While the mobile phone will make life tough for economic managers: Gottliebsen

Apprehension about the new media driven by mobile phones unites leaders in India, Europe, the Middle East and even the US. And in time that apprehension may encompass Japan.

The advent of mobile phone-driven media and communication has given the unemployed, the poor and other disaffected people the power of communication and crowd mobilisation. The 2011 Hayman Leadership retreat spent much time focusing on the implications of this to wider areas such as business and the future role of central banks. Accordingly, it becomes the third leg of our global road map.

What we have seen in London and the Middle East is part of an extremely powerful new media reality which will require different strategies by governments, companies and others affected by it.

Whereas communication – including TV-conveyed film communication – was once dominated by established media units and governments, it is now also the province of the mobile phone and the public.

What caught my attention at Hayman was the situation in India, which is one of the emerging centres of future global growth. In the poorer parts of northern India there are Maoist political parties and large segments of the population who are both short of food and cannot read or write. Today’s Liddington-Cox graph shows the staggering growth of mobile phones in India – from 100 million to almost 800 million in just five years.

India’s poor may be hungry and illiterate but they have mobile phones and so are connected together and exposed to the wider world in ways not previously possible. So the events in the Middle East must be of great concern to the middle class in India. In Europe, the African and Middle Eastern migrants who dominate the unemployed population also are well equipped with mobile phones.

The mobile phone and the computer have created a public media space which is, of course, highlighted by the recent revolutions and riots but also requires much faster reactions to events from corporations and government, as we saw with BP in the Gulf of Mexico.

Most central banks around the world have an anti-inflationary agenda, which has contributed to the long-term prosperity of many nations but can also involve extended periods of hardship. But anti-inflationary policies are going to be harder to maintain in this new world.

I will never forget some two decades ago, the CEO of a major global bank pointing to a table of central bankers at an international gathering saying: “They are all dinosaurs because eventually populations will not stand for the unemployment that goes with slow growth.”

China is showing the way. While growth has slowed it has remained strong and inflation is 6.5 per cent, or more than 50% above the target of 4%.

Interestingly, even in Australia unions are taking aim at the Reserve Bank (albeit unfairly). It is a sign of what will happen when unemployment in non-mining Australia rises.

The Chinese have understood these forces for a long time, which is why they know they must maintain high growth to absorb their growing workforce. I concluded at Hayman that once the growing economic turbulence has subsided, governments and central bankers will simply not have the option of pursuing low growth, high unemployment strategies. In many countries, if they do attempt such a strategy they will not be able to control their populations.

This is a very new phenomenon, so longer term be prepared for higher inflation in countries where unemployment begins to rise. 

Japan has been in the doldrums for more than two decades. Its young people have been hit hard but have accepted their lot. The role of the Japanese prime minister has been a revolving door for a long time. 

For most of the 1990s the Japanese denied they had a banking problem, which is akin to what the European central bank is doing now. Then for the next decade, when the problem was publically recognised, the Japanese were not able to take the actions required to rectify the situation because of political forces. 

Japan will remain in a prime ministerial revolving door scenario until they find a prime minister who will reinvigorate the workforce with migrants and invite overseas capital into the country. I am not sure the current prime minister is going to do that but there are others in the wings who understand what is required to get Japan back on track.

This article first appeared on Business Spectator.