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After the Recession

7 April, 2011

Wealth Creation after the recession

The recession continues apace, but as it does pointers are already emerging about future options; these options will be exciting. There seems still to be a feeling that we have to face up to things after a longish period of opaqueness and delusion. Many knew full well that the house price boom, foolish bank lending and maxed-out credit cards had to be dealt with at some stage, but we truly thought that the government of the day had a strategy for a soft landing. Maybe they did, but the banking crisis put paid to that and we now have to pay it all back. There is of course an issue about the speed of this payback; currently it feels rather like having to pay back the mortgage for the house just at the time when we can't afford the food bills. Governments will have to think carefully about how quickly we reduce this debt and there will be much lobbying to make sure that the balance between debt reduction and growth is addressed sensibly around the world. For we cannot all reduce our debts at the same time; the money to pay back the debt has to come from economies that are still growing.

Nonetheless, there still seems to be a social will to get all this over with quickly, pay it all back as soon as we can and then get on with normal life. Of course, it won't be quite like that because normal life has changed, and the speed at which we pay all this debt back will affect the sort of normal life we shall eventually have. Do we want a vibrant growing economy, where there are plenty of jobs for all; or do we prefer a slower pace of life, with all of us working much longer for less money, but with a quieter, less stressed life. Do we want high quality public services, properly funded so that all have a reasonably equitable slice of the cake; or do we want low taxes, with personal spending on healthcare, security, and the arts, allowing the poor and the weak to go to the wall. These are the sorts of social and economic choices facing our society, and as ever the only way through is by way of the democratic political process.

But we must not forget how the broader economy, both national and international, is funded by businesses. Our pensions, our healthcare, our overall lifestyle, are in part funded by businesses; the Business rates in Winchester alone bring in some £43 million, over 80% of which go to central government to pay for the running of the nation: defence, hospitals, schools and the like. Therefore it is not sufficient to opt out of the questions; they have to be engaged with.

Whilst we are mulling these issues over, voting in by-elections, writing to papers, marching in the streets, and generally expressing our views on the pace and type of changes facing us, the world is moving fast. It seems clear that business confidence around the world has returned to pre-crisis levels, share prices are rising and profits are returning; a survey by accounting firm PwC, at the start of the World Economic Forum (WEF) in Davos, suggests that most executives expect demand in Asia to drive growth. Some of the economists coming to Davos go even further. Gerard Lyons, chief economist of Standard Chartered - a bank with most of its operations in emerging economies - predicts that the world is about to enter a super-cycle of high economic growth that could last decades.

But this is around the world, and more specifically in Asia and the newly emerging economies that are already changing the power map of the world. What's it like on our doorstep? The 'lipstick syndrome', the way that we all downsize in troubled times, is very evident. Fewer people are buying houses, but more are having their kitchens renovated; more are spending money on cellos and violins to improve their children's life chances; many are buying high quality jewelry rather than keeping it in the bank earning puny interest. Thus some businesses are doing well; and for the first time in decades manufacturing in the UK is growing, and growing proportionately much faster than other part of the economy.

And it must be allowed to grow; we used to make great things in the UK, well designed and well made. We still do, but it is hidden, and it looks a little different. In Winchester we have great film companies making films for global audiences, we have international jewelry designers and manufacturers, we have website companies that are internationally regarded, and architects that work around the world. In Hampshire we have businesses that still design and produce beautiful lights, bridges and boats that are again sold around the world. We must ensure that this sort of real wealth creation - new jobs to employ those made redundant, new jobs for our children and jobs that can be sustained into the future - are allowed to grow.

Thus, if we are to endure the horrors of the current recession we must make sure that we come out of it better positioned than we were before. We must have more entrepreneurs, able to take risks and set up small businesses easily and fast. We must have new properties for businesses to set up in, close to where the owners and their staff live, new houses for them to live in, creatively and excitingly designed and built.

We do have good entrepreneurs; particularly in this part of the world. Every year for the past decade the Winchester Business Excellence Awards Entrepreneur of the Year, sponsored by the University of Winchester, has gone to exciting vibrant people who have done much for our economy.

Thus our politicians, community groups and businesses must work hard in joining up these various strands of good affordable living space, linked closely to business and work space, close to our towns and villages so that the sort of lives we lead can be both prosperous and of high quality. For without such joined up thinking we shall not progress very far. Economists may not always agree on everything, it is not a science and it is most certainly not applied mathematics, but some things are pretty constant. Generally it is clear that the future is always unknowable, but there is a distinction between uncertainty and risk. In a sense it is those two things that allow markets to operate, people and businesses to buy, sell and make money and the world over the past centuries to become a better place.

It is also why we must all work to try to minimise uncertainty. We need to develop agreed strategies that actually help business to start and then grow in a sustainable fashion to ensure high levels of employment. We need to provide land for new houses and new businesses that can be developed and designed beautifully; projects that can be the pride of the community and the envy of the world. Planning creatively for an uncertain future is what we all need to be doing, lifting our eyes above the grimness of the present and focusing on the creative possibilities of the future.