With
the present tenor of 'Inclusive Capitalism', the previous weblog
questioned as to how the thought leaders of capitalism would be able
to re-orientate the western (and global) capitalist structure to
appease the mass throng of an increasingly agitated public.
From
the demonstrations seen in Rio de Janeiro using the Football World
Cup as a publicity platform, to what may be a new
'passive-aggressive' attitudinal stance by many affected as
'non-economic' beings elsewhere (especially the young), the need for
a re-balancing of economic fortunes has been well understood by
leading economic actors.
That
change appears to happening, albeit slowly, a new 'flip-side' to
capitalism which promises much.
Thus
the system, though ostensibly of fixed philosophical shape with the
economic circularity of money at its heart, might be now considered a
Mobius System, whereby - as per Euclidean theory – the same
directional looped route may be travelled, yet with the in-built
ability to swap onto an obverse path.
End
of One Era -
In
the West and Triad region, with the previous era template between
1948 and 2008 effectively exhausted, perhaps the most important
action - indeed arguably the only option open - was the creation of
QE, able to notionally “pump” but in actuality 'trickle' new
inflationary liquidity into the US, UK, Japan and an awaiting Europe,
to counter-act the necessary post-crisis deflation required to
compete upon a now much revised global stage.
Whilst
such liquidity was indeed pumped into Wall St, The City and
Marunouchi / Otemachi - with a planned long-cycle reaction of 'demand
pull' underpinning stock, bond and derivatives purchasing (reaching
across safe and now even 'junk' instruments), the reality as seen is
that the process of feeding broad portions of that liquidity into the
real economy is an onerous and time consuming effort.
The
financial crash effectively re-configured the financial and
operational fundamentals of western business: whether from the
balance sheet perspective with high unserviceable debt, a cash-flow
basis requiring dramatic overhead reduction, likewise necessary given
retracted banking facilities, the reality of postponed client
payments (this creating a 'prompt payment discount' effort) and so a
“down the line” effect throughout all supply chains.
In
essence the after-effects of 2008 could be likened to that of a
commercial fitness test for Western and Triad businesses.
That
slow process – six years thus far – is very painful for all
people directly effected, and people wish to become economically
active once again; yet rationality and emotionality must be
distinctly separated if new green shoots are to be sustainable.
Western
banks have been publicly lambasted by politicians, business
commentators and the public for their apparent lackadaisical efforts
to channel nationally budgeted 'Lending For Business' monies into the
real world.
But
to use an agricultural euphemism, if such precious new finance were
simply “broadcast into the air” without meaningful commercial
assessment of the specific entities involved, it would be a real
economic travesty which would raise the spectre of a new crisis in
latter years.
Instead
the funds must be necessarily “seed drilled' into fertile soil”,
with what is effectively new seed money (for all enterprise sizes)
targeted at specific businesses which themselves are best
operationally attuned to their changed environment or are able to
grasp new market opportunities in today's much altered commercial
landscape.
Hence, here and now the
process of due diligence is more critical and so more detailed than
ever before, and given the scale of commercial change at a level
never see before. Thus the lengthy time period endured stems from an
unfortunate but necessary rehabilitation phase
The same is true for
the logical convincing of private equity, sovereign wealth funds,
pension and insurance institutional funds, dedicated regional /
sector or them fund managers and now even the average person given
regulatory moves to improve self-directed financial management.
Today whether
fixed-income lender or equity stake-holder, there is a necessary
fundamental re-assessment of those contemporary commercial engines
which are set to create new value.
In effect, the 2008 to
date period could be seen as a parallel to the beginnings of modern
capitalism, but with a new egalitarian promise.
Back to the Beginning -
Throughout human
history, for good or ill, it seems that the profit motive of gain has
been the prime central underlying philosophy. For the most part, the
process of civilization thankfully inducing humanity to transform its
inter-relationships from the simplistic territorial 'spoils of war'
of barbarians, to the somewhat awkward and generally inefficient
practice of gifting and bartering to the establishment of ever more
meaningful and trusted transactional currencies from about the 6th
century BC onward, until today.
