It's A Deal
September 24, 2009
The Economy, Normalized
Add one more catchphrase to the litany of those that have been used ad nauseum during the life of the financial crisis: "the new normal." It's a sentiment poised to take its position alongside "thawed credit markets" (on the heels of "frozen credit markets," of course), "financial tsunami," "worst crisis since the Great Depression," etc.
We'll see if it sticks -- remember, another "new" of a decade ago, that of the "new paradigm," didn't last too long -- but it's all the rage right now.
Ten economists will have 11 different visions of what "the new normal" means specifically, but the high-level view is pretty straightforward: get used to slower economic growth, lesser returns on your investments, and higher unemployment. As McKinsey put it in a one-year look-back at the crisis, it's "for many companies, an environment less comfortable than the one they knew in the pre-crisis world."
That's hard to argue for most firms, save the restructuring shops, but all the same it would be a mistake to attach any kind of permanency to this "new normal." We're a creative lot.
Indeed, in that same McKinsey report, in which the management consulting firm heard from nearly 1,700 executives in a broad range of industries and from regions around the world, innovation was a key theme, with more than half of the respondents saying it's even more vital to growth now than it was before the crisis.
That's not a new sentiment; even back in January, in a decidedly less cheerful environment, executives said that the best thing governments could do to help industry would be to support more innovation.
So, maybe one positive, longer-term development to come out of the recession is more focus on our need to be innovative. (Just don't tell Wall Street.)
Of course, if we don't start making nice with some of our partners, we can innovate all we want and it won't amount to much. The spat going on between the U.S. and China over tires and chickens, for instance, doesn't necessarily bode well for another hope of many executives around the world: that countries will continue to ease restrictions on international trade.
Forty-two percent now expect international trade to rise in the long term, up from just 16% in January. (The McKinsey poll was done just before the flare-up between the U.S. and China over trade.)
One last data point from McKinsey's survey: 44% of those asked believe that the commitment to free-market economies will be lower than it was before the financial crisis. If that turns out to be true, it'll take all the innovation we can muster to keep growing.
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