Five Economic Opportunities to Help Beat a World Recession
Byline: Matthew Lynn
There is no longer any dispute that the world is going into a recession. The only question is how long and how deep: 1970s-style or 1930s? But just because business is bad doesnt mean it stops completely.
Just as plants renew themselves in a frosty winter, so the economy often does the same during a prolonged contraction.
During the 1930s, new industries such as consumer electronics and plastics were created. In the turbulent mid-1970s, the personal-computer industry was born, as companies such as Microsoft Corp. and Apple Inc. were founded.
The economy didnt look much good then, either, with soaring oil prices, rampant inflation and tumbling stock markets. That didnt stop a young Bill Gates or Steve Jobs from setting up new businesses. No doubt there are now plenty of young entrepreneurs with bright ideas and loads of determination ready to build the corporate giants of the 2020s and 2030s.
As Tom Nicholas, an associate professor at Harvard Business School, said in the latest issue of the McKinsey Quarterly, the 1930s became a period of intense innovation and experimentation. "For companies with cash and ideas, history shows that downturns can provide enormous strategic opportunities," he said.
The question is where those market openings will be in this recession for managers, entrepreneurs or investors.
Here are five to think about.
First, local manufacturing. When we are worrying about climate change, does it make sense for goods to be transported around the world, with raw materials dug up in Australia, taken to Chinese factories, then shipped as finished products to Europe or the U. S.? Or how about food? Cant we develop the technology to grow vegetables in the U.K. or Germany during the winter rather than flying them in from Africa?
Entrepreneurs should find ways to re-engineer globalization, so we can still get a vast range of goods at low prices, and yet produce them locally.
The banking system that has developed over the past two decades looks broken beyond repair. That doesnt mean that people dont want to save and borrow money. We need some way of transferring cash safely from people and countries that have too much of it, to people who have too little.
There used to be a far greater diversity of financial intermediaries from the mutual building societies in the U.K. to credit unions, to savings-and-loan associations and cooperatives. …