The true landmark
however came with the instigation of the joint stock-holding company
format.
Financial and general
historians will no doubt continually debate the finite origins of the
concept. Whether it effectively stems from the “Société
des Moulins de Bazacle”granary windmills in mid-13th
century France, the creation of the “The Company of Merchant
Adventurers to New Lands” in England in 1553, Russia's “Muscovy
Company” of 1555, England's “East India Company” chartered on
the very eve of 1601, or the more commonly associated effort of “The
Dutch East India Company” in 1602 as a central pillar of the
simultaneously established Amsterdam Stock Exchange in The
Netherlands.
[NB
the latter seen by most as the foetus of today's global capital
markets mechanism, which though viewed by some as in contrast to the
edicts of Middle-Eastern 'Sharia' and Asian 'Participatory' Finance,
is in actuality very similar, given the sense of mutual ownership and
shared effort and responsibility; so negating the abhorrence of
“usury money-lending”].
As
colonial interests geographically widened so did the very idiom of
created, sold and bought shares of a specific company as
opportunities apparently arose. In 1606 “The Plymouth Company”
was formed, succeeded by “The Virginia Company of London” both of
which which sought to settle and reap from new North American
ventures, whilst its own associated long excursions south to
Caribbean Bermuda became formalised into “The Somers Isles
Company”.
Widening
the Net... -
Across
the core commercial districts of Europe, the Americas and Singapore
and Hong Kong, as commercialism appeared to grow exponentially thanks
to agricultural imports, innovative industrial applications and
because of both slave and cheap labour, so did of course the
availability and choice of stock-holding possibilities.
This
so for the fortunate (tho' periodically unfortunate) aristocratic
elite, a finite upper class and a broader 'upper-middle', as
inherited feudal and agricultural wealth alongside newer mercantile
wealth was directed to promising commercial ventures.
… With
a Deeper Trawl -
The
very nature of an ever expanding regional stock market dependent upon
proof of concept via attractive company dividend payments or capital
growth (or indeed both) to an ever broader uptake audience, the
expanding range of commercial “projections” targeted at an ever
expanding audience who themselves saw the advantages of partial
company ownership.
The
model was set and has been maintained even through the severe upsets
of early “Tulipmania” and the “South Sea Bubble”. Though in
fact many lesser known smaller contractions and collapses having
greater consequential ripple-effects as the mass middle-classes
became ever more entwined. When the life-time savings of 'old maiden
aunts' and even whole families were wiped-out the hollowness of such
investors' intrinsic remote trust in others, whether family
associates or 'professional' advisors, became all too apparent as
their middlemens' own remoteness from the true forces within market
dynamics was itself experienced.
Nevertheless,
even with such horror stories (which exist to this day), as new
wealth was generated and accumulated - assisted by both international
trade and economy-boosting / national debt-management
'money-printing' – so new opportunities appeared in an ever more
complex industrial and consumer society. It was that very complexity,
the increasingly separated and additionally created portions of the
overall systemic value-chain, serving ever greater volumes of goods
and services, which drove value creation.
To
the Peak of the Cycle... -
Returning
to stock-market realities, as seen investor interests and so
share-prices eventually driven beyond sound fundamentals and 'fair
value' by the interests of the many, private and professional.
Ranging from the entrepreneurial moguls who over-hype their
activities in search of investor support (and often personal exits)
to desires of the partly informed average person seeking not to
become left behind during the pronounced phase of economic expansion,
to eventually the cliché of “dead-set” stock tips from the 'in
the know' taxi-driver.
