Bain chairman sees many questions, few answers at Davos

by Vault Consulting Editors | January 27, 2011

  • My Vault

"The biggest decisions affecting the recovery will be made, or not made, by governments." So says Orit Gadiesh, chairman of Bain & Company, in closing remarks published ahead of the World Economic Forum at Davos. According to Gadiesh, the nature of the economic recovery will be largely dictated by "which economic advice Western nations turn into policy and whether countries worldwide can develop unprecedented levels of collaboration to jump-start aggregate demand." In her op-ed, published in the Times of London this week, Gadiesh discusses the critical role of government reluctantly, preferring to discuss Keynes and world water shortages than to dish her own perspective on what governments will or should do. Of course, she's built a remarkable career telling businesses what they should do, and she doesn't disappoint here; it's how corporate leaders respond to government action/inaction and economic trends that will shape the post-crisis business landscape, she says.

Gadiesh starts eloquently, waxing poetic about "the idling engine room of the global economy." That engine room, she says, is manned by consumers who have moved to save, rather than spend, their hard earned cash. The same goes for governments at all levels; local and state governments, for example, have sought desperately to cut costs and level their budgets. But austerity measures aren't a silver bullet for the world's economic woes, Gadiesh warns, citing China's continued economic successes as fueled by a "huge government stimulus plan".


The head Bainie also touches on a few classic sources of economic debate: Keynes, inflation/deflation, interest rates. Her purpose? The real problems facing the world require "unprecedented" levels of international cooperation; countries going it alone just won't cut it. She drives her point home with skill, citing an imminent world water shortage and worrisome population trends as spectacular examples of problems that require the world community's undivided and coherent attention. Our problems are global problems, she says, so it takes the whole world to address them.

So, if it's all about government, where does business fit in? "Even though business leaders cannot control fiscal policies, demographics or resources," Gadiesh explains, "part of the job is to stay close to these issues and anticipate the necessary adjustments required of the business." One "necessary adjustment" that businesses need to move quickly to capitalize on is investment; corporations currently have more cash than ever before, she says, so every "chief executive should have a clear and well-developed set of priorities for strategic investment and the right criteria to move quickly when the opportunity arises." Companies also need to diversify, says Gadiesh; diverse assets, services, and even geographies are key to avoid risks posed by political and economic changes around the world. Business leaders need to ask themselves: "What alternatives have you prepared?" "If the answer is 'none'," she says, "you have not been doing your job."

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Filed Under: Consulting

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