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Looking Backward and Ahead

The surveys filled out by top managers, investors, and influential board members all over the world asking them to identify the greatest challenges to their businesses clearly reflect how our world has moved from predictability and stability to unpredictability and instability. Instability for business people means growing risks, with all their cost implications. Instability in the past meant that we were not able to predict oil prices, the volatility of the exchange rates, the trustworthiness of a supplier or even climate change. 


Maria  Findrik Ph.D. 
Associate professor of Business Economics,
CENTRAL  EUROPEAN UNIVERSITY BUSINESS SCHOOL


In 2016, surprisingly or not, the factor given heaviest weight in the various surveys – and it is expected to be so again – was what the respondents called  geopolitical instability, which is defined as “geography, economics and demography affecting the politics of the state andrelations between nations”. 

And yes, there are surely new challenges ahead, the eventual outcomes of which we cannot predict, such as: 

    - how the political transfer of power, first of all in the United States and later in 2017 potentially in several European countries as well, will affect the environment around us; 

    - the definite slowdown of international trade and the capital flows that have thus far fueled economic growth worldwide; 

    - how the banking system can recover and fulfil its role to feed the economy if the margins on loans remain so low; 

    - whether the strong signs of de-globalization we have seen will lead to a certain degree of “islandization” only, or to strong but dangerous corporatism, nationalism, and populism that easily could generate local, national or regional conflicts; 

    - and, finally but very much in the news right now, we have just started to think about one of the negative consequences of the digital transformation, namely cyber-attacks and the potential of a cyber war. 

Most likely we have to ride the cycle and live in a world full with shocks and conflicts. But what is this cycle all about? Are we going to live in a closed world again, with all the consequences that implies? 

And yes, looking around today the rate of total productivity growth is definitely slowing down, around 1% on average. For two centuries Europe – its modern market economy accompanied with social services which on one hand had supported those in need but on the other hand had always appreciated and encouraged the talent, creativity and knowledge – was able to energize its growth based on the human factor. Unfortunately, in the last few decades, Europe has lost its cutting edge role in value creation based on human creativity and productivity (recently in Europe labor productivity is close to zero). No growth of productivity equals no progress. 

The good news for us teachers and professors is that productivity-based development requires a talented, skilled labor force and citizens. The reserves are there: more qualified human resources could/should be turned into assets and responsible citizens. It requires not just investment but new thinking. 

But do countries with decreasing PISA test results hear the voice of the progress? 

This column is part of a continuing series of opinion pieces from experts at the CEU Business School in Budapest. The opinions stated here do not necessarily reflect those of the Budapest Business Journal.

I believe that:

- de-globalization is not the same as anti-globalization, at least not in an economic sense: the flow of goods and services, capital, human resources, and knowledge in a digitalized world is not reversible, but it is a given in our interconnected world;

- globalization brings both good and bad; the bad overcomes the good (particularly emotionally) when nations/leaders use it to save energy to do their major task and fulfil their responsibilities, namely to create a domestic environment where all the major stakeholders are interested in permanently increasing productivity – otherwise globalization meant just cost cutting, which is far from its real potential.