Uncomfortable message

World Economic Forum is a place for the big brains, big business, big people to get together and set the theme for the coming year. People from all over the world throng it with the wish to learn, connect and to be seen with Who's Who. This year's event was marked by the marked absence of political glitterati such as Trump, Marcon and Merkel due to domestic woes that needed more attention. However big business and big institutions were there to dole out advise, forecasts, recommendations and warnings.
The major theme for this year's WEF meeting was "Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution". The theme touched on important challenges that businesses face in the context of distortion in globalization as unrest and disenchantment rise form underdeveloped countries. The digital disruption in the world has far reaching consequences beyond just another industrial revolution. The impact of countries, companies and institutions trying to create a global world through size, scale and structure strategically and operationally is being disputed relentlessly. While the 21st century onset heralded one world, more equality, more accessibility etc, two decades later, these very claims have become questionable.
The traditional state giants like the US and the UK are beset with polarized domestic politics. The traditional corporate giants in the banking and auto industries have still to recover from the 2009 recession. The traditional big institutions like the IMF and the World Bank are also viewed with suspicion and wariness. This has made the world a place of uncertainty and unrest. For growth and development both of the above have a degenerating impact. With this fuzzy global view the big speech by Christine Lagarde, the head of International Monetary Fund has added to the direction deficit for 2019. Interestingly her remarks about the role of big consulting made headlines but her other remarks about corruption control hardly made news.
During Lagarde's speech, she also addressed "the McKinseys and Boston Consulting Groups", and any consultants in the room, to listen to her uncomfortable message about the way their work is perceived. Lagarde warned, "I see many, many low-income countries and emerging-market economies spend millions of dollars commissioning consultants to build their strategy plans. While this is good advice to others it does not seem credible coming from an institution that has long been seen as an imposer of policies and plans that are costly in terms of the very principles that IMF has been founded on. IMF's mission says its purpose is to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. Results all around the world including Pakistan show that its programmes have generally created more unemployment and poverty in the countries they have worked in.
Of course, the IMF is not to be blamed entirely for the inability of governments to carry out serious reforms and make structural adjustments required. However, structural adjustments and reforms require three pre-requisites. Firstly, they cannot be a cut, chop, impose process. For example, privatization of non-performing public sector enterprises is a prime requirement of IMF. However in under-developed countries this process is beset with two major issues-employment of hundreds of thousands of low income workers and secondly the pricing of the asset to be sold off. The PIA and the PSM are examples of these hurdles. Previous governments have tried to turn them around but political and unprofessional appointments enhanced corruption. Thus for an airline that is bleeding billions and has an accumulated loss of Rs 403 billion, finding a buyer to get a reasonable price is an unreasonable expectation. Similarly, PSM is shut down but its workers have to be paid unpaid salaries of many months. All attempts to sell it by the previous government failed. Even when the federal government tried to dump it on Sindh government a few years ago they did not succeed.
These are some examples of why IMF has never really been instrumental in creating financial stability. The problem with IMF or for that matter Mckinsey or other consulting groups is that their solutions sometimes miss the local and socio-cultural context. Lagarde in her speech made a special mention of Boston Consulting Group's one of the examples of consulting firms that are not very useful for under-developed countries.
Boston Consulting Group has a very famous model of Growth and investment for organizations called BCG model. In this they analyze organizational market growth and Market Share to decide to invest or divest. The model advises to put your products or strategic business units in four categories - Stars, Cash Cows, Problem child and dogs. This they say makes investment decisions simple as you need to invest in Stars, Milk the Cash cows, Reform the Problem child to convert it into stars and disinvest in Dogs. Looks very logical. However what do you do when your stars are just burning stars that appear good, like a Metro Bus Project but has huge corruption holes in it; what do you do when the Problem child has serious psychological issues like PTV that the minute you try to make its idle capacity more productive its employees go on strike? And as for dogs to be disinvested their loyalty to certain political causes allows them to keep on wagging their stale tail.
The message given by the IMF Chief has important lessons for not just Boston Consulting, McKinsey, etc., but for the IMF chief herself in particular. Globalization was a concept that was misapplied. It had two basic issues. It was used selectively by big business and big institutions to impose their way of thinking and doing. Secondly, local adaptation was never considered important as the small did not really matter. Things have changed. Power nexus has shifted. 'Smalls' are getting 'bigger' and bigger are getting smaller. Social media has created a voice and visual for everyone to see and speak. In this changing scenario, lofty and noble statements at mega conventions are not going to be the annual gospel for the new world order. The title of the World Economic Forum itself signifying the 4th industrial revolution needs a revisit. It is more of a 2nd knowledge revolution where apps are replacing industries and intelligence and smartness is replacing standard global models and templates. The time for instructions and preaching self-proclaimed "Best Practices" is over and the time for practicing "glocalized models" has arrived.
(The writer can be reached at [email protected])