...And
Renewed Beginnings -
Thus
through both rational value-seeking and (ir)rational
growth-storytelling aswell as long cycles of fair value from economic
growth, plus the inevitable value gains to be had from “irrational
exuberance”, the joint-stock company (via exchange) proffers much
to the informed and ironically even uninformed (to a point). And with
modern capitalism's ever broadened activity realms and deepened
global base, thanks to real and virtual technology and humanities'
demands for comfort and convenience has itself grown ever more
convincing; even if an imperfect economic model.
Whereas
the EM regions of old had to be settled, often migrant populated and
wearily physically exploited, in the 20th
and 21st
centuries the foundations of new EM regions are fundamentally
established, with their own homeland bourses and increasingly active
participation by western multinationals; today seen as the spiritual
(and sometimes commercially derived) successors of the initial crop
of truly publicly orientated stock-holder firms.
Importantly,
whilst stock-markets convey a most vivid image of capitalism and
associated wealth via the media's portrayal (from everyday news
reports to 'The Wolf of Wall Street' et al), the very same
environment obviously serves; even with periodic contractionary
dis-service. Most he systemically critical plethora of institutional
pension and insurance firms, so as to provide for the future of
people's financial needs individually and en mass by way of present
liabilities.
But
perhaps the more historically meaningful cornerstone – indeed
foundation - of capitalism is the endemic notion of private property;
that dream arguably more realisable for younger EM populations than
for many today in the West.
The
Automotive Sector -
As
seen, the joint-stock format was well entrenched by the beginning of
the automotive age in the late 19th
century and early 20th
century. Thus many of the early associated new enterprises were
spawned from either the direct selling of inaugural private shares in
all new start-ups, or by the offering part of a new venture
free-float (private and public) from well established industrial
firms.
[NB
whether they be coach-builders, railway vehicle makers, bicycle
and/or motorcycle manufacturing companies or indeed general
industrial firms with internal capabilities to enter the new
automotive sphere in cars and trucks]
In
most instances, as with likes of Ford, the Dodge Brothers, Nash (to a
degree), Buick, Durant and Chrysler in the USA private investors (and
often investment banks themselves) sought to back specific
entrepreneur's who had proffered realisable product and business
plans; especially those who had learned along the way in those early
days.
Though,
as ever, where there was a flood of new money seeking-out promised
returns, there was also chicanery, especially toward the enthusiastic
but less knowledgeable.
Whether
from founders themselves with little more than 'snake oil'
propositions or from contriving and conspiratorial board members
seeking to either oust the founder or undertake a 'cut and run'
through misappropriation of investor's monies. Or indeed consecutive
disingenuous behaviour by by those who saw the ongoing possibility of
'sucking dry' monies via successive start-ups and intentional
collapses: the accrual of funding...implausibly incurred
expenses...operational run-down and ultimately 'fire-sale'
liquidation...with for the most ardent, the possibility of
re-purchasing the bust firm's assets at heavy discount to re-run the
entire money-grabbing and money-shifting ploy all over again with a
new founder, a new set of enthusiastic investors, a new set (or
indeed previous set) of employees.
The
Era of Auto-Investment Stability -
By
the 1930s there had been a great shake-out of the once nascent and
volatile automotive sector, both in North America and Europe. The era
of mass mobility had begun and the stratification of the general
market had become increasingly marked, between a basic functional
device (Model T) and a luxury status symbol (Hispano-Suiza) with a
myriad of product levels between.
Post
WW2 businesses improved yet more with the likes of “Whiz Kid”
executives applying considered knowledge, so serving their customers
demands whilst operating more efficiently, and generating new profit
margin improving offerings via specifically applied technical and
specification progress to gain model-line differentiation upon a
'next model year' basis, whilst simultaneously driving volumes and
scale efficiencies through consumer credit and optimised common-part
engineering dictums.
This
golden age spanning post-depression 1934 to 1973 unsurprisingly
served automotive stock-holders very well indeed, with the purchase
of additional stock at depressed prices in 1940/41 all the way
through to the Middle-East induced Oil Crisis, which itself actually
spurred well aligned European and Japanese auto-stocks.
