Even Countries Follow A Version Of The S-Curve, Eg China

Some examples of this include the Chinese intervention in their sharemarkets in mid-2015 and early 2016 plus the currency depreciation without warning in 2015.

After the instability of the cultural Revolution (1960 -70s), China worked on political stability, eg at change its focus from class struggle to economic organisation. This was shown by a focus on market incentives and education; followed by agriculture, then infrastructure and heavy industry; then manufacturing and exporting. More recently it has focused on service and customer-based economy like finance, logistics, health care, tourism, etc; a knowledge-based economy with a cleaner environment; more equitable income distribution; less energy intensive industry. The last few decades China has had a growth rate around 10% but in 2014 it has started to slow. Despite this it is now the world's second largest economy.

Future growth industries of China are expected to be knowledge-based around service and customers with focus on less energy-intense industries like finance, logistics, healthcare, tourism, technology and environmental science (cleaner environment). For example,

- finance (over the past decade the number of proper institutional venture capital funds in China has grown from 32 to several hundred)

- health care (accounts for around 7% (US$ 700 b.) of China's GDP; this is expected to double over the next decade)

- environmental science (it is estimated to cost China US$1 trillions to fix its land, water and air pollution problems)

There will be less growth in areas around steel, cement, glass and other construction-related sectors (building infrastructure like railways, bridges, roads, factories, apartments, etc) which have provided the basis for the growth in the last 3 decades.

Even with a growth rate of 6%, China will create the equivalent of a Californian economy every 3 years and an Indonesian economy every 2 years.

On the other hand, the Chinese economy is facing some problems related to

- high debt levels (China continues to increase its debt, ie mid-2018 it was roughly US $ 12 t.. The government encourages companies to use bonds for financing to make the economy less dependent on state-owned banks, ie

"...China's economic growth was largely driven by debt and its corporate debt looks like a Ponzi scheme..."

 Qin Han as quoted by Bloomberg 2018

China's lack of experience in the financial market has encouraged authorities curb leverage by clamping down on shadow financing, boosting money market borrowing rates and tightening regulations on the asset management industry.

- a sluggish property market

- lack of transparency, eg the government's control of Internet

- persecution of opposition to the government like crackdown on human rights lawyers and their families

"....China is like a huge teenager. Physically, the country is relatively mature, strong and powerful, but it is a little too self-centred and in a way too insecure..."

Gary Rieschel as quoted by Les Murray, 2015

Is launched (1), sells slowly (2), becomes accepted and sales rise rapidly (3), market matures, ie market becomes saturated; product/service is copycatted by competitors; product/service is commoditised (4) and the market changes, ie replacement product needed (5). One way to handle this is by

"...looking at trends on the horizon and using your temporary monopoly to build the brand, make a profit, and then quickly move onto the next generation..."

Oren Harari has quoted by Brad Hatch, 2007b

For example, iPod

"...Apple refused to mirror the opposition, continuously rewriting the rules of music with its popular music player. Copycats looked on and then set out to copy it, but Apple cannibalizes its established market again and again. While everyone takes aim at its products, Apple jumps the curve and keeps on evolving......Apple's new mobile phone with iPod functionality went a step further recently - making a separate music player largely redundant..."

Oren Harari has quoted by Brad Hatch, 2007b

For an organisation, the sequence is start up (1), growth (2), control (3), maturity (4) and shake out or decline (5).

Even Philosophies Have to Reinvent Themselves

Inclusive Capitalism

Capitalism is trying to reinvent itself away from its primary focus on profitability and shareholders to community concerns. This is a follow-on from

- the negative impacts of the GFC (widespread anger against corporate and political elites with more and more people feeling marginalised, challenging the concept of the wisdom of unfettered free market, etc)

- society's increased focus on environmental issues, like climate change, sustainability, etc

- increasing popularity of concepts like

i) Benefit Corporation (B Corp) (around 2006 a framework was developed that required managers to not just chase financial metrics for shareholders but to look at environmental and social goals as well, ie non-monetary factors

ii) environmental, social and governance goals (ESG) (mainstream was adopting this concept)

- minimal non-wage growth despite booming corporate profits and executive pay

"...decades of shareholder primacy had - unsurprisingly - left Labour losing out badly to capital, (ie investors) and executives. By 2007, chief executive pay was 345.9 times that of the average worker, up from a ratio of 29.7 in 1978 - and Labour's share in the overall economic output in America (ie wages) had fallen steadily over the same period, even as corporate profits boomed...... today dividend payouts and management equity issues at companies are worth almost 100% of after-tax profit; in 1972 these payouts were just 24%, since spare cash was being invested or paid to workers..."

Gillain Tett 2019

For many decades companies focused on sustainable profitability and felt no social responsibility to the public or society. They were solely responsible and accountable to their shareholders. This has changed. In 2019 around 200 American chief executives issued a collective statement on the purpose of a corporation

"...that abandoned their sole adherence to shareholder primacy. Instead the group......pledged a fundamental commitment to all our stakeholders..."

Gillian Tett 2019

NB The origins of the word "company"

"...to day this invokes images of balance sheets and profit margins. However, company actually arose from the 12th century French word "compagnie", a "society, friendship, intimacy; body of soldiers", which hails from the late Latin phrase "companio: one who eats bread with you". Commerce, in other words, was initially synonymous with social ties..."

Gillian Tett 2019

 

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