Government responses to the economic crisis have been trial and error
We have been watching the economic crisis unfold for six months now and have listened to various government pronouncements on how they are going to solve the crisis. We have heard pronouncements on more spending to revitalize economies. We have watched taxpayer money being spent to rescue failing financial institutions and corporations and purge “toxic assets”. We hear about the need for new regulations to “prevent problems”. We see governments tinkering with money supply and interest rates. We see many examples of the failures of government regulatory agencies to exercise their responsibilities. But, we see absolutely no effort by any government to understand the real problem underlying the economic crisis and to take action to solve the real problem. So far, we see no positive impact on the economic crisis for the public, due to government measures. The upcoming G20 meeting can only repackage old unsuccessful measures as the “new solution”.
Governments do not address the problem that caused the economic crisis
Government measures address the impact and symptoms of the crisis and not the cause to prevent future crisis. The European Union, for example, announced a strategy with three building blocks: 1) to restore confidence in and the proper functioning of financial markets, 2) to strengthen the resilience of the financial system, and 3) to dampen the impact of the financial crisis on the real economy. This strategy and other government strategies address the effects and symptoms, but contain no measures to address the real problems that cause crisis. Enormous sums are being spent to restore confidence in ineffective 20th century enterprise management methods, but no money is being spent to implement new 21st century business management methods needed to solve problems.
Governments do not have the information to regulate financial institutions and corporations
The economic crisis shows clearly that governments do not have the information needed to regulate the businesses of financial institutions and corporations. As a consequence, problems were allowed to continue and investors lost enormous sums. 20th century accounting posts arbitrary entries against arbitrary accounts. Financial statements and compliance reports can be skewed to show the reporting enterprise in a favorable light. Auditors check that rules were followed in doing this. No actual business information is reported and auditors do not understand or assess the actual business.
Governments need to look deeper at the crisis
Government and expert analyses of the problems are very superficial and identify symptoms of other symptoms as the real problem. Some say that the crisis was caused by the burst in the housing market. Some may go deeper and say the cause was mortgage-based financial securities. Some may go deeper and point out government measures to loosen lending restrictions and push risky lending so people can own their own homes. But these conclusions simply point out mistakes made along the way and the symptoms of the mistakes. Some governments and commentators have pointed out the need for a new structure for financial, corporate, and economic management and new best practices for business management. But, no one has pointed out what the structure or practices should be and how they would solve the current crisis and prevent future crisis.
We must go much deeper to find out why banks are not able to manage their loan portfolios, government regulators are not able to manage banks, corporations are not able the manage their businesses properly, and why the whole financial and corporation management system has crumbled. Then we can understand the best business management practices needed and the structure needed to manage businesses, corporations, financial institutions, and economies.
Only one fundamental problem caused the economic crisis, the failure to manage the business
The structure needed for financial, corporation, and economic management has existed all along, but has never been used. That structure is the business. As we explain in many articles in 21st Century Management Magazine, only one problem caused the economic crisis: the failure of financial institutions and other corporations to manage the business. Organization charts, corporate plans, business processes, charts of accounts, performance management, and compliance structures are laid over the business instead of organizing, planning, directing, controlling, reporting, and governing the actual business.
The actual business has never been organized and managed
The business is “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. Since the business is not managed, financial institutions and other corporations do not capture actual business data and do not have the information to manage capital worth (called asset value) and other capital measures, full costs incurred and other performance indicators, and value created and other economic output result metrics. Corporations cannot consolidate the business and manage the various units around the world as one whole. Governments do not collect actual business information to regulate financial institutions and corporations effectively, to manage industries, such as the financial and automotive, properly, and to build an economy structure to manage economic cycles and prevent crisis.
Read articles under “The Only Solution to the Economic Crisis” for descriptions of business management. Other article categories explain specific 20th century enterprise management problems and specific 21st century business management solutions
Result-performance Management (R-pM) provides the knowledge for actual business management
Result-performance Management (R-pM) is the only source of knowledge and expertise on how to manage the actual business. Forward-looking enterprises are now using R-pM guidance to organize and manage their business to gain breakthrough advantages over competitors burdened by unsolvable 20th century management problems. Business management is explained and documented in the Business Management Toolkit. The Toolkit provides procedures for actual business management and maintains emerging 21st century management conventions, definitions, and standards. Management consultants who base 21st century business management services on R-pM knowledge are licensed to help enterprises learn, organize, and manage the actual business. R-pM and business management are supported at result-performance-management.com.
The Solution to the Economic Crisis is explained in free downloads
Three free white papers explain the dead-end 20th century management problems, such as the failure to plan, account for, and manage the actual business, that caused the economic crisis, the way to eliminate the problems, and a government program to address the crisis by stimulating the economy, solving the problems, building a structure for financial and economic management, and organizing local businesses to flourish in the eventual recovery.
- How to Eliminate Problems that caused the Economic Crisis explains the major unsolvable 20th century management problems and the solution to eliminate the problems
- Business management; the only Solution to the Economic Crisis explains how to plan and manage the business to capture business data and provide management the information needed for actual business, corporation, industry, and economic management
- A Government Business Management Program to Answer the Economic Crisis outlines a government program to encourage business management, stimulate the economy, restore confidence, organize businesses to flourish in the recovery, and manage economic cycles to prevent future crisis
These three white paper downloads are available to R-pM Community Members at result-performance-management.com. There is no cost or obligation to join the R-pM Community. Join by entering your email address and personal password. Your email address is protected and used only for download problems, product updates, and occasional R-pM Member news and white papers.
