The new world order with regulation is now emerging.
Gone are the days when the so-called "free market" was the only game in town. We are now seeing a reappraisal of the "free markets" notion. Governments and investors are starting to realise that this does not mean total deregulation of financial institutions and financial instruments. There has to be a role for Government supervision.
br />What that means is that we are in for a period of more regulation, in just about every area. As this latest piece in the McKinsey Quarterly points out, it's all part of a new pattern.
"Tight credit; looming energy, food, and water shortages; and greenhouse gas emissions are high on the minds of business leaders as well as politicians. Consumers too are increasingly worried-and aware that an interconnected global economy means interconnected global problems. They hear about ice caps melting and banks collapsing in distant countries and know that all this matters to their lives, their jobs, their homes, their families. What's more, they expect companies to help alleviate these problems. Such developments underscore the expansion of the "social contract" between business and society. The contract includes not only laws and regulations but also a growing obligation for companies to fulfill certain social responsibilities.
What that means is that companies will be forced to deal with regulators in new ways. The folk at McKinsey say that the only way they can address this is with a new model of open cooperation with regulators. Whether that works or not remains to be seen. What's clear however is that this is a new order. With the global economy expected to bubble along with, at best, sub-optimal growth for the next few years, we are entering a much tougher period of regulation.
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