The updated version of my book on global strategic issues is out. The fastest way to peek its contents or to order it is at: http://www.lulu.com/content/paperback-book/how-people-make-the-world/8737964 If you like it, rate it or, even better, review it. Started today the preparation for a seminar in São Paulo, Brazil, about the systemic upgrading of organizations and the systemic exploration of business sectors and social sectors. We will apply various elements from our work. We could call it "beyond organizational constellations," without implying that those constellations have become obsolete. They hardly have developed their potential. But it is possible to enrich them, both from the viewpoint of system dynamics and from the viewpoint of transpersonal psychology. We live in interesting times. Some coaching for a bank in great turmoil keeps my mind directed to the present dynamics of the financial sector and the economy in general. Other inputs were meeting a classical free-market enthusiast who made me read Hayek, and reading an article by Ian Brummer in the latest copy of The Futurist. Brummer tells how he was visited in New York by He Yafei, the vice minister of foreign affairs of China. Yafei opened the conversation with Tell me, now that the free market has failed, what do you believe the appropriate role for the state in the global economy should be? Brummer doesn't tell us his answer, but my answer would be: To enable and ensure the free market. Now public sector overenthusiasm has to be bridled, so we are not swamped with rules, regulations and bureaucrats. And private sector enthusiasm has to be bridled to prevent systemic collapses like monopolies, bubbles and busts. There is learning and so celf-correction in bubbels and busts, but usually to liitle, too late, too wasteful. Then, usually, the public sector steps in and changes an overt collapse into a chronic, unsolvable problems. This is called "Shifting the Burden." It destroys feedback and so supports the problem behaviors that unleashed the crisis in the first place. Enabling and ensuring a free market means protecting the market also from its own tendencies to choke itself or to overstretch itself.The choice is not between state and free market, it is between wisdom and folly. State and free market are not enemies, they are an ever-quarreling couple. That quarrel is far from over, no matter what the Chinese vice minister thinks. Because of a recent assignment, I am involving myself more than usual with the international banking crisis. Pondering about the Alice in Wonderland feelings that are difficult to shrug off. Many, many billions of government money (= tax payers money) to prevent a bank from collapsing. It seems so important as a system bank, that we can't afford to let it go down. May be, but a year earlier nothing was done to prevent that same bank from being sold and ripped apart. That was internationalization, free enterprise and all that, and so good. I can follow both arguments, but is one or the other: either a bank has a public function (essential to the system) or it is just subject to the wheelings and dealings of the market. The recession in India has been a serious ripple. But the ripple seems almost over. Trade missions with China. The importance of mass-producing simple products that are really useful for the millions of poor. Stories about Pakistani involvement in the attack on Mumbai and the role of a US double agent. A meeting with consultants and directors about spiritual capitalism. The air in Bangalore and Pune is clear. The air in Delhi and Gurgaon isn't. It has been a long dry period. Part of the dust is from ever-continuaing building projects (for the last decades) and from the nearby deserts (for the last centuries). I can't tell the difference. In a rather cheap hotel in Pune I ask coffe, but I get tea. The next morning I ask tea and I get coffee. But the Indian breakfast and the Indian lunch are really superb. Bought Donny Wendiger's book The Hindus, scholarly, witty and often funny - a rare combination. Our minds are full of simplifications and generalizations and it is a treat when someone blows in some sobering facts.
Free markets, if left to themselves don't stay free long. The successful become powerful and will force out or gobble up the smaller and les successful. New entrants will be discouraged or worse. Entry to the market will be more and more restricted. To make this less transparent, the state is usually asked to do that. In System Dynamics this process is called "Success to the Successful."
Free markets, if left to themselves, will continue short-ternm gains to long-term losses and private gains to public losses. This is called "The Tragedy of the Commons."
Free markets need the public sector to increase reliability and to increase protection against fraud, embezzlement, robbery, extortion and assassination. They need protection of their assets, they need protection against rampant inflation and worse systemic disasters: war, revolution, pillaging, epidemics, floods. In sort, fgree markets need public order.
In System Dynamics, one of the prototypical traps is Shifting the Burden. Just reread Donella Meadows on it. Marvellous, her listing of system traps. And her listing of leverage points, places to intervene in systems. (Thinking in Systems: A Primer)
Handy concept: system bank. A pity there are no system consultants.