Wednesday, September 15, 2010

Outsource This: Thoughts on current dynamics (EU, UK, USA, World)

A solid decision must take into account local, national, regional (eg EU) and global regulatory & legislative constraints. Not an easy time for decision makers then!

Eg business in 2011 will have little in common with business in 2008. In that the conditions & working assumptions of 2008 that affect business have changed radically, it's a totally new "ballgame".

Eg (policy) to address the demands of the times governments need to completely overhaul the philosophy & the existing body of legislation & regulations.


Management: From out-sourcing to in-sourcing?

The competitiveness of economies (for business location purposes) is IMO a matter for the Strategy - Corporate Planning Dept of a corporation to determine, on a case basis. Yet most corporations do not have such depts since many decades ago. Maybe that's the "problem"!

In a few years, some corporations will be outsourcing the top management function of the corp. as well!
Is it time for corporation to start "in-sourcing" their advertising, strategy, IT, HR, functions/depts? #management (back to basics).
The decline of the Roman Empire started when they started outsourcing to the Goths, the Vandals, etc.
The decline of Sparta started when they started outsourcing their left flank to "allies".
And the decline of capitalism started when corporations started "outsourcing" their capital needs to the "markets" & banks rather than their shareholders.

By outsourcing important functions, corporations looked lean & mean in the eyes of the "markets" & analysts but in fact became "anorexic".

Plus, many analysts & commentators act as if they are judges in talent shows, "judging" corporations & countriies as if they are hopeful singers, puting even more pressure on publicly quoted corporations to max performance short term.


Exporters = modern heroes?

Are there mindset factors at play in the loss of exports competitiveness of the US and the UK in recent decades?


Information (and analysis) is Power

The US and the UK are used to analysing the world (think tanks, media, etc).
In recent times, the "world" is also analysing the US & the UK!


Are mentalities and attitudes in the UK but also Germany & France the key barrier to a deeper EU?
a) They dub foreign lang TV shows & films about 3 hours ago via web
b) They are pro EU as long as the EU is molded in their national model
c) France after all almost rejected Maastricht and rejected the pre-Lisbon Constitutional Treaty (in May '05).
d) Gernany's participation in a deeper EU seems tied by the decision of its Const Court.

The EU isn't in crisis this year. It has always been in crisis, because the EU & EEC/ECs were/are built via weird design & flawed project management!


Can a leader lead EUrope and his/her country at the same time?
The obvious answer would be: Yes.
Case study to the contrary: A few months ago Nicolas Sarkozy seemed to be the kind of visionary leader that could steer EUrope forward, through the debt crisis etc. A few monhs later, his proposals and actions in the field of immigration (recall of citizenship, Roma etc) in an effort to please a certain section of the French electorate have tainted his and his country's leadership role in EUrope!


The EU and the UK in a prisoner's dilemma!

The issue of a UK referendum on EU membership is kept alive in the UK. Polls indicate a strong lead againt EU memership (ie exit of the UK from the EU).

A few introductory notes:

* It's the Lisbon Treaty Euroskeptics fought against that actually provides a process for the #UK to leave the EU, should it so decide!!!

* The sovereignty card being played by English and other British Euroskeptics and anti-EUers could IMO actually backfire on England!

* I still think the UK could actually lead the EU into a deeper union! But it would require a major change in mentality (via better info). Read what I mean, below!

* Would the UK have a a) better or b) worse balance of payments if it was outside the EU and its Single Market?

* Would the potential for a deeper - fuller European Union increase without the UK (europhobia) & Germany (constitutional constraints etc)?

* Is a) the #UK b) Germany c) both d) other e) no MS holding back a "deeper" #EU (army, taxation, econ gov, etc)?

Here's my take:

Legal systems in Europe tend to have very different philosophies, eg British vs French vs German vs Italian. Yet another Babel!

Actually IMO better law-making could lead to a very large reduction in the number & volume of laws & better "protection" of people.

Those who fear that the EU leads to laws being decided by the EU institutions rather than national ones are right! A single market needs "single" (or common) laws in most areas in order for the market to be single (or common).

The UK's Euroskepticism is in my opinion justified only in that Euro continental policy & law making is more interventionist (see "dirigisme") compared to the British. The solution to that is a pro-EU UK that leads the thinking towards a deeper union that has better but less legislation (federal & national). A deeper yet less interventionist European Union with single yet fewer and "better" law and "statist" intervention! That is the best solution in the "prisoners dilemma" of the EU and the UK.

If UK and EU continue in their current paths, a lose-lose "divorce" seems inevitable down the line. The UK tradition for less interventionist policy & law making has many allies in all other member states but someone needs to lead the way With or without the UK, a dirigist EU will continue to lag behind the US plus lose ground to the BRICs, suffocating entrepreneurship & citizens.

