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 NEWS-TRENDS-ANALYSIS
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EDITORIAL FEATURE Recession and Our Failure to Learn from the Past 
Michael Maguire is Managing Partner at Quintus Management. He is a regular columnist on business matters in several major newspapers and business magazines. While scanning recent newspapers, I am struck by the paradox of how modest has been the political attention paid to the dynamics of economic reconstruction. True there has been much comment on the cost of the banking bailout, the bonuses and pensions of bank executives and the lack of global confidence that precipitated recession but on the state of our finances immediately prior to the ‘credit crunch’ there was surprisingly little. I will go further and suggest that in the time that the Labour government has been in power, public understanding of key economic measures has eroded. Traditional indicators such as the Balance of Payments, the Balance of Trade, Inflation and Structural Unemployment has scarcely merited a mention for the last decade. In the post war years Britain and Northern Ireland witnessed meteoric growth in consumer expenditure on housing and all manner of consumer goods and the economy that underpinned it all had been pretty sound. We had a significant export oriented manufacturing industry that matched domestic needs as well as that of Johnny Foreigner. Our cars, ships and planes were in demand and all was well with our world, right? Well no, not really. The problem was that while Britain was fast becoming the international ‘it’ centre of creative design that dominated the engineering, fashion and music scene in the 1960s, the industrial base was ailing and failing through under investment. Prime Minister Harold MacMillan, who in 1957 uttered the famous statement that ‘most of our people never had it so good’, appeared unable get to grips with faltering growth, a burgeoning balance of payments deficit and growing inflation. So like many of his predecessors and successors, he opted to increase taxes and public borrowing to balance the nation's books, thus constraining economic growth. While there were wailings from contemporary economists that despite apparent prosperity, the country lives beyond its means, the government of the day appeared stunningly ignorant of the need to stimulate greater industrial and commercial growth. Thus by 1964 when Harold Wilson rolled into Downing Street with his protruding pipe, the need for economic expansion was very evident. Yet despite the Labour premier’s renowned political dexterity, his reform programme centred heavily on government control of business and selective nationalisation rather than the encouragement of commercial competitiveness. Within a few years the country ran into serious debt and soaring unemployment and became an IMF basket case that was only arrested with the Thatcher years. The lady’s tough monetarist strategy and commitment to market economics brought inflation under control and confidence in industry as it won back market share. Now many years on the Blair/Brown administration has peddled an ever rolling state bureaucracy that intercedes in all aspects of social and commercial life that often appears to ignore the reality of the global village in which the prosperity of nations is linked to the prosperity of businesses. We have ignored the warning signs of economic underperformance with reckless abandon as we have returned to age old policies of higher taxation and state intervention rather than pushing better economic performance. To put the matter in perspective, the manufacturing sector is now the weakest it has ever been for over a century and a half with an undue reliance on the financial services, retailing, tourism and property to hold the economy together. The trade deficit in January 2009 exceeded £3.6 billion as imports from EU and non EU countries continues to rise; this despite a thirty per cent reduction in value of Sterling that should promote stronger competitive potential. Further, there is increasing reliance on the import of goods and services (including foodstuffs and energy) to satisfy domestic demand and which, in turn, is fuelled by an unparalleled private sector (as well as public sector) debt burden that ranks among the worst of the G20 nations. In the midst of the recession posturing, I am forced to reflect on the sentiments of those economists some fifty years ago. The American Philosopher George Santayana (1863-1952) put the issue more pointedly when he said, ‘those who cannot remember the past are condemned to repeat it’. Thus I appeal to our political leaders; please let us concentrate on addressing the recession through repositioning our businesses to compete on the international stage and educate our citizens on the importance of export driven growth. Revenue generation through effective marketing is the only route to wealth generation. The power to make a difference is in our hands. (27 May 2009)
You may contact Michael Maguire at:
© Quintus Management (2009) |
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