27 Feb 09 Strategy and the Future World: Why the next three months may hold the key

Those of you who have been following my scenarios will know that I hold that future, not the past or even current events associated with the current financial crisis, will determine the shape of the the future business world.

In my scenarios as described in 2009: Signposts to where? – I refer to a range of shaping events that will separately, or in an inter-related manner, form the shape  of the future world.

These are the events to actively monitor.

In all, there are five shaping events.

The Real Issue
The real issue is that a range of these shaping events could be triggered over the next three to four months and alone or together they could have a tumultuous effect.

The five shaping events, which over time work together in an inter-related manner, are:

#1: Industry Contagion a widespread domino effect as the crisis spreads from the banks into the major employers of at least the developed economies.  The loss of an iconic employer could place massive pressure onto politicians to impose what others would see as protectionist policies.  Such a move would be a big step to a divided world – The Jigsaw in my scenarios.

#2: Banking Future Shocks the view being that not all of the bad news is behind us. More is to be revealed.

#3: Global Fragmentation in other words the emergence of protectionism.

#4: Energy arguably one for the medium term. At some point we will face an oil supply crisis following a lack of investment in production infrastructure.

#5: Conflict The unhappy fact is that there is a correlation between recession and social and national – upheaval.

My point is that three of these shaping events could be triggered in the next quarter.

Firstly, industry contagion. Both GM and Chrysler stand on the edge of an abyss. By the end of March, Chrysler must demonstrate progress to viability if it to received more state loans[1]. Massive corporate failures in Detroit could result in over 3m additional unemployed in the US alone[2].

Secondly, some observers feel that there is even more bad news to emerge for western banks especially from Eastern European operations[3], [4].

Thirdly, we have the spectre of conflict in the form of social unrest particularly in Eastern Europe that could, at an extreme, challenge democracy[5],[6].

These, I suggest, are the events to monitor now.

Each has the power to reshape our world for a generation. Ultimately, it may well not be the economists that define the future shape of our world but public reaction to these shaping events.

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References
[1] J. Reed, GM future in doubt after $31bn loss, FT.com, Feb. 2009.
[2] R. Scott, Automaker bankruptcies would cost up to 3.3 million U.S. jobs, Economic Policy Institute, Dec. 2008.
[3] N. Roubini, Roubini Interview On The Severe Global Recession And The Risks Of A Financial Crisis In Emerging Europe, RGE Monitor, Feb. 2009.
[4] A. Evans-Pritchard, European banks’ toxic debts risk overwhelming EU governments – Telegraph, Telegraph.co.uk, Feb. 2009.
[5] A. Aslund, Baltic Protests and Financial Meltdowns, Peterson Institute, Feb. 2009.
[6] S. Wagstal, Analysis – Variable vulnerability, FT.com, Feb. 2009.

Tags: economic recession, financial crisis, meltdown, protectionism, recession, scenarios, social unrest

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