Social
and Competitive Disruptions -
For
various western auto-producers, and their auto-stock holders, the
1970s was value destructive. A a combination of the macro-effects of
the oil shock upon regional economies, ever growing inflation vis a
vis productivity declines generated 'stagflation', with the reduction
of real earnings for many employees (especially in old industrial
sectors) creating unrest and so the rise of union disruption.
As
seen by Chrysler's collapse and Chapter 11 re-emergence, and by
British Leyland's demise, dissection and divestment, the late 1970s
and early 1980s were troublesome times for the old guard
auto-players, their previous thunder stolen by the market relevance
of ever improved Japanese vehicles still buoyed by a strengthened but
still relatively weak Yen.
As
Toyota retaught GM how to build some of its own re-skinned and
re-badged models and generally improved cars at the Californian
NUMMI plant, and Honda did likewise for its 'alliance-partner' Rover
at Swindon in S.W. England, those auto-investors who had recognised
Japan's constantly improving potential did well thanks to the ongoing
climb in both domestic and western market sales, the slow
strengthening of the Yen and the strong annual land asset-base
re-valuations in Japan.
Into
Another Boom -
The mid 1980s once
again saw new economic traction in the west as the overt 1970s
Keynesian governmental spending (criticised as “voodoo economics”)
was reigned-in under the guise of 'Reaganomics' in the USA and
'Thatcherism' in the UK. Whatever the nomenclature, the pro-markets
stance enabled by financial deregulation such as the 'Big Bang' in
London, the ongoing de-nationalisation of industry and conversion of
building societies into fully-fledged banks prompted a new investment
and economic boom, most profoundly experienced in the price surge of
all classes of property.
The automotive icon of
the age was the BMW 3-series (E30), the vehicle which essentially
made BMW the company it is today. It was viewed as the embodiment of
“European chic” by American East Coast Manhattenites and
Bostonians, the intentional intellectual opposite in size, weight and
quality to Detroit's offerings. That highly influential 'Ivy League'
favouritism spread demand westwards and eastwards across the Atlantic
into the UK and Europe, and the little BMW – not Porsche (as
forever quoted) – actually defined that period and long after by
the size of its adoption. Whilst Europe's own parallel epicentre
trend came with the second generation VW Golf GTI (1G/A2).
The 1990-91 Gulf War
stifled overall growth, with what is in retrospect an over-reaction
upon the broad economy, but did manage to calm both stock and
property speculation. However by 1994 western economies had regained
strength and with it a further relaxation of credit availability.
The undoubted
reflective icon of this period was aimed at the American masses, with
broad demand for the pick-up truck based SUV, seen with the Ford
Explorer (and later bigger Expedition sibling) and Chevrolet Tahoe
and (9th generation Suburban).
In the land where
historically for the 'Average Joe' “Bigger is Better” since it is
seen as a mark of social success, along with the viewed safety
perceptions of SUVs, the 1990s and early/mid 2000s were an undoubted
boom period for Detroit, even through 9/11...right up to 2008.
Consequences of Financial
Avarice -
However,
as has been felt so harshly, the American (and latter European)
public and indeed business had been riding an ever inflating
self-serving credit bubble, one which itself allowed for overt
financial machinations and scandals such as ENRON. But it was not
just bankers who were “dancing whilst the music was playing”.
Whilst
many were culpable of creating and disseminating ever more "toxic"
CDOs based upon associated phantom mortgages, it should be noted that
the seemingly never-ending party also amongst the 'Average Joe' grew
the popularity of property equity withdrawals, so as to buy ever more
profligate fashion and leisure orientated consumer goods, including
of course the car.
Onward Again, From Here to Eternity -
The
obvious irony being that presently, whilst EM countries themselves go
through the economic spasms of internal reform so as to regain lost
competitive regionally and globally, even after the melt-down of 2008
and slow re-build to date, the USA retains its power if not
strangle-hold) on capitalism.
