Current system is unsustainable
We hear on an almost daily basis of companies bemoaning the current state of the country’s economy and the fall of, or collapse of, profits sales etc.
This is a complaint heard from every developed economy in the world.
There has soon to be a resetting of the mindsets of the people in charge of national economies and of the managers of businesses. The fundamental bases of nature and mathematics cannot be denied, or ignored, forever.
It is a proven truth that growth cannot, and will not continue, forever. Eventually there will be a collapse of the entity.
This entity may be a population – locust populations can grow exponentially, consume all the available food and collapse.
Industries, such as fishing, have experienced rapid growth, fished out the resources and collapsed. An unfortunate corollary of this collapse is the collapse in the fish population.
Nations and businesses, along with their populations and shareholders, in today’s economy see any year-on-year decline, or reversal, in GDP or profits or sales as a failure. They then rush to borrow money to invest in bigger plant, machinery etc. with higher output to produce more to sell at a lower price and so raise sales and profits.
These profits are demanded by the shareholders and they are pursued with no wider long-term planning as to the effects on the planet or its inhabitants.
Nations and businesses make no provision for possible reversals in their fortunes believing that any reversal will be short lived and will be manageable by borrowing more or reducing the workforce.
This is unsustainable.
Every week we hear of companies in trouble and the information emerges that they have either stopped paying into their pension funds or withdrawn money from those funds to shore up their failing businesses. Eg. Carillion BHS.
If the business wasn’t failing in the first place the managers would have had no need to take this money which morally belongs to the workforce. Nations and businesses should begin to plan for reductions in GDP and profits and behave accordingly.
In the days before every business needing to be nationwide or international in presence smaller family run business had a prudent approach to their businesses. They did not pay themselves or their staff ridiculously inflated salaries and, more importantly, they put a reasonable proportion of their profits into reserves which could be accessed in the event of a downturn in business or a requirement for capital expenditure; plant, machinery, equipment etc.
They did not borrow to do this. Borrowing incurs interest charges and other costs, increases liabilities and puts pressure on the existing and future business returns. Monies taken from reserves do not incur any of these negative pressures.
Nations and businesses have to begin thinking and planning longer term and include in that thinking prudent attitudes, a willingness to accept recessions and downturns with the necessary planning for them and begin to make financial provisions by building reserves to allow a successful weathering of these events.
The attitudes of entitlement engendered in all levels of society need to change.
We need to develop and nurture a more sustainable attitude towards our society, other societies and our biosphere which is not able to provide indefinitely.
Mike Tyson, Wellington
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