Lost among the history books is a forgotten theory that once again has relevancy — the Malthusian Limit. As it has been said many times before, if humankind does not understand its history it is destined to repeat it. Let me explain, and like always, ask some pointed questions. You see, it was in the 14th Century when the vermin crawled from place to place, spreading their hidden disease among the masses. One by one, people and homes fell into sickness with many soon to be buried and razed — tens of millions impacted around the globe.
When the “black death” circled the world in the Middle Ages, we thought our lives and our economies were at an end — nothing worked. Like today, many then pleaded for innovations and cures as uncounted, faceless masses suffered loss of life, fear, and livelihoods. The dogma of the past, like the dogma of today, proved to be an impediment to innovation as the world melted. Many spoke of change, very few positively and pragmatically acted.
It was Thomas Malthus who quantitatively postulated in the late 18th Century that historically mankind often times exceeded its ability to sustain its growth environment. Whereas he framed his ideals in terms of food, population, and the second Industrial Revolution, his conclusions when extrapolated pose some intriguing similarities to our financial and social predicaments of today.
After nearly 700 years, the world finds itself in a complex and unfamiliar pandemic — a financial pandemic triggered by euphoric embracing of “new economic innovations.” There are many superficial similarities that can be drawn between the Medieval Black Death and the on-going housing plague.
You can decide for yourself who the vermin should be, what detailed parallels seem applicable, and what should be done to prevent future “infestations.” But were our global shortfalls really because of innovation, unforeseen correlations, or just lustful greed? However, a comprehensive discussion is far beyond a simple column.
After two years and trillions in USD pledges during 2008, what will happen during the next two years as a New Year and decade dawns? Can we buy or even innovate ourselves from the mind numbing numbers that daily flash across our personal information services — $300 billion, $700 billion, $800 billion, TARP, TALF, $2 trillion (deficit)? How can this be absorbed within a stagnating $14 trillion GDP economy with a national debt that is approaching $10 trillion, and adding roughly $40 billion per month (before the bailouts)? Is innovation enough to stem the plague of performance brought forth from our inept financial and political leaders?
Putting the numbers into perspective, our government has committed in 2008 programs alone, enough money to buy every person in the entire world 200 double decker hamburgers, 250 gallons of gas, or 700 candy bars. Where will it end and what will be the consequences — both within design specifications and those outside of the intended control limits? As in times past, will today’s governments suffer the same fate spending huge amounts of treasury to combat the impacts, while failing to solve the underlying causes, protocols (e.g., Basel), operational processes, and yes, executive leadership that materially contributed to failure?
There is an on-going fallacy that money can purchase innovation and buy a path forward. It is a catalyst, not an answer. Politicians and those in positions of educational endeavors believe that solutions can be found with a new generation of knowledge workers skilled in discrete technologies. They are facilitators, but not an end all resolution as many will be reeducated on the same dogma that got us into this situation. Associations will push for greater importance and lobbying once again. It is a mistake that should not be allowed (and repeated) to cloud the judgment of consumers and our national economic health.
No, I firmly believe that it will be as I previously postulated before the world melted away and the disease carriers headed for safe havens (see my prior column entries and diagrams). It will be the relevant application of pragmatic innovation that allows for a positive, iterative cycle of growth — definition, adoption, sustainability, and adaptation.
Unless something radically is done to integrate with the shifting global wealth base coupled with the fifth iteration of globalization, tomorrow’s innovations will probably come from the East. Yet, all is not lost.
Still, the next five years will set the stage for a new generation yet to arrive into the workforce. If we apply the old principles, fail to adopt orchestration, and assume the old school is the best path forward, we will have let the vermin win and doomed a new generation to malaise.
“ Ashes, Ashes, we all fall down.” Indeed we are down, but not out. The length of our suffering will be measured in years — not weeks or even months. It is not a cycle. It is a far reaching, dogmatic plague residing in the cultures of once hallowed financial and lending institutions that must be re-forged and re-regulated. As we now realize, it will be paid with trillions of dollars of printed money creating a huge U.S. government sponsored hedge fund the likes the world has never witnessed. Will it go bust?
As private and public efforts seek out validity, the struggle from within will be about ensuring efficacy, while at the same time retribution and oversight. Much like the healers during the time of the “Black Death” when the diseases’ cause was finally discovered, the carriers will be sought out. Actions will be taken, organizational cultures changed, stringent controls implemented, and careers ended.
While Malthus’s theory is not entirely transferable to today’s situation, there are some broad lessons learned that cannot be ignored. Unwinding of the previous “financial innovations” will be achieved, the real disease will be uncovered, and a cure found. But for how long and what will the lasting consequences be for our favorite discipline that made America into a global economic powerhouse — innovation? So put your tired old school technology, pundits, processes, and dogma away. A new economic and innovative reality has arrived whether we are ready — or not. Innovation was not the plague. It never was. Relevant innovation will be the answer.
