Reading on the BBC website today about the occupation of St
Paul’s by the, apparently peaceful, protesters at the way our country is being
run for the benefit of a few rather than that of the many, it seems time to
make my own statement.
I note with relief that the effect it is having is to get
people talking about the problem rather than starting more fires in the London
streets. And this is a good thing. It is about time this was discussed in a
constructive fashion. The time for finger pointing and party politics is past,
and we need to find ways of dealing with the situation locally, nationally and globally.
In fact the time passed sometime around the turn of this
century when the economic bubbles kept forming and popping. When the
governments first realised that, to keep people voting for them they had to
promise things they couldn’t deliver. When the final pieces of the family
silver were sold off by our government to pay for these promises, and they had
to fall back fully on the private sector to bail them out, which they did by
encouraging businesses to show bigger and bigger profits that were lapped up by
the hedge funds and pension funds on promises of yet further wealth for the
masses.
I remember thinking at the time; “how can this work, where
is all the money coming from?” But I had no economic qualifications and was bad
at writing my thoughts down and who would listen anyway? Besides, this was such
an obvious question that surely those in the know were asking it too. Well,
maybe they were, but it seems as if vested interest was skewing the answers. It
turns out that my question was a pertinent one. I wish I had asked it out loud
at the time.
Anyway, here we are, in a pretty awkward situation which
appears to have no solution. This is, of course a false impression. There is clearly
at least one solution – that of economic meltdown and the slow rebuilding of
confidence and wealth. I don’t like that solution, partly because I don’t think
we will learn anything new that way, but mostly because it will be extremely
unpleasant for very many people (including me) and there is no guarantee that
the final result will be a place where any of us would want to live.
So, let’s not blame, let’s not get angry, let’s not despair.
Let’s just see what we can do.
Legislation is important. But it needs to be the kind that
will work and build confidence and not a rushed stop-gap measure. This really
does need to be talked through in detail and this will take time. But we don’t have
to wait for legislation. We can start now by engaging the businesses, in
particular the finance sector and the large funds, to start to make a
difference voluntarily. Without the backing legislation in place, this means
that it needs to be somewhat in their interest to make such a difference. For
this, I am sure that a proper public awareness campaign of the sort of things
that will work in everyone’s favour will help nudge businesses in the right
direction.
So, discussion is important too. But this discussion must not be restricted to the economists, businessmen and politicians. We need articulate
people, of good temper, from the rest of society to join in as well. And not
just to be consulted, but intimately involved in all the committees and other meetings
at all times. We need the results of those discussions to be as public as
possible so everyone can see that they are directed towards a solution for
everyone. This is not about politics or vested interests, but about what can
and must do to restore the faith of the masses.
For the record, here are a few ideas that we might start with
from a non-economist. I am by no means certain that they will make the required
difference, but they seem to be pointing in the right direction and could at
least form the basis of some discussion.
The customer is the first priority of a business.
Shareholders need to learn to take second place. In theory
they are low down the pecking order in a case of bankruptcy, so I would guess
that the original intention was that they should not be able to turn the
direction of a business from its core competency to that of making money for
the shareholders. But in reality, since they ultimately own the businesses,
they can and often do force a business to concentrate more on paying good
dividends and keeping their share prices going up than on what their customers
actually want. This can only be bad in the long run.
We need to be creating things that are tangible, not ephemeral
The allure of selling serivces and other intangible things is that the raw materials are cheap. But, in the end, what creates wealth is things. If there is nothing tangible to show for our work there is very little to fall back on when things go badly. The trend of cutting back on manufacturing over recent decades needs to be questioned and reversed by some means. I know materials are expensive and manufacturing traditionally works because the manpower requirement is relatively cheap, but some radical thinking in this regard needs to be done. If the world goes sour, we need some real things that we can call our own.
A business without any customers is not a business
There is a trend to invent various businesses whose only purpose
is to satisfy some specific or regulatory need for the people who created the
business. These are the so-called ‘special purpose vehicles’ (SPVs). Any attempt to create an SPV should be looked
into rather thoroughly by regulating authorities and by the businesses
themselves to find out what they are really doing to the company and if they
are distorting its books in any way. Companies should strive to simplify their
structure in this regard and operate with the minimum number of these vehicles.
If a company structure doesn’t fit on to one side of an A5 sheet of paper, people
should ask why.
Perhaps mergers should be discouraged for now
Not stopped altogether, but the motives should be understood
thoroughly and approved before allowing them.
What we need more of is competition. This is the one of the few incentives
that companies have to keep the customer at the forefront of their daily
business. Mergers can be used to inhibit competition. As far as the customer is
concerned, lots of smaller businesses should be a better deal than a few
mega-businesses. Also, as long as the shareholders allow a business to put their
customers first, a customer centred approach need not necessarily cut into the company’s
finances. There are surely more ways to attract customers than simply having
the lowest prices. Let’s get inventive here.
We need small businesses
Small businesses are good for the economy. They have to be –
they create jobs and they have to serve their customers well or they don’t
survive very long. We need to make it less scary to start up a business. There have
to be more ways than venture capital, prohibitive loans and putting your house
at risk. Maybe banks can start up business savings packages in the way that we
used to save up for that deposit on our first home. Save now to be able to
start your business at favourable rates in 5 years’ time.
We need a gesture of faith
Company directors and the wealthy need to indicate that they
are with us in this situation. No amount of quoting numbers at us will dispel
the feeling that they have let us all down badly. Even if a director’s pay is a
fraction of a per cent of the company’s expenses it merely seems to most of us
that they don’t care to help as long as they can cream off enough of the
company funds to make their lives easier. In most cases, even if the company collapses,
they will be alright. The same cannot be said for all the other employees.
Maybe, if, instead of taking a bonus, that same money was paid into some
employee support fund, it would show that they care. And who wouldn’t want to work
for an employer who cares for its employees? I am sure that an inventive board
could think of additional ways to show their solidarity with their workforce.
The public also needs to be responsible
Yes, we benefitted from the bubbles as well. There was high
employment and cheap gadgets. There were also suspiciously cheap loans. We had
the ability to put our hands on more money than many of us would have earned in
a lifetime. We should have asked how this was happening. I suppose we didn’t because
we liked it and because we were assured by the governments and financial institutions
that it was due to brilliant and innovative strategies and that there were
sufficient and rigorous controls on what was being done. Ha ha.
As the majority shareholders in our world, we owe it to
ourselves to look more closely at any miracle that comes along from now and ask
what the true cost might be. We should not buy everything simply because we are
told we want it and should conduct our financial transactions with a view to
being able to afford what we buy.
Close the poverty gap
This is hard on those with a low income. Somehow we need to
make it easier to move both up and down the social ladder. This means more opportunity
for the less well-off and less fear of moving down the ladder for those with
money now. There is, after all, only a finite amount of wealth. Most of the
apparent growth in the available wealth has been to make the numbers bigger,
but that doesn’t always mean you can buy more. If someone gains wealth someone
else is certainly losing it. The more we close the gap, the more manageable and
bearable this fact will be. However, I don't think there is any magic wand. Because wealth is finite, we all need to be prepared to donate to this cause.
In conclusion (for now)
These are just ideas and points for discussion. I don’t know
if any of them are new. What is important here is that those with the expert
qualifications clearly need some new ideas and those will not necessarily come
from within their ranks, nor should they. Let’s not be angry at them, they are
doing their best and may well come up with the working solutions. But let’s
join in the debate too without shame and without fear of being called stupid. Who
knows what chance remark will be the seed to our renewed and prolonged
stability?
