Grexit and Social Contagion

Two views have appeared in recent days regarding the ramifications of ‘Grexit’ or Greece’s exit from the Euro Zone. The picture painted by Daniel Keleman in Foreign AffairsEurope’s New Normal – is relatively upbeat. The other, Martin Wolf in today’s Financial TimesA Permanent Precedent is far less optimistic.

I side with Wolf.

Most importantly, my position is that the Grexit will be the final straw that will set the pendulum of social contagion in motion. By ‘the pendulum’ I am referring to the way we make decisions and see the world. The pendulum is illustrated below:


For a long time, especially in the business world, we have seen the future through the eyes of Adam Smith (Adam Smith died in 1790 but dead thinkers can tell us a lot about the times that we are now in and we should should listen intently to them). Basically, Adam Smith believed in the ‘invisible hand’ of natural harmony and our ability to resolve differences. We have been living in this thought world for a long time (and certainly since the fall of the Berlin Wall) and it underpins the aspirations of the ‘oneness’ of economic globalisation.  It also underpins the way that we think about business strategy. But there is another way of seeing the world and we must listen to the words of Thomas Hobbes (1588 – 1679) who warns us that the life of man without the rule of authority (and we can say here ‘legitimate authority’) is ‘solitary, poor, nasty, brutish, and short’. What this all means is that the pendulum can swing to a world where it’s every human being for him/herself – the opposite of a globalised world on ‘oneness’.

And this is the problem of the ‘Grexit’, it could be the final straw to start the pendulum swinging.

The task for business leaders is to look closely at markets and think which way the pendulum could swing after ‘Grexit’ in each market.

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