Russ Chrusciel – Boursing Around
Published at forbes.com Aug. 31 2011 – 10:39 am
Here we are once again at the end of August, which means two things – summer as we know it is about over, and yet another school year is getting underway. When I put two of my daughters on the school bus this morning, I couldn’t help but think back to my own elementary school days. For most of us, elementary school is nothing but a fond and distant memory, but I think many of us would be well served to reflect back on the lessons we learned back in the day. If you’ve ever read Robert Fulghum’s classic book “All I Really Need to Know I Learned in Kindergarten”, you know what I mean. Jumping from the kindergarten classroom to global markets might seem like a quantum leap, but stick with me here. Given all the recent tumult across the globe in the past month, I think we could all do ourselves a favor if we applied some good old-fashioned kindergarten lessons to the worldwide financial landscape.
Lesson 1: Share Everything
Sounds easy enough, right? A good citizen shares with others and does so happily. But a simple glance at current global markets demonstrates that this is easier said than done. For example, if you’re Greece, you probably want the rest of the European Union to share your country’s debt burden and relax the terms on your debt instruments so your economy can recover. However, if you’re a fellow European Union member in a much stronger financial position, such as Germany, how do you appropriately share Greece’s current predicament? In an ideal world, any country could find that perfect balance between lending aid to struggling nations, while protecting and furthering their own interests. But this is the real world….and we all know that balance is rarely achieved. Whether your primary allegiance is to a company, country, region or other marketplace, at some point you will be asked to share or sacrifice for the (hopefully) economic betterment of the group. In this respect, I hope that U.S. leadership finds tax rates that both enable Americans to share the current expense of running our country and also enable us to create incentives for future economic growth.
Lesson 2: Clean Up Your Own Mess
The older you get, the more you realize that you need to take responsibility for your own actions and clean up your own mess. There are plenty of messes in our world today—and they’re a lot more complicated than the broken crayons and spilled glue of elementary school! Many leading governments like the U.S., China and Germany will intentionally intervene in these “messes” in hopes of improving financial conditions and spurring economic expansion. Think about 2008, when the U.S. government chose to bail out some major banks and manufacturers after these firms teetered on the brink of bankruptcy. On a human level, I can understand this. I’m all for improving the global economy, but how much SHOULD governments intervene in their respective economies in the months ahead? When it comes down to it, sometimes companies (and countries for that matter), need to figure things out on their own without a safety net. For better or worse, they need to deal with the consequences of their actions. They need to clean up their own mess.
Lesson 3: Play Fair
Remember how angry you’d get in your primary years when someone didn’t play fair? I’ll bet you can still remember the name of the bully who didn’t follow the rules – upsetting the delicate system of checks and balances that exists on every school playground. What does it mean to play fair in today’s economic and political environment? I’d argue that the U.S. Congress certainly didn’t play very fairly with the American people during the whole debacle of raising the U.S. debt limit. If a person wonders whether or not her guaranteed Social Security check is going to be paid out, then that’s a problem. Moving the point in another direction, is it fair for a country’s financial stewards (notably China, Switzerland, and Japan in recent months) to proactively weaken their country’s currency across the global marketplace – therefore making their exports cheaper to the rest of the world? Is this type of fiscal policy indeed fair behavior compared to other countries who do not proactively engage in this type of market activity? And how fair will it be to business owners if a country like Germany implements a tax on all its market transactions? I’ll suggest that this type of legislation will put selected companies and countries at a significant disadvantage going forward.
So there you have it – three good Kindergarten concepts. Yet laying these foundational tenets into today’s financial world is tricky, depending on who you are and what you seek to achieve in the marketplace. Nevertheless, the simple lesson here is to apply common sense to our financial world as best we can, respecting the rights of others while fairly seeking profits for ourselves.
In Fulghum’s words, “When you go out into the world, watch out for traffic, hold hands, and stick together”. As counterintuitive as it might seem for those of us in the financial markets, doing so will make the global landscape a much better place for us to conduct commerce.