The end of capitalism?

Today Jack Welch stated that the pursuit of short term share price was “stupid”.  All over the press are articles about the death of capitalism.  State intervention is taking hold in almost every country.  Industries across the world are being subsidized by state aid.  Access to money more difficult than anyone can remember, even Berkshire Hathaway has lost its coveted AAA status according to Fitch.

It would be easy to think that capitalism as we have known it over the last few years has ended.  And in my opinion you would be right to think just that. 

Moving forward, companies are going to be run in more traditional ways than we have seen over the last 20 years or so.  Management will be focused on longer term shareholder value rather than the quick win of today’s share price.  Capital will be conserved and used to fuel growth.  Strong balance sheets will be vigorously defended at all costs; after all, they are the true value of a company’s worth along with the ability of the company to sustain long term growth.

So are we seeing the end of capitalism?  Absolutely not!  What we are seeing is an end to the easy money days.  Great ideas backed by decent execution and toil will win out and be the only real way to deliver real gains in wealth.  Smart companies, including those that embrace globalization will win out.  I for one am delighted that the values have returned.  These are great days for entrepreneurs.

What gives India its edge?

I’ve just arrived in India this afternoon and was thinking about a comment I heard yesterday from my barber of all people!

He spent his early years living and working across various southern African countries and has spent the last 20+ years living in the UK.  When I got my haircut yesterday, he said he had just come back from a short one week trip in India, the first time he had visited the country.  His comment that struck me was “everyone is so industrious and hard working.”  In particular, he thought this was very different from most other countries he had lived in.  “Even the poorest are prepared to work hard and not just hold their hand out and expect to be given something”, he continued.

I can’t comment on his experiences of Africa and I am sure he is generalizing.  There are bound to be plenty of hardworking, industrious people in African countries as well as a fair number of people in India that do not work hard.  But, overall, I agree with his observation.  India’s hard work attitude, it’s culture of education and the young age and size of it’s population will mean that most other countries will find it hard to compete.

PS. I have just seen a news report from the G20 conference.  This probably won’t get reported in the western media but Manmohan Singh (Indian Prime Minister) view of the conference is that this is the first time the views of emerging countries were taken into account and he felt that power was beginning to shift to the larger emerging economies including a stronger say in the running of the IMF.  I wonder if this financial crisis is not just cyclical but the beginning of a permanent structural change in the balance of power?