In the news today are two enterprises whose fortunes have diverged so dramatically over the past decade that I wish to comment. I think that the Austrian economists Schumpeter and von Mises would also have been impressed.
On the one side is an ancient people whose government borrowed hundreds of billions of euros over about the past decade and is within a day of announcing whether its Private Sector Initiative to restructure its debt will go through in some form. What happened to the vast amount of credit that was extended to this government has not been publicly disclosed. The bottom line is that so far as the lenders go, the money was grievously misused.
On the other side of the ledger is a company that was nearly about to lose its independence in the late 1990s. A new management team came into place. Borrowing no money and selling no stock to the public, the company executed a turnaround of an epic nature, one that some modern Homers have chronicled, and despite eschewing financial leverage, now has as many or more unencumbered financial assets than the entire market values of such titans as McDonald’s, PepsiCo, 3M, and Verizon. And of course is the the world’s most valued company by market capitalization. And is engaging in extreme creative destruction, to the point that its well-publicized new product introduction scheduled for a few hours from now has by itself helped take the modern machine that changed the world–the personal computer that this very company more or less invented more or less in a garage– on a path to stagnation and perhaps decline.
I think that both the Austrian economists mentioned above would have had a number of comments on lessons they could have drawn from the above dichotomy.
Now, all that said, what the future holds for either of the above enterprises is another matter. The past and present are well-described. Will the Athens Stock Exchange soar from here? Will the company named for a fruit featured in an introductory scene in the Bible ultimately stumble and even get RIMMed, its products outcompeted by a known or unknown other One?
The world, filled with billions of economic actors, most of them individuals but also including governments and their central banks, corporations, other unincorporated businesses, charities, religious institutions, etc., has so much variety and complexity that one can find both uptrends and downtrends at the same time. Sometimes the wind blows from the east, sometimes from the west. Not to mention not blowing at all, or swirling. If all the satellites, other measuring tools and supercomputers to crunch the data cannot, even now, reliably predict tomorrow’s weather, how can it be possible to predict the future course of all sorts of economic events more accurately than that engendered by prices set by all market participants taken as a whole?
And how is it possible for one central banker and his committee, invested with great powers, no matter how hard-working/brilliant/responsible, to always get it ”more right” than a free market would?
(Note: Long the fruit)