I had a blast New Year's eve with my girlfriend. Only me, her and enormous amount of fireworks everywhere seen from the upper floors of my dormitory in Oslo. Picturesque view it was!
There is a tradition in many countries for the top-person to deliver New Year's greetings to the people. I watched recorded speech of the President of Estonia, I read the speeches of the King of Norway and the President of Kazakhstan. They all had one obvious common trait in common - they all touched upon global financial and economic crisis as well as upon the need for national unity in order to overcome economic difficulties.
These days financial crisis (or economic crisis followed by it) is in the top list of the most discussed topics around the world. Many fears and many negative thoughts are expressed in relation to it.
There is indeed much trouble for people who have lost their money due to previously done risky investments, for people who are loosing their jobs, for small and large businesses which are losing their clients, for national governments which do not receive enough money with taxes to sustain necessary level of social services and so on and so forth.
Yet there is another side of the coin which is not that obvious. Taking an abstract side away from individual troubles and personal losses (which are hard to underestimate!) one can indeed find a number of positive sides about current economic outlooks.
1. A crisis cleans up a system. When we don't clean after ourselves in our apartment, the rubbish piles up. It may not worry us in the beginning if we are not all too aesthetes. Once it starts to smell badly, however - a crisis! - we move ourselves to clean up this mess and make our house tidy again.
Economic crisis wipes out inefficient corporate companies, shows clearly the holes in national and local financial governance, punishes people who have misused seemingly easy credit opportunities.
2. Growth is always followed by decline. Growth is not eternal. People and organisations tend to forget these two simple theses and become too careless. Living organisms grow, but then decline and die. Empires, states, organisations, religions all experience their growth and decline phases. Decline may well be followed by growth again, but this change is always there.
Investors putting their money into risky projects, people taking large loans, states expanding their national spending all have made these decisions taking into considerations that "my stock price / salary / tax revenue will continue to grow". Alternative scenario planning is always useful... Many have hopefully learnt at least that from current situation.
3. It's not wise to live beyond your means. People like to feel reach. They like expensive and shiny things.
People working in financial services have universally enjoyed the highest payments. If you work in the bank, investment company, trust fund etc, a very high personal bonus would be guaranteed. Yet financial services do not create any value - people there just move money around. And often this money is not simply moved from those who have money in excess to those in need for that, so that latter would pay interest to former (that should be the basic logic of finance world). In contrary, many smart people around the world spend days and nights playing on speculations, on risk perceptions and so on. Being straightforward, many people get paid a lot for doing something similar to a man going to casino.
Financial services' officers have indeed a very high responsibility. But don't engineers, scientists, doctors, journalists (you continue) have lesser responsibility than them?
Financial crisis has shaken this self-created money-creating-money-world. I am not naive to believe that many dwellers of this world have become poor thanks to that (ex-executives of infamous Lehmann Borther have gotten millions of USD as a compensation after the bankrupt). Yet probably many of them had to refuse from buying a yacht, a diamond or another expensive thingy making them a little bit more happy.
On the other hand, there were so many people all around the world miscalculating their ability to pay back the loans they have taken in order to have bigger house, another car, to consume more. I know personally people in Estonia who have taken a loan to buy something, then took another loan to cover payback of the first loan and so on... until they got in the real trouble with paying all of their debts back.
Island has been labeled a notorious victim of financial crisis. How about the data from 2006 which shows that Iceland has been of the biggest consumers of oil per capita in 2006 (
http://news.bbc.co.uk/2/hi/business/7090664.stm)? One could indeed argue that Iceland is cold country which simply requires a lot of oil to heat up itself. People who have travelled to Reykjavik said that literally every household there had their own 4x4 Jeep or another huge truck (although most of them would go at most 2-3 times a year outside of the city)...
4. Crisis triggers entrepreneurial ideas and improvements. When everything is good and rosy, we don't seem to want to change something much. Difficult circumstances, on the other hand, push us to think in a creative way. Of course, this creativity may manifest itself in more creative ways to commit crime. But it also may mean improved effectiveness of existing companies, better calculation of personal expenditure and savings, new ways to do business.
5. Economic crisis pushes oil prices down. Oil prices have sunk dramatically over the course of October-December 2008 - more than twice. National economies don't simply need that much oil to sustain themselves in times of decline.
This is certainly bad for environmental reasons: cheap oil will not push humankind to think of new, environmentally-friendly sources of energy. Yet low prices of oil may make radical elements in governments in such oil-rich countries as Venezuela, Iran or Russia to think more before wasting money on populist nationalistic projects which are not sustainable for their own people and dangerous for other nations.
Happy New Year, with the crises or without them!
