I find myself being grimly vindicated by the fruition of the predictions I had made in previous editions of Climate Control Middle East about the rough course of the global economy. The trifecta of challenges hitting the global economy at once in the period 2020-2022 – the coronavirus pandemic and the lockdowns; the productivity sluggishness; and the supply shocks brought about by increasing geopolitical fissures, including the Russia-Ukraine War as well as US-China tensions – have slowly begun to bear its grim outcome on the world. The series of interest rate rises in the United States by the US Federal Reserve and the domino effect of that on interest rates all over the world is also being felt, in the form of higher borrowing costs and liquidity crunches.
A few banker colleagues I spoke to over the past few weeks have openly confided in me about their industry’s “anticipation” of a global slowdown in 2024. In other words, they have seen the icebergs in the distance and are preparing in advance to launch the lifeboats. Jack and Rose – you and I – are we still dancing?
To my mind, the phrase that has been carrying us through most of the year, and that which will be our pole star for the remainder of the year well into 2024, is “soft landing”. Everybody is trying to achieve that – in multiple human endeavours – some better than others. In space flight and exploration of interplanetary bodies, such as the Earth’s natural Moon, we have had multiple countries try and achieve a “soft landing” of their space contraptions, rather unimaginatively but practically called “landers”. Many have succeeded, many have not.
India achieved the difficult task of achieving a “soft landing” for its lander/rover module, called “Vikram/Pragyaan”, part of its “Chandrayaan-3” mission, on a location in the Moon’s South Pole region, a world first. It beat space superpower, Russia to the task, whose Luna-25 mission unfortunately ended up a sorry wreck on the Moon’s surface. There is something poetic about the success of India’s long-winded, well-prepared, slow, steady, controlled and pragmatic approach to achieving the “soft landing” of its payload, which is about the weight of a minibus (3,900 kilograms), when contrasted with the seemingly hurried approach of the Russian mission to the same objective.
And there may be learnings from the contrasting outcomes of these moon missions for economics, as well, given that the aim of most countries in the world for the remainder of the year, and into the next year, will be to achieve a “soft landing” here on Earth. This applies to our companies and enterprises, too, as we navigate extremely troubled times and, perhaps, a phase in the business and wider economic life cycle, which can broadly be termed as “productivity fatigue”. Our companies, too, led by their management and answerable to multiple stakeholders, are trying to achieve a “soft landing” in the face of multiple economic, political and environmental shocks.
The Indian mission was characterised by its immense creativity in the face of biting constraints, and leveraging of the natural gravity of planetary bodies to “slingshot” itself between them; one, “out” from the Earth’s gravity through controlled bursts of fuel to accelerate the mission vehicle into ever greater orbits around the Earth; and two, “into” the moon’s gravity through controlled bursts of fuel, again, this time to decelerate the mission vehicle into ever tighter orbits around the moon. Like Columbus’ Egg, this looks extremely simple to explain, now that it has been done. By contrast, the Russian mission took the direct approach to the moon, spending way more fuel, ostensibly to save time, and high on confidence on the back of legacy and previous performance.
The results are there for us all to see.
In the programmed series of interest rate rises of the US Federal Reserve, as well as the domino effect this has set off on interest rates across the world, we see something of the Indian space mission’s limited bursts of fuel, this time leveraging the natural laws of economic theory, to achieve a “soft landing” for the world economy. I only hope that they will achieve it, for we all have something to rejoice from that. What does an economic “soft landing” look like? To my mind, it looks like a situation where the least bit of harm is done to the greatest number of people. It does not mean that there will not be losers, but that those who lose most will be those who can afford most to lose. I do not need to emphasise to a reader of this magazine that this may perhaps be much more difficult an endeavour than even landing a truck on the moon, softly and with precision!
The problem may be with us, who still hold tight to memories of the economy of the previous two decades, and with an inadequate view of the nature of the upcoming economy of the future and its characteristics. In the face of overwhelming reality, our wails and cries of alternate disbelief and discomfort may seem petulant. But it is what it is. What we can predict based on what we know is that for the foreseeable future, economic growth will be more subdued. The runaway growth of the previous 2-3 decades, driven by rapid globalisation, historically low borrowing costs and a red-hot property sector, will not be something that is likely to be extant for a good few years. This is going to affect everything, from the borrowing costs of your house to your car-loan, from your child’s education loan to your healthcare costs, and from your business loan to your refinancing costs.
The limiting factor for the Indian moon mission, the singular controlling metric deciding its course, the number of orbits it would take, how it will land and how long the lander/rover module will operate, is nothing other than “fuel”. All other decisions surrounding the entire mission are based around this singular controlling metric.
In the case of the Chandrayaan-3 mission, while it used various Earth-based fuels to propel itself on its slingshot course, once on the moon, the lander and the rover are utilising solar panels to generate the power needed to operate. The mission will last 14 days from the day of landing. Why? Because the lunar day lasts for that period of time, and the solar panels will cease to generate power after that. Whether the mission can live up to the next lunar day, and then regenerate and resume from where it will leave off, is yet to be known.
For businesses and enterprises here on Earth, the controlling metric is “liquidity”. As we proceed along a period of increasing uncertainty across the world in Q4 2023 and further beyond, it only makes sense for businesses around the world to take a leaf out of the book of the Chandrayaan-3 mission, identify that conserving business liquidity is of fundamental importance to navigating a turbulent environment, and make business decisions with this aim at the centre. This will involve reviewing the balance sheet in the manner of a mission director with a limited budget, identifying the main leaks eating away at the limited liquidity and mending those, and seeing “the bigger picture” and parting away with those objectives which are beyond scope for now, and to leverage gratuitously the natural leeways, which the business environment offers.
In being extremely sparing and conservative with fuel, being mindful of budget restrictions and public pressure, in guiding the course of action, in line with fuel restrictions as well as with leveraging extant natural leeways, and thereby minimising the cost of operation, and ultimately achieving the desired-for objective, not merely has the Chandrayaan-3 space mission been proven to be cost-effective, it has also been proven to be the correct way to go about it. It is a lesson those responsible for enterprises can really take to heart.
Closer to home, but just as nerve-wracking as a space mission, the aim, the hope – and the resolve – for every enterprise leader or person of responsibility is to achieve a “soft landing”. Can your Chandrayaan-3 achieve that?
Krishnan Unni Madathil, Auditor, Bin Khadim, Radha & Co Chartered Accountants, writes a bi-monthly macro-analysis on geopolitics, incumbent political structures, global business and finance exclusively for Climate Control Middle East. He may be contacted at email@example.com.