Portfolio: Business
that the work ethic, attitude and productiv- wasted; let’s invest in our future.” I don’t agree that a six-day work week is
ity of American workers – white and blue The entrepreneur’s view sparked a the answer. I think it’s about productivity,
collar – is half of what I’ve seen in coun- debate last week: “Like all great ideas, making the right decisions, and eliminat-
tries like Japan, China, and Korea.” it’s over-simplified and a little flawed in ing 20 per cent of things that are not as
Calacanis added: “While I am advo- the details if you poke at it, but it’s still important as the other 80 per cent.
cating everyone pay down – and, in fact, brilliantly direct, and easy to remember,” “How many productive hours does
stop – the debt associated with unnec- said Tim Windsor, director of web strat- the average American worker experience
essary consumption, I’m very much in egy at Johns Hopkins University. “Our in a week: 10, 15 maybe? I’m sure there
favour of investment in new companies, grandparents and great-grandparents are people in the 30-35 hour range, but
ideas and education. If we’re going to got this. They all sacrificed so that we I think that is more the exception than
take on any more debt, it should be into could get fat and happy. Now it’s time to the rule. Think of this, how many inter-
things that pay back at least two dollars start thinking of the kids of 2050, and ruptions did you have this week in your
for every one dollar invested. Investment what kind of country they’re going to office environment? How much time did
in new technology, technical training, inherit, based on our work ethic now.” that take out of your week? One more
new companies, energy independence, But critics argued that simply work- hour of productivity to 30 per cent of
mass transit, high-speed trains, cheap ing harder would not stimulate demand: our population would result in a huge
broadband and education are critical “I agree that we need to cut the waste and benefit to our economy.” HM
in getting us out of this mess. I’m not start new companies,” commented a fel-
against debt; I’m against debt that is low entrepreneur at Calacanis’s site, “but http://calacanis.com/
OPINION: JEREMY PEAT
jeremypeat@holyrood.com
Dismal forecast
T
his article will not make pleasant fall through next year, but gently rather sumption and investment may be even
reading. There is no real hiding than more dramatically. Consumption is weaker than anticipated and the global
from the fact that the outlook for the held up somewhat by the tax measures; economy could prove traumatic. The
UK, Scottish and indeed global econ- and lower interest rates, along with some amount of ammunition left in the UK
omy is somewhere between bleak and return to liquidity, mean some access to policy locker is limited. We could face
dire. As I have to so often remind my- credit for businesses and individuals. a more extended period of recession.
self, nobody knows the economic future We then see a welcome return to Given the extent of UK policy response
with any degree of certainty. There are growth in 2010 – but slower growth and the degree of co-ordinated interna-
Jeremy Peat
always a range of plausible scenarios, than we have become accustomed to in tional effort, this outcome is unlikely –
based upon a combination of known the ‘NICE’ (Non Inflation Continuous but by no means impossible.
trends and ‘known unknowns’. Even Expansion) period since the mid-1990s. A second risk that I covered in a pre-
these plausible scenarios will not cover Having loosened fiscal policy so dra- vious column is that of the dreaded defla-
the full scope of what might transpire – matically to head off depression it will tion. This is the story of prices falling,
given the ‘unknown unknowns’ lurking be necessary to run a tight fiscal ship for causing demand to fall back even further
in the mist of the economic future. But a good number of years. Further, the as folk defer decisions to consume or invest
let me at least attempt to set out some of MPC may well decide that too loose a in anticipation of future price falls and
the alternatives that I can see for the two monetary stance in the NICE period was thereby cause more of the same. Once in
or three years ahead. one major reason why credit and asset deflation, escape is difficult indeed – the
If I have anything like a central view, price growth got out of control; and Keynesian story of ‘pushing on a string’
it is that 2009 will be a year of continu- they may, therefore, wish to run a tighter – so the answer is not to get there in the
ing recession and rising unemployment, regime in the recovery phase to avoid a first place. That is one very good reason
but with signs of relief emerging as 2009 return to the bad old days. It could eas- for supporting all the fiscal efforts made
turns into 2010. That is probably also ily take a couple more years to return to by the Westminster Government rather
the best that we can hope for. In this sce- trend growth (say 3 per cent pa) and even than the ‘wait and see’ approach favoured
nario, the measures taken by the Chan- longer to catch up the ground lost during by Mr Cameron. Policy makers learned
cellor and the Monetary Policy Commit- this recession. This new economic world huge lessons from the Japanese experience
tee (MPC) – and reinforced by further will differ from the halcyon days to which a couple of decades back, so entrenched
monetary easing in the first quarter of we had become accustomed. deflation should be a limited risk. I very
2009 taking base rate down to zero or The downside from this central case much hope so.
its near neighbour – will prevent reces- is that there are at least four worrying risk Now for downside risk number
sion becoming too deep or too pro- stories. First, the medicine dolled out so three, a sterling collapse. Sterling is not
longed. Confidence does not disappear liberally thus far may prove insufficient. a reserve currency, so an extended run
completely in either the business or the Confidence may plummet further, liquid- on the pound is conceptually possible.
household sector. Output continues to ity may take a long time to return, con- We are not Iceland, but nor is sterling
60
| 15 December 2008 | Holyrood magazine | www.holyrood.com |
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