Linking Economy with Ecology: Making Sensible Decisions
Ecology is the study of the distribution of life and its interdependencies. Ecologists tell us that every living organism on this planet has a shared need of food and shelter from the limited resources available. There has thus always existed a struggle and competition for the acquisition of those resources which not only resulted in the survival of the fittest, but also created a sensitive balance between the organisms. Tampering this balance has never been a good idea. This is the fundamental principle and rule of our planet. This is the theory of natural selection.
A recession can be defined as “a decline in a country’s GDP for two or more successive quarters of a year”. A wide range of philosophies are available on dealing with the risk of recession and most of them were debated in length during the recent election process and presidential campaign.
Keynesian economists are in advocate of Government spending in order to stimulate growth. The laissez-faire economists suggest simply that no one should interfere with the forces of the natural market. With so many different and diametrically opposed theories coupled with astounding uncertainty, it is very difficult to comment that which is the right risk management strategy.
As the year 2008 passed and turned out to be “The Bailout Year”, the argument presented by the Keynesian economic doctrine prevailed. However important questions still remain to be answered. One cannot comment that whether such huge amount of capital injected will provide the liquidity to the system which is desperately needs? The problem is that the Troubled Asset Relief Program(TARP) has not been able to fundamentally alter the risk landscape.
If we stick to the laissez-faire economic philosophy, which is very much similar to the rules of Ecology described in the beginning, then we should do nothing at all at the moment. It may seem harsh but shouldn’t we let those organizations “die” which were unsuccessful in the survival of the fittest? We would thus witness the preservation of those which are favored in this process of natural selection and struggle for “life”.
We should count on the full restructuring of our banking system. Banks will get smaller, some will vanish but there will eventually be a creation of banks with cleans balance sheets. This is a natural process.
The question remains that will we have enough courage to allow the process of natural selection to continue so that our generations to come are stronger, smarter and healthier? Or will we tamper the sensitive balance?
