Continental Contagion

For the past century or so, one unfortunate European country or other has been called the “sick man of Europe.” Now, practically all of Europe is the sick man of Europe.

Today’s Wall Street Journal takes a look at the patient and asks: What next?

If you’re running a company that does business in the eurozone, that’s an especially tricky question. The volatility in Europe makes planning harder than ever. “Measuring this kind of mega-uncertainty, and making rational decisions, is tricky for business,” notes columnist John Bussey.

So far, reports the Journal, businesses are sometimes securing their cash, sometimes digging in and sometimes pulling back.

Peter Drucker, for his part, surely would have been skeptical that Europe’s monetary union could be maintained. “There is practically no reason to expect that the political units, that is, the various nations, will subordinate their fiscal, monetary and credit policies to any but their own political authority,” he observed in Management Challenges for the 21st Century.

So how does a business plan amid all this turbulence? On the most elementary level, it simply needs to mind its currency exposure. “With currency fluctuations as part of economic reality, business will have to learn to consider them as just another cost, faster changing and less predictable, perhaps, than costs of labor or capital but otherwise not so different,” Drucker wrote in The Frontiers of Management.

Regarding the bigger question of how to deal with political volatility, however, Drucker’s advice was no different from that related to business volatility: You plan, and then you take the wisest risks you can.

Strategic planning is not an attempt to eliminate risk,” Drucker explained in Management: Tasks, Responsibilities, Practices. “It is not even an attempt to minimize risk. Such an attempt can lead only to irrational and unlimited risks and to certain disaster.” The best thing we can do is to “choose rationally among risk-taking courses of action rather than plunge into uncertainty on the basis of hunch, hearsay, or experience, no matter how meticulously quantified.”

What “risk-taking courses of action” do you think business leaders and investors should take to Europe? Would you scale up or scale down there—and why?