The volcanic ash crisis is unfolding in a fascinating way with business leaders starting to look for someone to blame - and in this case it's 'the government' or even 'governments' of the EU that are to be blamed for not realising how bad the situation was becoming over the weekend.
I was one of those potentially stranded souls without a way to get home - from the Netherlands to the UK. In the first case I had to change plans at the last minute on Thursday to ensure I could get to a business seminar in Maastricht. Then as the situation escalated it was a matter of wondering how to get back.
The market system responded quite well to the occasion. Eurostar found extra capacity it could lay on and its pricing model pushed ticket prices up. Other alternative travel routes have followed suit. The telecomms
operators will have seen usage rocket in the last few days initially as people communicated to make new arrangements to travel or not. Then mobile usage will have increased as it has become a substitute for business travel. So some winners amongst all the trauma that the dust cloud has created.
I noticed on my particular Eurostar that not all seats were sold. In fact there were many vacant places. That's odd when you reflect on how difficult and costly it was to find a spare seat over the weekend. They had appeared to be fully booked as early as Thursday evening. I cannot help but wonder whether the market might have found a better way to communicate with customers that there were indeed seats available. I guess it shows that there are imperfections - both informational and to do with communication - in the system: once the tickets are sold there is little incentive for a company to put extra effort into re-selling tickets that will not be used. It gets too complicated and costly to do so.
It is now unsurprising but also not sensible to start looking for who to blame. The same imperfections that limited the effective market solution over the weekend also provided a major limitation to how effective governments can be in dealing with such events. We were all expecting the 'dust cloud' that was announced on Thursday to be a transitory event. But as events unfolded it became clear that the cloud was in fact a plume with little short term prospect of stopping.
Under the circumstances of novelty and uncertainty the authorities seemed to work well - as well as the market did - in their response. We are not familiar with such activities and just like in the banking crisis we first applied normal procedures and gradually woke up to the need for unconventional measures. The UK's actions to send the navy to repatriate UK holiday makers may yet become to the ash cloud what quantitative easing has been to the banking market though I doubt they will be in place for so long.
The reality is neither companies nor governments had access to any better information over the weekend than each other.
Once the next stage of the situation is passed and we have discussed who and whether any business bailouts or support packages are required we should learn two lessons. By the way I do not think any financial support is really warranted. The first is that when change happens the best way to handle it is with a combination of markets based on firms and businesses making fast decisions to react to consumers' needs and governments who can take a wider social perspective. But both have their limitations and may fail to fully solve the problems thrown at them.
The other lesson? It is to realise that even in our highly technological and post industrial societies we can appear powerless in the face of dramatic changes. The global political/social/economic model is robust but cannot deal with all problems. We should use that to realise that our willingness to ignore the natural world and how rapidly we are using up our scarce resources in our economic actions may bring about long term consequences that cannot be solved by any mixture of market and government actions. No amount of regulation nor business innovation can stand against nature when it shows its raw power.
No comments:
Post a Comment