McKinsey has documented events following major recessions in the US since the 1770's. (see image above) It's an interesting take suggesting that all major recessions lead to both significant increased regulation combined with social unrest and/or war:
History provides three clear lessons: first, reforms followed every major US financial crisis that led to an economic downturn. Second, the length and severity of the postcrisis recession have historically been approximately proportional to the degree of change that follows the recession. Finally, the resulting shifts commonly extend well beyond the financial-services sector.
Paul Kedrosky says that the Willmott interpretation is 'wonky.' I'm not so sure. McKinsey's analysis calls upon a lot of history that would support the theory. While history dioesn't necessarily repeat itself, it often echoes loudly. The question for professionals is whether the flow of increased regulation will help protect clients and move business towards greater transparency. Government track records are not good in this regard. It is notable that in the US, the Federal Reserve, which remember is a private corporation accountable to no-one, has been given more power in recent times. One view of McKinsey's analysis might say that the repetitive nature of boom-bust always leads to more power concentrating in the hands of a few.
At the grass roots level, I am getting almost daily calls from colleagues and friends, fearful of losing their jobs/homes or having been recently RIFed (reduction-in-force, the new term for laid off.) There is a genuine fear, especially among my American friends that this recession will bring real hardship to many people. I don't see that same fear but do know it does strange things to people. The flight to survival mode is very real and fully understandable, even though it is exactly the wrong thing to do. If economic conditions are prefacing signficiant industrial change then now is the time to be drawing on the lessons of the past and looking towards re-invention. That's where professionals could prove invaluable. Whether they see it in such terms is another matter as they tend to have risk averse, cautious DNA.
On the other hand, Francine McKenna questions the extent to which the current shake up impacting the US profession is little emore than 'business as usual:'
If I had listened to Mark Olson's speech live, The PCAOB Supervisory Approach and Current Market Challenges, after reading the Report on the PCAOB's 2004, 2005, 2006, and 2007 Inspections of Domestic Annually Inspected Firms, I would been compelled to ask,"Is he talking about the same firms?"
While in Paris, I had a brief discussion on a related topic with Steve Gillmor. I said that Obama's election has echoes back to 1997 when Tony Blair came to power. Gordon Brown it seems held the real power throughout Blair's presidency PM'ship. Obama has brought Hillary Clinton on board, effectively co-opting the Clinton Clan to power. I wonder whether history will repeat itself in the US such that the real reforms the world needs will be significantly diluted. We cannot know the answer today but as I said to Steve: "Watch out for emerging parallels." Steve's response is one of optimistic wonder. "Who would have thought the US could ever elect a black president yet here we are?" We thought the same when Maggie Thatcher came to power and look how that ended.
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