You are currently NOT logged in.
Please enter your details to receive our blog updates.
- April 2012
- March 2012
- February 2012
- January 2012
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
Scream if you wanna go faster....
And so the austerity measures cometh as the last decade of financial exuberance ends and payback time begins. Once again we lurch from the liberal left to the conservative right just as swiftly as we swayed in the opposite direction back in 1997.
This time however it will be different. A whole generation has been affected by the financial crisis and our memories will be long. A new sense of frugality and fiscal restraint has permeated through our society and never again will we allow the public finances to get into such a mess. Right? Unfortunately, history would beg to differ.
Our political ancestry is punctuated by economic crisis’s on a worryingly regular occurrence. This is because we allow politicians to run our economy despite the fact that the skills required to get elected are the direct opposite of those required to run a budget; basically promising people things that you can’t afford. Given the choice, we would no more allow a politician to run a multi billion pound financial system than we would give sellotape to a monkey.
The economic roller coast basically goes like this. In the good times we spend and borrow with no thought for the future and feel very smug that we have finally stopped the ‘boom and bust’. Then it all goes bust and we elect a new government to cut our spending and reduce our debts. We feel better for a while, but steadily become upset about our crumbling schools and hospitals and want to invest in our infrastructure again. We elect a new government and we spend, prudently at first but then, like an alcoholic with a short memory, we think we’re strong enough to handle it because ‘this time it’s different, we’ve solved the boom and bust’. The pendulum perpetuates and we seem incapable of stopping it. Worse still, we don’t even feel it swinging.
Easter Island sits in the middle of the South Pacific some 1260 miles from its nearest neighbour. It is barely 63 square miles in size and is famous for its large head carvings called Moai. These huge structures were sculpted from the volcanic rock and erected around the perimeter. This was achieved by rolling them on logs to the desired location and then building a giant pulley system to heave them upright.
Excavating and building these Moai was a national obsession for the Polynesians and they were very much a symbol of the prowess of the incumbent leader. Due to the spiritual significance of the heads to the islanders, they were a useful tool for the politicians of the day. ’Vote for me and we’ll build some heads’ was an election winner. ‘Vote for me and we won’t build any heads’ was the political equivalent of an American presidential candidate suggesting that they aren’t entirely convinced about the whole Jesus thing.
The problem was that when they weren’t building big stone heads they needed to farm the land to feed themselves. When you live on a volcanic island in the middle of an ocean, the only thing that stops your soil blowing away is the trees. Consequently the farmers needed trees to protect their farmlands just as much as the head carvers needed them to roll the heads to their locations.
As a result, running the island was a pretty simple affair if you could grasp a few basic rules. Share the trees between the head carvers and the farmers and no matter what you do, don’t cut down the last tree otherwise it’s game over. As you can see, this involved all the intellectual rigour usually demanded by a GMTV quiz question.
Interestingly the quarries are littered with half finished heads which predate some of the ones which still stand. That tells us that from time to time they abandoned building heads in order to preserve resources, probably the first act of a newly elected leader. It also tells us that they subsequently felt happy to start construction again (new leader) but then got carried away again and had to stop again due to lack of resources (new leader). Remind you of anything?
What should really frighten us is not the austerity measures, but how close we came to cutting down the last tree. You see that’s exactly what the Easter Islanders did and they decimated their lands and 90% of their population with it. This is even more unbelievable when you consider that from its peak, you can see every corner of the island and consequently how many trees you have left. They were so busy cutting down the trees they forgot to send somebody up the hill to count how many they had left.
Mind you, they’re probably laughing at how we managed to overspend by £940 billion pounds despite information on our debt levels being openly available. Levels that we, and the government of the time, were warned many times by the Bank of England were unsustainable.
So which is worse? Not sending anybody up the hill at all? Or sending them up and ignoring what they tell you when they come down?
Tagged as austerity measures, budget cuts, public spending, easter island
A Conscientious Objector - 18:08 on the 29th October 2010
I find it completely astonishing how everyone, and I mean everyone, in the political world and the financial sector of the economy blames everyone else for excesses as though they had nothing to do with it. Where were all the Financial Advisers when the "good times rolled?" Financial Advisers like your company acting as brokers and being paid commissions from the very companies you pretend now to admonish for their nefarious activities in the financial markets? You, in your own article, claim to acknowledge the existence of public data that you claim showed warning signs of the unsustainability of the national and international debt levels. Yet your company's raison d'être is to encourage people to assume more debt, by selling loan products, or servicing such debts by investing in those companies you claim are at fault for getting us into the present debt mess. Your company had access to that information. Your company was selling the products of those companies. Your company was, in fact, a part of that chain of providers that caused the situation in the first place. The article is hypocrisy at its most blatant. And it's fundamentally worrying. Because it's a sign that the lessons of excess have NOT been learned, when people in the sector continue to blame others as though they themselves had no part to play in it. You cannot, as part of the financial sector, hide behind others and blame them. Your company, just as every other company in this sector of the economy, must shoulder blame for what has happened. That means the main problem is still with us. Without acknowledgement and acceptance of guilt or blame, there can be no real commitment to resolution. It'll happen again. At least your article got that right! By contrast: Why I believe that Toyota and Lexus will ride out the media storm surrounding their recent spate of product recalls (I have been directly involved) is because their company ethics are grounded in their commitment to excellence - not just paying it convenient and superficial lip-service. It enables them to admit they've got a few things wrong and wholly commit to putting them right. That is far more powerful and reassuring than having one department blame another and look to deflect the blame from themselves. Toyota and Lexus, by their public acknowledgment of having got it wrong and by dealing with the matter in an open, professional and reassuring way, will became stronger for it in the longer term. Their brand will grow be synonymous with honesty as well as adherence to their core values of quality and excellence. Companies in the financial sector are nowhere close to such an ethical position as these honourable Japanese manufacturing companies. Other that those who have lived within their means and adopted a policy of prudence instead of a strategy of greed and material self-interest, no one can be absolved from blame for the development of the most recent bubble that burst. The general public cannot be excluded from blame entirely. But the majority of them take their lead and expect others in specialist fields to act prudently in the common good. This includes anyone upon whose services and advice they relied when making decisions concerning their finances. And THAT includes independent financial advisers. It's hugely hypocritical of someone in the financial sector looking to deflect blame from themselves or not even assuming part blame, when you're so integrated into it. I understand why you do it. But I suggest you would serve your own interests better by not blaming others for shortcomings of the entire service sector of which your company forms an integral part. The entire industry, company by company, should take a lead from the actions of the President of Toyota. Then and only then will people even begin to trust that their personal interests will be safeguarded and put before self-interest of others. And it needs to happen soon. Because going down the same path again will result in anarchy. And global anarchy on a nuclear age would be unthinkable.