PHOENIX
Difficult Choices in Challenging Times
Is AI content amplifying the geopolitical issues that global trade faces at the moment?
During an oil crisis, managers and business owners think more deeply about capital formation, capital movements, and, ultimately, the profits that drive the market system. But how does an oil crisis reshape ideas about sustainable capitalism?
After the 1960s incredible growth in jobs and living standards in developed countries, the 1970s were a big reality check. The oil crisis of the early 1970s undid many certainties for capitalism and the market economy. As an almost irreplaceable input cost, the world realised in 1973 that oil prices influence all aspects of the economy.
Real wages stopped growing in the 1970s. After buoyant industrial and manufacturing jobs, with excellent wage growth throughout the 1960s, the 1970s saw stagnant wages. With high inflation. If we think back to the automotive aftermarket, during the 1960s, the American auto industry was globally dominant. By the end of the 1970s, the signs were there that that would no longer be the case.
Detroit was Motor City in the 1960s. By the start of the 1980s, larger areas of the former automotive production hubs, office spaces and the neighbourhoods built by those strong auto assembly and component supply chain wages from the 1960s, were in despair. The geopolitics of the oil crisis and its influence on the product, were misunderstood by many American auto industry leaders. But their miscalculation during the crisis benefited others. And that is the peculiar truth of capitalism, the market economy, and opportunity: losses aren’ t absolute, and gains aren’ t guaranteed.
The Japanese automotive industry developed products that were the best response to the 1970s oil crisis. Compact, economical and well-built, this decade was defining for the Japanese auto industry. But capitalism and the market economy doesn’ t reward temporary excellence or dominance in perpetuity. It rewards adaptability and innovation.
Today, the Japanese auto industry is struggling. From its decade of global dominance in the 1990s, it has not retained the scale and innovation across all its corporate entities. Some Japanese auto companies remain global leaders. But several are struggling.
What is the lesson of all this in a time of global volatility and an oil price which is creating anxiety for everyone, from cargo fleet owners to automotive aftermarket suppliers who need to source polymer materials for component production? It’ s important to consider the realities of oil exploration and production.
Venezuela has been in a market crisis for more than a decade, despite having enormous proven oil reserves. Is that symbolic of an inevitable crisis? If you think deeply about it, it isn’ t. Because Guyana shares a border with Venezuela. And proves what motivated capital can do. A small South American country that only discovered oil in 2015, Guyana began producing oil in 2019, and is now delivering 900,000 barrels of crude a day. Guyana has also created an oil revenue sovereign wealth fund, which, in a short period, has accumulated $ 3,43 billion for the government budget.
Context matters during an oil crisis. Lost in all the AI content noise about events in the Persian Gulf and oil price fluctuations is the significance of emerging oil suppliers. Countries like Guyana. It’ s unwise to waste a crisis. There’ s always an emerging innovation nation, ready to supply and create new trade and business links whenever a crisis arises. In this oil crisis, Guyana is one of them.
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