The end of extreme capitalism – opportunities for NGT
In our recent report, Investing in the Communications Revolution, we analysed statements made by Professor Carlota Perez, who claims that for an economy to make progress it must cease rewarding financial capital and begin promoting the use of capital to create infrastructure and move ICT into the deployment stage throughout society and the various economies.
We are presently experiencing large-scale changes in the way the society and the economy needs to be run, but a section of the financial market continued to speculate, rather than using that valuable money to deploy some of the new and necessary technologies and infrastructure.
Of course, there are many excellent financial companies as well and I certainly don’t wish to generalise this behaviour to the entire industry. I also do recognise that a place exists for the speculative process, especially in the innovative stage of economic cycles.
The financial market is particularly subject to excessive speculation and it is amazing that the US Government, especially, has allowed these speculative investments to be further developed and expanded. Some of the schemes are continuations of the ENRON schemes and are actually being driven by people who invested in the original ENRON scheme – and some of these people have successfully lobbied the US government to allow these schemes to continue, all under the banner of a free market.
That would be fine if the people affected by collapses such as ENRON, Bear Stearns, Freddie Mac and Fannie Mae were only inflicting harm on their own companies and their own shareholders. The reality, however, is that these collapses are creating damage well beyond those directly affected. The broader society and the broader economy, in the USA and worldwide, are also feeling the impact.
As we speak speculation is especially rampant in the vulnerable oil and food industries. While I would not recommend further regulation of this market I do believe that we should restore to a more normal level the speculative activity that has been allowed to creep into the US market through regulatory relaxation over the last few decades.
The reason I am querying whether capitalism is faltering is that, on top of the abovementioned disasters, the US Government has gone on to save these companies. If you really want to argue for a free market that the speculators have persuaded the US Government to agree to then these speculators should bear the consequences of their speculative behaviour.
Yet under American capitalism the losers are now being rewarded.
Of course, I do understand the consequences of not intervening, but it can no longer be a one-way street.
We are entering a new era and the US Government, through its rescue packages is quite publically accepting a great deal of responsibility for the financial mess that has been created. This should send clear messages to government and companies around the globe, who are still sitting on the fence line of these developments decisive action is now required to change an entire investment/business culture based on greed and speculation and which doesn’t take into account the national interests.
Bringing the topic back to our own industry, it is now evident what investments in telecommunications have meant for economic development in the emerging markets of Africa, Latin America and Asia. Over 40 countries in these markets are now seeing GDP growth above global average. It can’t be coincidental that all these countries are at the same time seeing an explosion in mobile penetration. Our industry can create global economic growth and we desperately need all the investment money possible for this purpose.
We see an overwhelming demand for next generation telecoms (NGT) system to support the growth in our digital economy in healthcare services and in education. We also need to upgrade our electricity grids with smart grids.
Valuable money is wasted by these speculators. Infrastructure is a nation building activity and requires billions, indeed trillions of dollars over the next decade. A trillion or more has been being wasted by these speculators – money that could have been deployed in a much better way.
There is a place for these people – it’s called the casino.
While we certainly expect a tightening of capital at the same time there is a good opportunity that the next generation of business and financial managers are going to be more responsible and are going to look at where capital can be better deployed; once this starts happening our industry is well positioned to participate in this new environment.
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October 6th, 2008 at 4:31 am
[...] of longer term investment projects, or is it too focused on short term reward? In his blog entry “The End of Extreme Capitalism” Telco analyst Paul Budde argues that valuable money is being wasted by speculators that could be [...]