Beating the drum on both sides is an old syndrome, as old as human existence and something that all managers must know. What constitutes this hideous phenomenon? It is best understood through a simple and short story. The story:-
The Company is organizing a convention for its sales and will be held in a few months. A senior manager is put in charge of printing the program and the folder. During the course of committee meetings, it is found out that he has not done anything about it. With two weeks to go, another manager is given the responsibility. He, too, doesn’t do it. With a week to go, the alarm bells ring. Another person is put is charge who reports that it is the festival season and most of the printers are busy. However, due to the pressing issue, one of the printer’s who regularly does the company’s printing work is willing to help out but the printer has to stop other jobs and his employees must work extra hours to complete this job on time. Accordingly, he will charge double the normal costs. Since, that was the only way out, the Management agrees. The pressure eases and the job is done on time. Two weeks after the convention, the bill arrives. The Management queries the high costs and refuses to settle. Now the pressure shifts.
When there was a pressing need to get the job done to prevent the precipitation of a problem, it had to be done at all costs - they beat the drum on one side. Now that the job is done, the pressure is gone. The value of having got it done on time under the pressing circumstances is no longer appreciated – appreciation evaporates into thin air. Now they query the costs of a job done well – they are beating the drum on the other side. Sounds familiar? Situations may change but the same thread can be found in different situations. There is no shame. Shame does not always work, especially when many people are involved.
People were angry at the executives who plundered wealth away into a sink hole and created the Wall Street meltdown. The world came to realize that “too big to fail” is a myth and some of the world’s biggest corporations will be falling down and many giant companies around the world will face colossal losses and millions of people will have to be laid off. Consumer spending would shrink and so would global trade in tandem with the contraction of GDPs of most of the countries. People understood the meaning of the meltdown at Wall Street and its ensuing ripple effects on the global economy. Rightly, experts called it a financial tsunami, the world has ever seen. The experts assessed the vicious effects of the downward spiral and pundits spelt the doom that would shadow the economies in developed and developing countries and how it would adversely affect the average family. The alarm bells rang. Something had to be done quickly. They beat the drum to quickly shore up these Wall Street companies to prevent their collapse. It was a pressing need of the hour to prevent the final trigger of a tsunami generated by collapsing giants that could crumble the world economy and paralyze it for decades to come.
All of this happened while Bush had his eyes glued on to Iraq – trying to topple Saddam and trying to “create a linchpin of democracy in the middle-east.” The world had never dealt with such a phenomenon before but in good time came the huge investments through the Obama administration. The inevitable collapse of giants had been averted. The prancing ripple effects died down. The economies of India and China are on the upward trend while the economies of most countries are on the mend to various extents. Recovery is in sight, at least there is a vibrant hope, excepting in countries where their economies were traumatized by their own leaders and myopic policies and by policies that run counter to wealth generation based on excellence in harnessing human capital and strategic use of tools and resources.
Of course the problem of reining in of executive pay at Wall Street companies remains. Executives are paid for performance that does not result in such problems. They are paid to solve-problems, not create them. They are paid to create wealth not destroy it. Embarrassment, remorse and shame did not work to rein in executive pay and multi-million dollar bonuses. The compensation philosophy did not change and possibly there is no change in Wall Street behavior that would alter practices in business and management pointing to the need of a spice dose of regulatory framework to prevent that kind of thorny financial eruption again, frightening as it was.
On hindsight, yes, the Wall Street meltdown relates to practices that resulted in the destruction of wealth. Giant corporations posted multi-billion dollar quarter losses. At the end of 2008, the world’s population of high net worth individuals (HNWIs) shrunk by about 15% while their wealth was shaved off by about 20% representing a whooping 6.4 trillion dollars. By 2013, the global financial wealth of HNWIs is expected to recover to US48.5 trillion, which signifies a state of recovery in the global economy.
Asian economies are not the epicenter of the crisis that led to so much destruction of wealth and perhaps the US might want to consider strategies to twin investments into countries with a strong legal system that was inherited from Britain and have not departed from it or have not signaled departure from the Commonwealth legal system or otherwise practice it intact in form and spirit such as India to help accelerate its own recovery. This is one economy with its large post-graduate pool of expertise, large middle income group and a very large domestic market led by liberal moves of an intellectual Prime Minister who believes both in democracy and freedom in economic activity as foundations and prime movers in driving vibrancy into the Indian economy. The Indian economy is a good store house of value in itself and for the dollar as the value of currency lies in the vibrancy of its economy and its growth and in the potential of empowering its young minds through education and research. India is increasing its funding of research in a wide range of fields including phytomedicine and biotechnologies.
At the same time, American companies need to spend its “mountain of cash” to help boost consumer confidence in the recovery phases of the economy that generates a sharp improvement. With that confidence there is hope of increases in global trade to turn around the balance sheets of shipping companies that are still posting huge losses. But, the silver lining has already appeared. Currently, it is just possible that the top 600 companies in the US have earned more than the amount invested by the Obama administration in the prevention of the inevitable collapse of giant corporations that would have triggered a free fall in the global economy and prevent an all out destruction of wealth on a global scale.
Just when the silver lining was emerging in an economic environment that is financially more stabilized, thanks to the huge investments made by the Obama administration, transformational change met with resistance from the Gang of Six. One in the gang wants to break Obama’s back which is an attempt to break the back bone of change. He forgot that this is people’s change, not a politician’s change and nobody actually succeeds in breaking the people’s back. All change does draw resistance and managing the resistance to change is an integral part of change management but that resistance would manifest through the Gang of Six was unthinkable. However, the real and more important issue is not this puny resistance that defies the aspirations of people and the desire of a new and more vibrant America that would spend more money in investing in developing people and in science and research to broaden its economy and create more jobs rather than let a big chunk of its wealth be gobbled up by pharmaceutical companies in exchange for toxic drugs. And that issue is about beating the drum on the other side.
That is obvious in the empirical findings from the grassroots by a much respected intellectual and economist – Paul Krugman whose many conversations reveal that “people who voted for Obama, yet dismiss the stimulus as a total waste of money.” Why are people now beating the drum on the other side?
Interestingly, people often beat the drum on both sides. Now the pressure of collapsing giants, financial storms, ripple effects of a global tsunami emanating from the Wall Street meltdown is released as the economies are mending to various extents and the silver lining is encouraging indeed simply because the downward spiral leading to the destruction of wealth has been halted. The process of creating wealth and building economies is on some hopeful footing, already. What is the lamentation? Is it costs or anger? What are people angry about now that they beat the drum on the other side?
As Paul Krugman puts it – “After I press them, it turns out that they’re really angry about the bailouts, rather than the stimulus…” Obama did not bailout companies but made investments. This investment is not about the classic notion concerning valuable collaterals which is how a bank ought to work. So, the taxpayer is not left holding valuable collateral but the value in preventing destruction of wealth and the value in recovery. That is what it was from the start, to invest in the value of a stimulus.
That part is not too hard to fathom and to make a distinction is relatively easy. Lending money against valuable collateral is not the same as investing in a turnaround on which to expand the economy and one that would function to keep the store house of value for the US currency. Yet the American people are really angry about something. The real anger may not be about the investments made by the Obama administration that has had such positive effects on a global scale but may be confined to the executive salaries and the fat cats that are still playing the same old games.
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