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Turbulent Times Turning Toward Global Recession ?

By Mark P. McDonald | June 06, 2022 | 0 Comments

TechnologyPersonal ObservationManagementLeadershipEconomy

Executives are leading in a time of turbulence in its truest sense of the word.  Turbulence in terms of the uneasy or unsteady movement of economic and socio-political forces.

Turbulence Factors

Navigating turbulence requires acknowledging the multiple and often contradictory factors at play.  These include, in no particular order:

  • Inflation at 40-year highs, initiated by supply chain disruptions, exacerbated by the invasion, and accelerated by recover from the pandemic
  • Rising interest rates, coming off historic lows to curb inflation via traditional monetary policy, as well as the end of quantitative easing.
  • Supply chain disruptions, driven by world events: the pandemic, Russia’s invasion of Ukraine, the realignment of global trade arrangements
  • Food production and supply, as the Ukraine and Russia are major food exporters, this not only drives inflation, but it also increases political and economic instability, people who cannot feed themselves or their families take action.
  • Tight labor markets, as companies look to hire in response to greater demand created by recover from the pandemic, particularly in the services and traditional ‘blue’ collar jobs.
  • Strong U.S. Dollar, supported by a combination of the dollar as a haven in turbulent times as well as rising U.S. interest rates
  • Lower stock market valuations, as rising interest rates and turbulence have shifted investment patterns and predict future economic conditions.
  • Other factors, the shift to more renewable energy, social justice and equity issues, gun violence and rising crime – particularly in the U.S. all contribute to turbulence

I am sure I am missing something, apologies.  There is no consistent theme, no clear direction, no easy fix – that is the definition of turbulence.

The inability of simple solutions, like raising interest rates and other actions, will most likely turn turbulence into a recession. The stock market has been the best predictor of future recession.  On that basis it looks like we are headed for one, not only in the U.S. but more globally. When, how long, how deep is anyone’s guess.

Navigating Turbulence

If the past is any predictor of the future, we can expect to see the mood evolve from dire predictions of protracted downturns, toward the lionization of business and political leaders who ‘show the way’, and a turn toward highlighting positive news that are signs of a recovery. What will be the subject of that cycle? How should that cycle influence the actions leaders need to take today and next year? Who knows?

Here are few thoughts, conjectures really, that are likely to be wrong in fact but less wrong in their sentiment.  I really welcome your comments and thoughts.

  • The ongoing transition toward an information-based economy. Information and insight are the tools to navigate in turbulence and the basis for taking more powerful actions in a recovery. The information transformation is centered on customers and internal operations via digital technology. That focus will expand to include information created outside of the company changing the balance of power and policy in the future. Access Rules discusses these issues from one perspective.
  • Customers will continue to rule. Businesses will not be able to put customers back in their place as consumers. Consumers buy what businesses sell as demand exceeds supply. Current supply chain issues and shortages are real and significant, but over the longer-term companies with the best customer value can be expected to win.
  • Global trade will change from market-based to partner-based or friend-shoring relationships. It is easy to call form the end of globalization and repatriation of supply chains. Global trade as we knew it will evolve away from open markets toward more exclusive partner/supplier relationships to secure supply chains and stabilize prices and product availability. Resource realities, economic efficiencies, political and other factors support continued trade between nations.
  • Sustainability will remain on the agenda. Sustainability issues transcend individual companies, countries, and societies. The impacts of environmental, social, and other issues are self-evident with significant human, social and political consequences. I might be pollyannish here, but these issues cannot be set aside in the face of near-term turbulence. There are no easy answers here which leads me to my last thought.
  • Political instability will increase, at least over the next 2 – 5 years. This goes beyond political discord and culture wars. Hunger is instability as food insecurity increases due to climate change and Russia’s invasion of the Ukraine. National competition for resources will hopefully not lead to aggression, but it will create instability. Addressing sustainability will require changes in views of national sovereignty and collective action. Global, bi-polar, multi-polar, mono-polar, who knows, but it will be different.

Honest dialog is needed

There are no simple answers to the turbulence we face. Complex challenges do not resolve themselves in a single, simple answer. Dialogue, understanding, and action are major parts of any answer so:

  • What do you think?
  • How are you considering navigating the current turbulence and high probability of a global recession?
  • What are your considerations for the future?

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