One has to consider how the union system of the EU suffocates not only companies & growth but citizens as well. Let's take a look at the demographics of the "mighty" (in terms of GDP) Eurozone! A single state Europe is the only viable strategy! Plus: Can one argue that the Germanic states were better off before they were united into Germany in the 1870s?

Can a weirdly designed union of 27+ countries of 500 million compete with a solid 300 million US of A, the 1100 million of India and the 1300 million of China (for GDP/growth, jobs, etc)?

There are hundreds of languages spoken in the homes in the USA! But a single one is used in the workplaces and marketplaces. That means that national diversity can exist, even flourish, under uniform parameters, thus a single state Europe need not supress national "IDs". A single state EUrope is indeed a leap compared to the current situation & the socio-political trends in MS. But without vision Europe is bound for bust.

Otherwise, we might as well move back to a city-states system! Like eg pre-1870s Germany! Or Ancient Greece! With Germany, France and the UK vying for the dominant role, like Athens, Sparta and Macedonia or Thebes (Spain?)!
Ancient Greece has similarities to modern Europe. Greece did not become a single state until 1831 and after Roman and other occupations. When will Europe then become a single state? In 3010 or 4010 AD?

Without English as its lingua franca (in the workplaces & markets) the EU will remain a quaint linguistic Babel for American & other tourists! A real single EU market needs banks with connecting branches all over the EU, the ability to be serviced by a single mobile provider no matter where in the EU one lives, an EU-wide "NHS", an EU income tax system that encourages mobility, etc etc!

Anyway, in 50 yrs, Europe will probably either be
a) a single country OR
b) a huge museum for American, Japanese, Chinese, Indian etc tourists.

Probably the latter!

A continued Euro-chaos as now? That option actually leads Europe to the museum I mentioned.

I propose you also read my post: Britain and the heart of Europe, in 2005 (and today)


The pseudo-immigration problem in EUrope:

... of non-EU and intra-EU "immigrants" is IMO one of the reasons the EU will remain un-competitive in the world while the BRICs & US will do much better!

Intra-EU "migration" isn't supposed to be "migration", just like intra-EU sales are not considered exports/imports. Yet it is not treated that way. Maybe that's the problem with the EU. Most things are not clear cut, they are half-way, thus confusing the average person & firm. Everything EU is vague (flou). US-style inter-state relocation doesn't require a single EU state though. And sovereignty is another "flou" subject, globally! Ie what constitutes "sovereingty" in 2010 is quite different than in 1910, 1810, 810!

The population of a new member state should be given the same transition period constraints re relocation to one of the "old members". Not the current pick your choice between 0, 2, 5 and 7 (I think) years. In 2004, the UK chose a 0 years transition period for population of the "A8" new member, while many member states chose 2 years and 7 years (!!) was
chosen (I think) by France & Germany! Quite uneven! 2 years for all by all should be the policy, IMO.

But at present, EU citizens' freedom of intra-EU, inter-state relocation is not as free as intra-US, inter-state freedom. Alas EU laws don't give EU citizens per se freedom to relocate, only give it to those who find job, start biz or have means not to become burden on the state. But does not apply to intra-US "migration", eg when a Californian moves to New York or vice versa.


Certainties about Uncertainty & Economics vs Physics

There is an ongoing debate re the certainties of Economics and its similarities and difference with sciences such as Plysics.

This is my take:

Between certainty and "que sera, sera", there is a lot of room in between! A lot!

Having studied Prob/Stats, OR (Operations Research) - Decision Sciences while at MIT & NU & Finance at INSEAD I wouldn't over-estimate their ability to predict.

How many are aware of the maximum efficiency frontier on a E(return) vs E(risk) table, anyway?

The trade-off between expected return and expected risk (curve) remains one of the most not understood Financial (and decision sciences) concepts.

The use of either perfect markets or perfect information hypothesis in most Economic theories & analyses waters down the realism of the results.

In spite of the use of fancy math formalas in recent decades Economics (including) is still a Social Science. Physics is a Natural Science.

I used math/OR to try to better assign aircraft to flights in my MS thesis (1987) but didn't claim I was actually optimising, ie finding an exact or perfect solution!

A lot of Economic & Financial stuff these days seems more like product of a "religion" (see dogma/dogmae) rather than a science!

Economics, including macroeconomics, is a useful tool, but still not Physics" or able to predict/assess with the certainty we read quoted in or by well known media etc!

In other words, I agree with the conclusion in Legrain's Aftershock book but of course Macroeconomics is not Physics. Riccardo was not Newton!


Spare thoughts:

WTO -Doha: Have the US Congress & Senate given Obama the "fast track" powers GW Bush had?

UK exports in Services: £3.8 billion surplus on trade in services in July, surplus of £3.6 billion in June. Not too bad, eh?

Civil Society will make or break the European Integration

Banking and Finance are not the core of modern economies

SMEs must take a more proactive approach to European Integration

Hungary says will meet euro criteria by 2014-15

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