Ian David, McKinsey's Worldwide Managing Director, has written on the new norms that will invest business practice once the current crisis is over. From a more commercial perspective, David paints a landscape of less leverage and greater innovation, as companies are forced to innovate for greater productivity as financial wizardry is no longer able to provide the returns that investors have become used to. This landscape will exist, no matter how the crisis plays out.
Despite identifying political risk as a rising anxiety for business, David does not clearly delineate that we face a new political order, as the economic structure, its rules and principles, have not changed. An axis favouring market forces, lower taxes and non-intervention is better than government regulation and prescribed capital allocation. The risks of catastrophically bad policies are not just limited to Asia, as David writes; they are applicable to the West:
The big unknown is whether the temptation to blame Western-style
capitalism for current troubles will lead to backlash and
self-destructive policies. If this can be avoided, the world’s economic
center of gravity will continue to shift eastward.
Now that the G20 summit has passed, the temptation of the political classes to act has proved the defining feature of this crisis. From history, we know that politics worsened capitalism's ability to deal with the problems arising from Depression. This heightened political risk has begun with the dilution of independent standards for a political smokescreen.