Can money run out? Why we need to re:think world finances

By | June 10, 2013

Courtesy of Yale BooksStephen King – the economist thriller of HSBC, the bank, rather than the thriller writer – has caused quite a stir.  His new book When the Money Runs Out looks at the failures of Western economic policies of the last ten years and warns that this failure has led to a collapse of trust, which goes beyond financial services.

This loss of trust was a theme at a dinner I recently hosted with Tony Reeves, to ask businesses how we should celebrate our 50th anniversary.  John Huddleston from the CBI stressed the importance of trust in business today – and was in many ways confirming what Stephen King is saying – and that there is a major cost to businesses and the economy when trust is broken.

Hamish McCrae of the Independent says of Stephen King’s book, ‘He shows how we assumed the good times would continue forever, and how policy-makers made matters worse. He notes how their failure has led to a collapse of trust not only in financial services, but in economic policy. Politicians in the West have promised services they cannot deliver. King argues that unless we learn from the past, the West is doomed to a long period of very low growth and rising mistrust. Globalisation goes into reverse.’

However, Ryan Bourne, Head of Economic Research at CPS says that the book is perhaps not as doom-and-gloom as the title suggests, ‘Yet it is a warning. The central thesis suggests that the premise from which we have based all of our projections (and our ability to keep funding entitlements), that we will return to fairly robust trend growth, may well prove to be false. If so, we won’t be able to fulfil the promises we have made to ourselves.’

All of this has great resonance in terms of what Bradford University School of Management is looking at with the circular economy.

The School has recently launched our Innovation, Enterprise and Circular Economy MBA.  Created in partnership with the Ellen McArthur Foundation, the first cohort of 30 business participants – from companies such as Ricoh, BT, CISCO, National Grid, IfixIT and B&Q – has just concluded.

The course is designed to help businesses change their perspectives.  Today’s economic conditions, characterised by increased price volatility and scarcity on energy and resources fronts, means we have to do business differently.  We have designed this circular economy MBA to give the next generation of leaders a first-mover advantage, by tackling subjects including regenerative product design, new business models, reverse logistics and enabling communication technologies

Ellen MacArthur set up her foundation in 2010. When sailing round the world, she thought about the scarcity of the world’s resources – and related that to how she was using resources differently and carefully on her yacht, because she had no choice.  The foundation’s challenge is to help our society find new ways of doing business that looks after scarce resources better.  But it is not about ‘sustainability’.

She says that a circular economy ‘seeks to rebuild capital, whether this is financial, manufactured, human, social or natural. This ensures enhanced flows of goods and services. The system diagram illustrates the continuous flow of technical and biological materials through the ‘value circle.’

courtesy of the Ellen MacArthur Foundation

courtesy of the Ellen MacArthur Foundation

And it is this kind of new thinking and approach that we need for Western financial services and our economies.

Amazon’s summary of Stephen King’s sums up what he thinks we need to learn and do, “The Western world has experienced extraordinary economic progress throughout the last six decades, a prosperous period so extended that continuous economic growth has come to seem normal. But such an era of continuously rising living standards is an historical anomaly and the current stagnation of Western economies threatens to reach crisis proportions in the not-so-distant future.

“It’s not just the end of an age of affluence. We have made promises to ourselves that are only achievable through ongoing economic expansion. The future benefits we expect – pensions, healthcare, and social security, for example – may be larger than tomorrow’s resources. And if we reach that point, which promises will be broken and who will lose out? The lessons of history offer compelling evidence that political and social upheaval are often born of economic stagnation.”

King says we have to take painful but necessary steps towards a stable and just economy.   What are these steps and have we yet learned the lessons of our past?  Is he right in his thinking and could we run out of money?  (for King’s own answer to this last question, click on the video of his interview!)

About Jon Reast

Jon  is a Professor in Marketing at Bradford School of Management, Research Cluster Head for Marketing and Co-Editor of the Corporate Social Responsibility Section of Journal of Business Ethics. Jon primarily teaches Marketing Strategy, Relationship Marketing and Marketing Communications and specializes in research relating to marketing ethics, corporate social responsibility (CSR) and relationship marketing. Professor Reast has professional marketing experience in the healthcare, toiletries, food and beverage sectors, working for companies such as Reckitt & Colman and Kraft General Foods, and has consulted widely. A graduate of Leeds University (BA Econ) and Leicester University (MBA), with a PhD from Leeds University. His research work has previously been published in journals such as Journal of Business Ethics, Psychology and Marketing, Long Range Planning, Journal of Marketing Management, Industrial Marketing Management, Journal of Advertising Research and International Journal of Advertising.

Specialties

+        Marketing ethics
+        Corporate Social Responsibility (CSR)
+        Relationship marketing