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Rebuilding the post-COVID economy Rebuilding the post-COVID economy
by Joseph Gatt
2021-02-16 11:01:33
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The problem with the economy in pre-COVID times is that it wasn't all that great. There was a web of interdependence among nations that was doing more harm than good. And there was a lot of waste.

Waste, in my opinion, was the result of economic ignorance.

I never thought of myself as God's gift to the world, nor do I feel entitled to anything. But, having read a great deal of classical economic theory, most economic theory focused on money. Most economic theory was financial macroeconomics. Not production. Not distribution flows. Not labor. But how to make as much money as possible, as quickly as possible.

econ001_400So the pre-COVID economy, let's say from 1989 to 2020, was an economy where you had a lot of money being spent, a lot of money being made. But not much was being produced.

To use an analogy, the pre-COVID economy was like a system where you purchase a can of Coke or a Big Mac for 10,000 bucks. You're not in it for the Big Mac, but you feel entitled to the 10,000 bucks, because your social status as a big brand CEO entitles you to the 10,000 bucks.

Of course I don't have Amazon or Facebook or Microsoft or the Coca-Cola group or those big names in mind. What I have in mind is all those companies that built ghost towns. All those companies that charged millions, hundreds of millions of dollars for projects they never finished. All those banks who loaned money to people who never intended to pay it back. All those mom and pop stores that open and don't get a single client. All those factories that start production and sell nothing.

What I mean is pre-COVID the economy focused on financial flows. So I'm humbly offering a different economic perspective. Economic theory was also heavily focused on financial flows, the financial market, banking, and how to make money fast.  

The idea I had in mind about a month ago was to write an article with personalized advice to individual nations and economies. But, over the course of one month, I grouped the trends in ways, I hope, almost every national economy in the world can relate to.

So I'll discuss global economies as a series of problems that need to be fixed. Not financial problems, but production problems. Because if there's no product, finance is just paper.  

Rewards, punishments and titles

The economy works as follows: producing anything be it a service or an industrial product or an agricultural product takes a lot of time. Sometimes minutes, sometimes hours, usually days or months or cycles.

So any product being produced need a decent amount of labor that goes with it.

But, because the school system in a lot of countries is about rewards and punishments and titles, not learning. You have CEOs and senior managers who focus more on rewards, punishments and titles, not producing and distributing.

The idea at many, many companies is that if you make a mistake in the production or distribution cycle, you get a huge punishment. The boss, floor supervisor or CEO will cynically count punishments, dish out more punishments, and before you know it, the factory floor or farm is not producing anything.

It's a question of mentality. Rather than focus on punishing bad workers for mistakes, and focusing on titles and rank and respect, you probably need to make sure the product is being produced and distributed.

These are the basics.

Production is slow, distribution moves fast

You need several months to produce tomatoes. But if you don't sell them in the next few days, you'll be losing big money.

Production is slow and expensive. Distribution is fast and not always profitable.

So, as a CEO, you need to keep in touch and harmony with your clients and distributors. You need a steady flow of reliable clients and distributors to make sure your farm and factory does not collapse.

In many countries, clients and distributors are not reliable. They'll come one year or one season, but won't come around next season.

One big mistake a lot of companies make is they have no sales representative. In many companies around the world, the senior manager or junior manager is also the sales representative.

Many companies give sales representatives other roles so they can “milk the cow better.” Big mistake!

The backbone of your factory or farm or company is your sales representative. They are the ones who are going to keep in touch with the clients and distributors. If you treat your sales representatives like slaves, they are going to stop calling your clients. Something to think about.

Unfortunately, in a lot of countries, sales representatives grow arrogant because they know they are the thread that links the company with clients and distributors. So one way to fix this is to hire a trusted sales representative, another way to fix this is to hire sales representatives who display humility, honesty, integrity and willingness to help. BUT keep in mind that a lot of times the sales representative's personality mirrors the CEOs personality. If the CEO does not check in with the sales rep on a regular basis, the clients will be gone soon enough.

The education system

I've discussed education before. The current education system trains office workers. The current education around the world discourages students from working in services that are in demand like butchers or bakers or barbers and the like.

I tend to think about it this way. If I'm a teacher and an 8 year-old kid tells me he or she wants to spend their life baking bread, I'd be worried. If I'm a teacher and a failing 15 year old kid tells me he wants to be a barber or a welder, that he's getting training for that, and that he'll start working next year after he finishes training, I'd tell that kid he made a good choice, and anything that keeps him off the streets is an excellent choice. And a wise choice.

The current education system around the world is basically telling kids: go work in an office, and nothing else. That should change.

One way the education system could change is by providing agricultural, industrial or services training on the weekends. You never know when kids could find their callings.

Another way to change the education system is, simply, by discussing the job market. Right now, and back then, whenever kids discussed jobs, teachers would tell them “not now kiddo, you'll think about getting a job when you're older.” In my opinion, you're never too young to explore the job market.

Yet another way is by providing optional online vocational training skills and diplomas. For example, it wouldn't hurt a 15 year-old kid to take an online diploma in teaching English as a second language, or in fundraising, or in graphic design, or in museum tour guiding or tourism guiding and the like.

Communication and regulating the flow

Any economy is about products and services that flow. Not money that flows (although money's important). But more importantly, raw materials, finished products and services should flow.

For that to flow you need something called honest conversation. If honest conversation is a luxury in your country, may God be with you. That's all I'll say.

Dishonest communication is often the result of focus on rewards and punishments rather than providing the service or product. So if you set your priorities straight and focus on the product, not on punishments, you should be fine.

Fixing scarcity in some sectors

-Raw materials scarcity: if you depend on raw materials, you can still purchase them. But you also need to train your people to find replacement raw materials that are available in your country. Because if there's a natural disaster or if there are wars or something, you could lose your vital raw materials (be it oil or iron or cement or fertilizer name the raw material). So a little bit of research and development never hurts.

-Agricultural products scarcity: food is vital for two reasons. People eat food. And food is used in a variety of industrial products. Agriculture is not rocket science. It's techniques. And it's hard labor. So you need to get training in techniques that match your climate and soil. And you need people willing to put in the effort.

-Industrial products scarcity: if you depend on other countries for your industrial products, if you run out of foreign currency, industrial products are going to be very scarce, and people are going to be fighting for them. Industry is not rocket science. Factories are expensive to set up. And you need factories to produce products that are in demand. Supply rarely creates demand in the world of industrial products. There usually needs to be a big demand.

-Services scarcity: this one is vital. Most labor is what we can call services. Restaurants and cafés and barbers are services. But then factory workers and office workers and agricultural workers are also providing a service: their labor.

How do you gain quality in the service sector? The rule is simple: the longer someone spends providing a service, the better he/she usually becomes at providing that service. So you need to make sure people are willing to provide services, and are willing to spend a big chunk of their careers providing that service.

-Retail scarcity: some countries produce almost everything, but they can't find ways to distribute their products to the client. It's either that land and space is scarce. Or that bureaucracy makes it difficult to set up retail businesses. Or that retail is controlled by big names, and the big names only sell their own products.

So you need to allow retailers a degree of autonomy to be allowed to display the products they wish to display. And their clients will be the kings and queens: they get to cringe if a big name product is missing from the shelves, and they get to ask for that product to be available next time.

So much for the economy for now. More later.

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