Thinking outside the growth economy box

Box, Memory and Nickel

LAST WORD: Thinking outside the growth economy box

Lexpert, September 2007

by Marzena Czarnecka

What a summer. Lord Black found guilty as sin, an unholy coalition of Canadian pension funds and US private equity funds grabbing BCE Inc. (or have they? Dare one pronounce any deal definitive these days until several months after the fat lady’s sung?), Alcan escaping from the clutches of Alcoa into the clutches of Rio Tinto (or have they? I’m full of caution these days. I am, after all, one of the enthusiasts who lauded Inco and Falconbridge as a Canadian deal of the year not that long ago)… and as I write, it is only mid-July. Thomson Dealmakers and other number crunchers report worldwide merger mania has led to a breathtaking and record-breaking US$2.7 trillion in deals in the first six months of 2007. Off the top of your head, do you know how many zeros there are in a trillion?

A lot.

A frightening lot. Comparisons to 2000 do not apply. Although, they should in at least one respect: shortly after the deal mania that reached its peak in 2000, a period of calm ensued that had law firms “laying off” associates (they don’t call it that, of course)) and corporate dealmakers fiddling their thumbs. Fortunately, several massive restructurings came to their rescue.

It’s not very popular to talk about a coming downturn. Especially not in Calgary—where people truly should now better. But when, locally, the oil is more precious than gold and, nationally and internationally, deals are counted in tens of billions instead of hundreds of millions, no one has time to think bust.

But they should. At least once in a while. Because the peak we’re at now—even a little slow down may have some of the implications of a full blown bust. So, I have an assignment for you, brilliant legal minds that you are. In-between the incessant buzzing of your Blackberry, the inter-meetings races, and call conferences, try to envision a New Economy. Not a la the information technology revolution—that was just a new industry area grafted onto an existing economic model. But a real New Economy. One which isn’t hurtling towards an effective, world-wide monopoly in just about every key industry area. One in which there are more creative and competitive ways of dealing with competitors than swallowing them up whole. One in which management is able to plan on more than a quarterly basis.

I know, I know, I’m a big fat party pooper. ‘Tis the game, and ‘tis the way the game is played. But there’s no reason some brilliant mind couldn’t come up with a new set of rules.

Now, however healthy an ego I’ve had to develop to preserve my sense of self (and my sanity) hanging out with lawyers, I’m not quite arrogant enough to suggest myself as a candidate. But surely, one of you?

And I’m not just calling on the corporate types here. Yes, I confess, I am an m&a lawyer groupie. What can I say, they are the pop stars of the bar, at least when the economy is roarin’. But litigators, however much I tend to ignore them in my daily toils, I understand a few of them have powerful human computers lodged between the ears.

But perhaps I’m still thinking too much in the box. Corporate dealmakers aren’t going to come up with an economic model that unseats the one that makes them who they are, are they? And litigators—well, they’re just too darn unpredictable and prone to arguing, aren’t they? IT lawyers—no, no, I’m just kidding. I’d never ask IT lawyers to pretend to be economists.

I think this might be a job for the intellectual property bar. Yes. Think about it. These are the folks who breezed through medical school while working on a graduate degree in physics, decided to do a doctorate in micomollecularbiochemistry just for fun, and, because all that was just too easy and breezy, picked up a law degree while trying to find the cure for cancer. If anyone could come up with an economic theory to replace the “must grow, must grow at whatever cost” model we’re stuck in now, surely it’s them.

Okay, probably, it should be—will be—an actual economist. But maybe not. They tend to be stuck thinking in old models as well. So I think our IP lawyers have a damn good chance of redrafting the rules of the game.

Go to it, boys and girls, please. Because despite the pools of capital sloshing around the world, despite the private equity funds trolling the globe with suitcases full of cash, and despite the apparent desirability and stability of Canada’s oil sands—and other natural resources—sooner or later we will have to go through an unpleasant tallying of accounts. And I have a niggling feeling it will be sooner than anyone’s predicting, and definitely sooner than anyone wants.

Marzena Czarnecka is a big fat—and paranoid to boot—party pooper from Calgary.

• Thomson Reuters article record

Photo (Box, Memory and Nickel) by Thom Watson