Ants, and other members of nature’s resource recovery team, help clear away the dead-wood from the environment. Our economies also need a bit of a prune now and then. We’re not getting it right now, and the longer it goes on, the bigger the risks become.
A life without ants is not worth living.
Who would clean up all the mess?
There are 1.5 million ants for every human on earth. Even though they can weigh a fraction of a gram, they account for about the same total biomass as humans.
There’s a lot of them. And they’re part of the Earth’s resource recovery unit. Along side, fungus and bacteria and a bunch of other bugs, they’re on clean up duty.
They take dead animals and plants and break it down. They recycle all this bio-matter into compost to feed back into the creation of life. They eat dead lizards so we can eat lettuce and hold hands and sing ‘It’s a small world after all.’
They are the archetypal destroyers.
I quite like the way they map it out in the Hindu faith. God takes three forms: Brahma the Creator, Vishnu the Sustainer, and Shiva the destroyer (sometimes expressed as Arnold the Terminator).
You need all three to keep the world ticking over. Without the destroyer element, the world would just get full. Endless creation would just end up in more and more stuff. The world would get cluttered. It would be practically impossible to find your keys.
And eventually, creation would drive itself into a dead end. There’d be no more room for creating any thing new. No resources to make anything new with.
Everything would stop.
No holding hands and singing then.
And the economy works the same way.
Business are born. They live and thrive. They adjust to new realities, and if they can’t, then they die. It happens to the best of them.
Their resources then become the compost that nourishes the next generation of businesses. The office gets refitted. Their line of credit gets directed somewhere else. Their typewriters become art installations at hipster cafes.
And ‘progress’ is driven by a Darwinian engine of evolution. Businesses with cumbersome systems and processes die out. More efficient businesses take their place.
The average standard of business practice gets better – more efficient. As a society we achieve more with the same amount of resources. We get better at giving people exactly what they want.
This, in the capitalist doctrine, is progress.
Now the system’s far from perfect, and there’s a lot more to quality of life that an efficient business community. But still, it seems like an important thing to aim for.
And the capitalist machine doesn’t really work with out it.
We need a vital destroyer element because we need growth.
The modern economy is like a shark. (Guess who’s been watching a lot of the Nature Channel lately…) It needs to keep moving to survive. If it stops, it dies.
And as we bump up against harder resource constraints, we’ll need to source growth more and more from innovation – finding better, more efficient ways to do things.
And this ‘business composting’ mechanism is one of the best drivers of innovation we have.
But it’s in trouble.
Low interest rates are a ball and chain around econo-Shiva’s ankle.
Because low interest rates mean that inefficient businesses can drag out the inevitable.
Rather than face foreclosure and bankruptcy, they can just keep rolling over their loans. As long as they can keep hitting their repayment targets out of their measly revenue, they can keep shuffling along the road.
And the lower rates go, the smaller and easier those repayments become.
It stops mattering how good you are at business. It stops mattering how profitable you are.
All that matters is that you can eek out enough revenue to keep kicking the can down the road.
At best, it removes the pressure to get your house in order and find more profitable ways of doing things. At worst it creates an economy of living-dead zombie businesses.
Low interest rates become a life-support for terminally ill corporations. But we don’t want to prolong their misery. It doesn’t do them or us any good. We don’t need to keep them alive at all costs. We need to let them die with dignity, under the loving pillow of disciplining financial conditions.
Take a look at this chart here. This is monthly bankruptcies in Australia.
There’s been a clear downward trend emerge over the past couple of years. In some ways, obviously this is a good thing. But it hasn’t been driven by a surging economy.
Which to me suggests that it’s been driven by falling interest rates… I’m not sure that’s such a great thing.
And sure, bankruptcy is a hard story for the business owners and staff. I can see that.
And if we erode the dynamism of the economy in the process by keeping zombie companies alive, then everybody loses in the long run.
More tough love from Jon.
But I also don’t really know what the solution is. I’m certainly not advocating raising interest rates just to get a bit of blood-letting going in the business community.
But this is one of the many new challenges that come with life in a low-interest world. And I’m not sure many people are awake to it.
So what do we do? How do we create dynamic business environments?
How do we empower the ants, so the creators have room to create?