident, they established the country’s first luxury label called Taytu. With support from NGOs and the United Nations Industrial Development Organisation, Taytu products – decorative handbags and gorgeous one-off scarves – are now bought and sold by the world’s most esteemed fashion buyers.
It is a story worth repeating. It is proof that the recession is an opportunity for anyone ready to re-gear and retool their economies. It is a time for bold, imaginative initiatives. It is a time to light the fire under our feet to make transformative improvements in governance and politics.
The art of survival is about thinking one step ahead. The art of preparation is about being at least two steps ahead. The art of success begins three steps ahead. Moving forward one step at a time will benefit all of us. It would help, too, if someone could predict the future and hasten the race to recovery.
Datuk Vijay Eswaran is the executive chairman of QI Group of companies.