The recent Olympics were exceptional because they came during the most critical times in modern history. After five tumultuous years, the future of our society is still in the balance. We live in a period of deep structural economic crisis, political division, uncertainty, and yet no reversing trend is in sight. (Capitalism Without Owners Has Failed: Where Is True Growth Going to Come From?)
Sporting metaphors are frequent in economics and finance. In this extreme environment, can sport teach us something of value for an economic recovery? I think so and, in fact, something has emerged way beyond the results, human values, emotions, and the celebration of these memorable Games.
To succeed in any human endeavor, a level playing field is the way to make the most difficult of goals achievable; a sustainable and uniform distribution of resources, and the whole world is better off.
For the third time in the Games’ history, they were held in London, and except for the poor ticket management, these Olympics and Paralympics were an overall success.
Decisive ingredients of this accomplishment lay in diligent long-term planning, deployment of resources and funding, gathering of talent, inclusion, and hard work. Finally, such a success would have been impossible without the generosity of volunteers and the participation of people from all walks of life. Many Olympic moments will be forever remembered. There was a slogan asking future generations to be inspired. Hopefully, an even more immediate legacy could be learned as the key to go forward, not only in sports, but in everyday life. A few parallels first:
An important observation is the power of crowd support. An exceptional number or world records have been broken thanks to unprecedented encouragement from the crowds. This suggests a highly believable economic counterpart: enterprises will succeed much better if they win full support and encouragement from the people watching them, and in the communities in which they operate – customers, suppliers, employees and if they can operate in a favorable environment.
Another relevant observation is that intense rivalry and great co-operation are two sides of the same coin. Rivals are the only people that come between a competitor and his or her dream. Yet, in most sports, we find that competitors have a strong sense of respect and get on very well. The reason is that we can only make the best of ourselves by playing with others, sharing our game with others, in a healthy competition and exchange. We learn from each other by pushing our own boundaries higher, unfolding new areas of strength and so, opening up new opportunities, which reward our motivation and hard work. The economic lesson is clear again – large monolithic organizations that dominate the field and dictate (and violate) their own rules, are unhealthy and a larger set of highly motivated smaller enterprises is more likely to provide success and benefit for all. The rules are the same for everyone; no cheating is allowed or can be bought out.
The other observation is that of inclusion, diversity, and freedom. A slogan says: “Sport does not care who you are: Anyone can take part”. Diversity, variety, and individual expression of freedom. There are so many sports and so many winners! From the classic track and field, to swimming, martial arts, gymnastics, weightlifting, equestrian, and so on… There are sports for all shapes and sizes. So, for an economy to work and be healthy, we need a wide variety of businesses each fit for purpose in their own expertise. Oligopolies are destructive to democracies, free markets, and our communities, and thus for wealth creation. Success is achieved via a multitude of highly motivated smaller and medium sized enterprises well routed in their communities.
In all, the 2012 Games demonstrated how the key to get out of our economic mess is a level of unity and fairness. We need to be able to compete on the same grounds, with the same rules, with no special privileges, and with the necessary resources and time. We need to promote and encourage the willingness to work hard, open opportunities for those currently disadvantaged, and we must firmly suppress cheating. Only in this way, is possible to get the best results, the widest number of people can contribute, be in the condition to participate and benefit from such results. Only in this way, a sustainable recovery is possible and the much-needed capital can find ways to be invested productively in real activities and for the long term.
The oligopolies that impose socializing losses and privatizing profits, and their resistance to change, are the main obstacles to a long needed recovery; the bread on the table of our society. The oligopolies must be broken down, starting from the financial services industry. Antitrust laws should be applied. No additional regulation, no name and shame, or anything else like it, is necessary. Only re-establishing a proliferation of players, with the promotion of partnerships and of direct ownership, is the way to fix the financial system. The condition of developing entrepreneurship, attracting long-term capital investments, create employment and sustainable growth. Capital would flow back to the Small and Medium Enterprises (SMEs), the real motor of our world. Full employment and proper allocation of resources would be achieved. Operation Direct Growth: The Avenue to Redevelop the Real Economy
Unbundling oligopolies already happened in the past in the railroad, oil, and telecommunication industries. There is no reason not to do it in the financial services, as it is such a vital sector to serve and support our society. So far, the advice of eminent and super partes experts beginning with Paul Volcker have gone unheard.
In the meanwhile, the financial services industry is malfunctioning and failing to perform the fundamental role of support to the real economy and society. As widely documented, there are no economies of scale that justify the dimensions and the conflict of interests of the largest financial players: using the words of an expert, Dr. Yves Smith: “Shame on any fool who insults our intelligence by making this argument with a straight face”, (Quelle Surprise! Former JP Morgan Chairman Offers Dubious Defenses of Big Banks).Instead, we continue to suffer from the perilous consequences of oligopolies: market manipulations, excessive and unjustified level of compensation, frauds, mis-selling scandals, mistreatment of customers and suppliers, money laundering, uncalculated risky activities, and a whole array of uncompetitive and criminal behaviors (and no jail sentences!!!). . Only corruption of free market rules keeps the sector together thanks to the success of a small group of lobbyists buying governments, regulators, media, and still enjoying the implicit public guarantee towards their reckless business risk. This is the honest answer.
The breakup of the financial activities would unleash huge value in the financial and industrial world. It would bring back the “skin in the game”, that ownership/responsibility element, that is so important to any human activity. It will make taking calculated risks and receiving proper rewards sound and possible. This will also enable a restart to lending activities and capital access for Small and Medium Enterprises (SMEs), an absolute key to any feasible recovery. The latter should be the paramount focus of any western government. A Systemic Capital Redirection Strategy Is Our Only Hope
So, after all the medals conquered, the world records scored, the memorable moments, the legacy challenge to be won remains possibly the most difficult one, that is to reinstate a level playing filed to restart our economic engines in a sustainable and honest way. Yet, like well run Olympics, while it requires great effort, it is a possible goal – a goal of which we are capable.
Now it is time for leadership beyond the boundaries of party politics and it is an opportunity to make a mark on history. Whoever is in power should win over the opposition and deploy the proper reform. The country that will effectively embrace this transformation first, will be the world leader; it will reap the greatest benefits before anybody else, and enjoy a much-needed turnaround. Here is the opportunity to win a real Gold Medal and accomplish the best Olympic legacy.
Rest assured that the alternative is not a pretty one.