The decline in industrial production in Europe is an excellent indicator of the true energy transition. An energy transition that, for geopolitical reasons, has begun in Europe but which in the medium term will spread to the rest of the industrialized world
And it is not just industrial production, unfortunately, this will be the case for most economic activities (but all of them).
All the signs point to the fact that the replacement of fossil fuels with renewable sources is being a failure. The plans for the introduction of electric vehicles are far behind the objectives. The use of green hydrogen is far behind expectations. Electricity generation from wind or photovoltaic sources is facing serious problems of intermittency. The storage devices that were supposed to solve these problems of intermittency are giving results far below those necessary to guarantee the stability of supply.
If this negative trend continues, and there is no indication that it will reverse, economic growth will weaken significantly in the coming years. Weak economic growth means weak capital generation.
At the same time, the system is supporting the largest debt in history, both in absolute terms and as a percentage of gross domestic product. Even worse, the growth of global debt, far from slowing down, continues at unsustainable rates. This excess of debt is overconsuming capital at the fastest rate in economic history.
If capital is overconsumed and not regenerated at the same rate, capital becomes scarce and capital is the most important resource of the financial system. In reality, capital is the most important resource of the socioeconomic system in which we live. That is why it is called capitalism.
If we look closely, we can already see signs of this capital shortage. Capital and commodity markets are suffering from increasingly frequent episodes of panic. The number of companies that have difficulty refinancing their debt is growing, and at the same time many others have difficulty obtaining raw materials or components necessary for manufacturing or goods to supply to the market.
The shortage of capital is not distributed evenly. And even worse, its allocation does not spontaneously adjust to the needs of business processes.
Information systems perform the fundamental function of searching for and allocating the capital required by business processes.
Among these information systems, SAP has been the most responsible for the improvement in capital management that the business sector has experienced in the last 30 years. SAP has facilitated holistic asset management models for organizations and has substantially improved the visibility of these assets for their customers and suppliers, as well as the traceability of the movement of these assets in intercompany processes.
I started my career as a SAP consultant in the early 1990s and have had the privilege of observing this transformation in many organizations. In 2006, I participated in my first analytical banking project and I was able to see how the level of efficiency that organizations in the real economy already had at that time was far ahead of that of financial institutions and motivated by being part of a transformation in the financial system similar to what was happening in the real economy, I also oriented my professional career in that direction.
Two decades later, the transformation of the real economy has even accelerated with scenarios of collaboration, analysis, artificial intelligence, asset traceability, etc., which would have been difficult to imagine when this transformation began 30 years ago.
On the contrary, the transformation of the financial system has been much more limited and given the urgency with which the growing scarcity of capital is needed, I have serious doubts that it will arrive on time.
As the scarcity of capital increases, so does the cost of capital, making it difficult to refinance debt and capitalize economic activity. Rising capital costs further slow growth and make capital optimization increasingly critical.
I came to this conclusion years ago and since then I have focused my efforts on designing and building a capital optimization model that offers a holistic view of all assets, tangible and intangible, of the financial economic system, facilitating the integration of the processes of the real economy and the financial economy.
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