Can we really take another hit – Global Financial crisis 2.0

The honourable Alan Greenspan testifies before...

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What is the difference between the state of the world in 2008 and how we are doing here in 2011. Well if one look at the global assets they fell by 16 trillion USD in 2008 according to McKinsey lead by the US, Japan and China who almost lost 10 trillion USD just the between the three (that is 10,000,000,000,000 USD).

If you look at another key indicator for economic performance that both affect organisation and countries one could look at the total Equity compared to GDP. Out of 112 sampled countries in 2007-08 every single one lost value. With countries in the Eurozone as the worst places to be it is no wonder that everyone is looking here to find some kind of political will and comprehension of the enormity of the crisis that have hit their economies. All of the countries of Greece, Ireland, Austria, Russia, and Iceland lost more than 64% of their equity value in this period. One could argue that there was an unholy alliance between business and government policies in these countries, which contributed to their demise but the fact is that it happened and now we have to deal with the consequences.

In 2009-10 the markets did regain some of their momentum and there were signs that some of the structural issues which needed to be addressed did get at least some attention. But these things take time to work and even to this date no one really have a real overview of what went structural wrong in 2007-08. The economist are at the moment treating symptoms of the decease more than they are treating the sickness it self. Not because they did not want to prescribe a cure it is just so that the financial and economic instruments available to us do not have the affect that they used to. Neither Marx, Keynes, Hayek or any of their followers can prescribe a treatment that will cure the decease and put the world back on its tracks. While we might like whish that some really brainy economist comes up with an answers to the problems we face it is more likely that they will not.

So standing on the edge of economic collapse the last thing we need is another crisis but that is exactly what we are about to face.  And we are not ready at all to meet the challenge.

First of all the world do not have the financial strength that it had priori to crisis 1.0. Not least is the banking industry not ready to take another hit and it is more likely that we will see numerous bank and financial institutions disappear in the coming years. But worse is that people pensions will be affected on a scale we have not seen before. In several countries the government were able to help pensioners from loosing their life saving or at least they had some kind of package that meant they would be able to retire with some finds to live of. This option is no longer available because the governments do not have the money that they used to and if they want to help again they will have to borrow money at a much higher interest rate. Just look at the downgrade we have seen done by S&P and how they have create chock waves through the political systems in the US and Japan.

Second issue arise because the dynamics of the crisis have changed. Before we could put the blame on the financial institutions, on greed and even on numerous fraudsters who were exposed as there schemes no longer worked. Now the crisis exists as much in the realm of politics as it affects businesses ability to operate and evolve. In the first crisis it was easy to see what to do or at least what we believed we could do, things like bank reform, ethics guidelines, systems of control etc. but now the picture is much more blurred. We have had several rescue packages since 2008 that have been designed to help one industry or another, but while the money used in the first instance were relative easy to get hold of it is more likely that future funding will come as hard money. The funding can be either borrowed at high interest rates or be fund by cutting national budgets and or in combination with increased tax. This will certainly create political instability and governments will come under intense pressure as we have seen in places like Spain, Greece, Italy and lately Israel. The question is if governments will try the short-term “easy” way out and print money instead of dealing with the issues that almost certainly will cost them their political power.

The fact remains that the state of the world is not the same as in 2008 and that neither markets nor politicians are ready for another global financial crisis.

A watchdog, yes, but still one with a mission

Internationally recognized symbol.

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Greenpeace claim that the Japanese nuclear disaster should be upgraded to a category 7 nuclear accident are meet by skepticism from several corners. Of cause is the Japanese government against the upgrade as they have a clear interest in keeping the disaster as small as possible and not causing wide spread panic and loss in confidence in the public. The nuclear energy provider (Tokyo Electric Power) is not interested in upgrading the accident and by that damaging their reputation even further. But what about Greenpeace why should they interested in an upgrade? What would motivate a watchdog to yell wolf?

I will not go into a discussion about if the number should be 5, 6 or 7, on the level of disaster but it is interesting form a communicative point of view that Greenpeace have a clear interest in upgrading the disaster. Well at least in my mind…

Greenpeace claims that because they are not being paid by the nuclear industry, they are to be considered an independent and trustworthy source. But to what extend can this claim really be true?

First of all, Greenpeace live of people donating money to the organization because they believe that the organization is a true and trustworthy speaker for the rights for a clean environment. So by being perceived as a powerful speaker in case of the Fukushima plant they will fit in to this role very neatly gaining legitimacy with their donors. And by that reassuring that the money the donors have invested is going to a cause they think is right.

Second. Greenpeace need to be visible as it is competing with other Environmental NGOs on the ‘goodness’ market, and as a leading brand they will need to stand out and make sure that people know that they are present and alert. This ensures that there is continuity in the Greenpeace communication and claim as a legitimate NGO in this area.  

Third reason could be that Greenpeace have already issues with some of the Japanese around whaling and there general reputation in Japan is not very good to say the least. Basically they are being perceived as picking on the little and hard working fisherman that is only trying to provide for his family. So this is an opportunity for the organization to change this image and try to communicate that they are on the side of the ‘common’ people against the big corporations and governments lies. At the same time the communication fits very well in with the general discourse in Europe and the US that Greenpeace will communicate the truth about the environmental impact of big industries, especially nuclear ones.       

So basically there is a clear incentive for Greenpeace to escalating an already existing catastrophic incident and using this disaster fits very well with the image that Greenpeace tries to create of itself towards the general public. I do not know what the truth is or what it even matters that it’s is a category 5,6 or 7. But what I do know is that when Greenpeace claims that they can be trusted based on that they are not being paid off by the energy sector, it is not the whole truth about the organizations communication.

A.P. Moller-Maersk and strategic philantrophy

A. P. Moller-Maersk Group

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The Danish oil, shipping, airline and retail giant A.P. Moller-Maersk (APM) donates free transportation to victims of the earthquake in Japan. It is not the first time that APM steps up and helps out using its core capabilities in line with strategic CSR.

Senior Consultant in APMs CSR department Jens Munch Lund-Nielsen was quoted by Reuters to say that the offer of free transport is sent out via diplomatic channels from the Danish Embassy in Japan. The beneficiaries are governments and organizations.

“We have allocated one million U.S. dollars for relief ship transport. So far we have received response from the UN and an Eastern European country that will send emergency relief. In this situation we can do what we do best” says Jens Munch Lund-Nielsen.

The donation follows A.P. Moller-Maersk same line as the flood disaster in Pakistan last year and the earthquake in Haiti, where it also sailed with free emergency assistance. At the same time the Danish Red Cross can look forward to a nice cash donation from APM and the many thousands of employees in more than 130 countries.

“We have started a collection among the staff through the Danish Red Cross. It runs until 15 April. The sum of this collection among the staff is being doubled up by the company” says Jens Munch Lund-Nielsen.

APM have for several years have been lacking on the CSR front but one of the things that the company always have done well it is to use it resources and knowledge as strategic philanthropy.

With the company ideally situated as the biggest freight forwarder in the world it can use it ships and terminals to help at a fraction of the expense that other companies would have to pay for a similar service. While APM have plenty of other issues that it have to deal with around the world especially related to Human and Labour rights this is one instance were the company really does things well.