If
Wall Street never sleeps, then capitalism never stops.
Presently
investment-auto-motives views the new renaissance of capitalism as
standing upon three apparent pillars:
1.
Re-Construction of the 'Old' Physical Economy
2.
Continued Construction of the Cyber Economy
3.
Merging of 1 and 2 within 'Augmented Reality'
The
former consists of those companies which though battle-scarred have
survived the after-effects of 2008. Of what ever size, multi-national
to national SME to one-man-band, these are enterprises which –
typically through conservative attitudes, business methods and much
pain - have been able to endure in core socio-economic B2B and B2C
sectors. In various cases able to seize the moment with efforts to
grow through the acquisition of weaker competitors.
The
latter is of course related to the advent of the net-connected,
cyber-age whereby the dual aspects of both increasing productive
connectivity through the growing 'internet of things' and personal
and group 'augmented reality' offers wholly new realms of enterprise
and investment opportunity; now being explored and tested by many in
the California's 'Silicon Valley', London's 'Silicon Roundabout' and
various other IT hubs around the world. It is recognised that much is
simply on-line behavioural alignment via ever more screen-based
enablers; such as the branded smartphone app which replaces the local
restaurant's junk-mail menu and the once required telephone call to
order delivered take-away food.
But
it is the promise of the ability to increasingly and seamlessly merge
these two physical and cyber-worlds through the 'internet of things'
which then provides for yet further advancement of what may be termed
neo-capitalism.
The
New “Merged World” -
Efforts
such as the recently availed autonomous 'Google Car' set the
direction and tone behind the efforts to establish neo-capitalism.
Such
innovation seeks to become far more than technology disruptors. Hence
the perceived psuedo-prophetic words from the likes of Bill Gates,
(the late) Steve Jobs, Jeff Bezos, Larry Page et al; individuals with access to so much money, the process of capitalism puts the power of socio-economic change directly into their hands.
This now well entrenched technocracy seeks to proffer major social and behavioral change. In the case of the Google Car adding to personal productivity levels and transport safety.
This now well entrenched technocracy seeks to proffer major social and behavioral change. In the case of the Google Car adding to personal productivity levels and transport safety.
The
consequential argument is that much of today's physical, man-made,
infrastructural environment will demand a massive scale of
re-modernisation; especially so in western lands which largely
originate from the late 19th and early 20th
centuries. The fundamentals of our immediate city-scape environment
will need cosmetically subtly but nonetheless powerful alteration so
as to itself “enable the e-enablers”. The world around us
substantially re-imagined and re-configured.
The
Take Away -
The
gold rush times of the 19th century saw hoards of people
chase the promise of the next big gold strike, but the real immediate
and long-lasting was gained from those individuals and joint-stock
companies which were able to sell the specifically required items to
the hoards of gold-panners and gold-miner, aswell as offering the
aligned commercial and respite services sought.
There
will undoubtedly be many more rich strikes within the still
burgeoning e-economy, amongst the plethora of 'modern-day miners' of
BitCoin extraction and elsewhere.
Yet
equally so, it looks to be those real-world re-alignment
opportunities that provide greater prospects.
Paradoxically
the original ancestors of today's joint stock shareholders had to
fund very risky but potentially lucrative ventures to far-flung
destinations. But today, the veritable hold of mankind over his ever
more self-created world and domain means that value prospecting and
achievement should be theoretically far more attainable, if one can
avoid the 'fool's gold'.
To
End -
The
promise of a Mobius-like 'Inclusive' Capitalism which maintains its
directed progress along an obverse path is compelling; exactly how it
pans out remains to be seen in future years.
But
what is equally compelling is the manner by which capitalism itself
is directed, and from a simple “macro-tech” overview of points
1,2 and 3, twenty-first century western (and global) "neo-capitalism” appears a truly powerful phoenix.
