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Burgess COMMENTARY

Peter Burgess

John Michael Kern Follow John Michael Deceleration in Emerging Markets Manager's Choice John Michael Kern Global Communications Specialist at DuPont For much of the past decade, emerging economies served as the harbingers of growth. However, a confluence of factors such as currency fluctuations, waning stimulus spending, demographic change and an impending rise in US interest rates has led media to speculate about a “great deceleration” (http://econ.st/18EZH4O). Such reports have persisted throughout the year, with a spate of articles being published in November (http://on.wsj.com/1iFtJos, among others). In light of this, how should business leaders respond? Change nothing, says Nenad Pacek, Founder and President of Global Success Advisors GmbH & Co-founder, CEEMEA Business Group. At the recent CEO Forum held in Dubai, Mr. Pacek addressed concerns about deceleration: conditions in emerging markets are much more resilient…“most economies around the world have very decent economic fundamentals. The currencies will go up and down, [because] no one is stopping the speculators…the biggest advice that we give our clients is ‘you don’t want to stop your growth initiatives in emerging markets’, …because fundamentally, things have not changed”. Ultimately, emerging economies are expected to grow two to three times faster than developed nations in the coming years – at least 5% according to the IMF (http://bit.ly/1c5TDzj). While we are likely to see slower growth, particularly in China and Russia, emerging markets remain attractive for long-term investment. Indeed, for multinationals, emerging markets will still allow for greater diversification, simply because their economic performance tends to be decoupled from developed nations. Do you agree? Let me know your thoughts by commenting below. Like (1) Comment (2) Share Unfollow Reply Privately12 days ago Comments Serena May likes this 2 comments

Five years of feverish worldwide government spending to re-inflate the economic balloon that burst in 2008 shows that while the balloon may have risen off the ground, it still has too many holes to stay afloat on its own.

Strategically, companies across the world should be focused on solidifying their businesses and creating or finding new value to be better prepared to withstand the consequences of the confluence of factors you list..

Footholds in emerging markets with natural growth from supportive demographics and stronger economic fundamentals makes sense much as Mr. Pacek outlined above.

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If by growth, you mean GDP growth, then the faster this slows down the better because in real terms fast growth is very bad for people and the sustainability of the planet.

Very highly concentrated economic power means that there is no real market (as Adam Smith would understand market) existing any more. What we have is an economy where big players are using outdated metrics of money wealth, business profit and stock prices to measure their success ... and of course more GDP growth rather than less makes it much easier to improve those measures. Governments and Central Banks make GDP growth central to their policies ... good for corporate performance but to the detriment of society as a whole and our future.

I want to see analysis and decision making focus on people rather than on organizations and their profits. What should be the policies that will improve standard of living and quality of life for us all. Me being fired and my former employer improving profits is not a good formula for improvement in my quality of life. More jobs in a sweatshop with ultra dangerous working conditions may maximize profits, but is it fair to the workers and their families. More industrialized agriculture and less forest may be good for industry, but is it good for the environment.

GDP growth as a metric encourages stupid consumption and waste without doing very much for quality of life. Why do people in North America have twice the carbon footprint of people in Europe? Is it waste that is part of the explanation ... waste associated with profitable inefficiency in the built environment and waste associated with frivolous consumption?

How come the economic / business model used for the past 30 odd years has resulted in nearly every government entity ... national, regional and local ... to be bankrupt or near bankruptcy. This did not happen by accident, there are many identifiable reasons for this state of affairs, none of them acceptable.

In emerging markets GDP growth more closely correlates with improving quality of life for people, but decision making is not sufficiently attuned to people and quality of life, but singularly focused on profit potential in these markets. This is problematic, especially where a lot of discretionary investment is attracted with incentives like tax holidays, suspension of critical workplace, environmental and other regulations, etc. In other words, business decisions reflect a race to the bottom in terms of where we really ought to be going.

A number of responsible major companies are starting a journey towards better business practices. However, most remain totally committed to the idea of maximizing business profit no matter what the consequences to society as a whole. Getting the change that is needed requires radical reform of the metrics being used to measure state, progress and performance.

Peter Burgess - TrueValueMetrics
Multi Dimension Impact Accounting

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