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Monday, March 16, 2009
Survival instincts need rethink before killer disease spreads
By NORIKO HAMA
We used to think that SARS was the killer disease. No doubt it still is. But at least it seems dormant for the moment. In its place we now have a potentially more potent epidemic going around that looks set to engulf the whole world. I hereby christen that disease SLICS. This is short for "So long as I can survive."
Banks caught it, companies caught it, the people caught it and now countries are getting it — So long as I can survive, it really doesn't matter what happens to others.
This mentality is catching on with alarming speed all over the world. Banks are not lending because to do so puts their own survival at risk. To be sure, being extra cautious about whom you lend your money to is the sensible thing to do in uncertain times like these. And since you might not get it back, you might as well secure a lot of collateral while you're at it.
All of this comes off as sound business instincts. You really cannot blame individual banks for being prudent under adverse circumstances.
Yet if all the banks around the world started to behave in this prudent way, money would stop flowing. And when money stops flowing, the global economy stops moving. At that point, SLICS turns into SMDs, that is to say, "Strategies of Mutual Destruction."
Precisely the same thing can be said of companies that are trying to survive the global depression by firing lots of people.
From a SLICS perspective, it makes sense to slim down in times like these. Again, individual companies cannot be accused of anything more than following their self-preservation instincts as they cut back on workers in line with shrinking demand for their products.
This is completely rational behavior in times of hardship. But when all companies everywhere adopt the same approach, the global economy becomes awash with unemployed people. Unemployed people do not buy things. When people stop buying things, no amount of downsizing will help keep a company afloat.
Needless to say, when nation states catch the SLICS virus, the whole global economy is in big trouble. SLICS is another name for what economic textbooks call beggar-thy-neighbor policies.
Nations have been warning each other since the global credit crunch hit last September not to resort to such policies. Yet none of them really seem that determined to resist the SLICS mentality. It seems to be a case of: "Make me SLICS-free, but not today" for all concerned.
The surest antidote to SLICS has to be SLYCS, that is, "So long as you can survive." If all nations decided to ensure each other's survival rather than their own, all our problems would be solved.
The same goes for companies and people. If Toyota were to introduce a company rule that says its employees shall buy only non-Toyota cars, and Nissan were to decide its employees should buy only non-Nissan cars, that would be a good way to embark on the SLYCS cure.
Likewise, the United States should replace its "Buy American" laws with "Buy Non-American" ones, and China and Japan should start buying "shiitake" mushrooms from each other rather than trying to shut each other out of their own markets.
SLICS is ultimately self-defeating. We all know this. And yet the terrible thing about this disease is that knowing the consequences does not make us immune to its effects. We are all antiprotectionists until someone else becomes protectionist. Once somebody succumbs, the disease spreads like wildfire. It is the opium of the escapist. It is about time to start a "SLYCS not SLICS" campaign.
Noriko Hama is an economist and a professor at Doshisha University Graduate School of Business.