CBI: 50 YEARS OF BUSINESS INNOVATION | THE BIG PICTURE


ENSURING THE


UK STEERS THE RIGHT ECONOMIC COURSE


JOHN CRIDLAND Director-general of the CBI


When the CBI was established 50 years ago, Britain was a country that was in decline and puzzled by that decline, yet unable to find a way out of that downward spiral. Today, we live in a country that is more comfortable in its skin, one that has found its niche within the global economy and developed a growth model that has generally been on an upward trajectory since the mid 1980s. The critical periods, in retrospect – from an


intellectual rather than a political point of view – were the first two Thatcher administrations, which oversaw wide-ranging reforms of the economy. Whether by accident or design those reforms of product, labour and capital markets released the animal spirits of an entrepreneurial society that had lain dormant for the first 15 years of the life of the CBI. From a business leader’s viewpoint, the


contrast is equally dramatic. Five decades ago, there was a less solidly based entrepreneurial culture, a relatively sparse seedbed for small companies, a dependency on established – and establishment – businesses, and an economy


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that was protected and resistant to innovation and change. Now we have a strong emphasis on small business start-ups and growth, a greater appetite to take risk and a renewed confidence in our ability to invent, exploit, commercialise and market ideas. What has the CBI’s role in that process


been? As an organisation, we have never been satisfied with the status quo and have consistently advocated the case for change. For the first 15 years, we were a reluctant participant in corporatism because it was clear that structure did not work. My predecessors argued for a pro-enterprise culture and a pro-enterprise tax system. Of course, in the early years of the Thatcher revolution the CBI was shocked by the impact that the high interest rates and exchange rates needed to curb inflation were having on manufacturing. However, it soon became clear that supply-side reforms in the form of privatisations, cuts to taxes and liberalisation of financial services were key dynamics of a new growth model.


The fundamental choice for the British economy


was between state capitalism and market capitalism and that issue was settled by the 1980s. Since then there has been a prevailing cross-party consensus that the market can be nudged, encouraged, cajoled and facilitated – and occasionally corrected – but that it cannot be managed or ruled.


AFTER THE STORM While the UK economy has benefited from the supply-side revolution, you do not need me to point out that the ride has been anything but smooth. So what should we make of what went wrong in the run-up to the crash of 2008 and what has happened since? While some commentators have rushed to say it shows that market economics have failed, I disagree. I believe we have the right engine for long-term growth but we had the calibration wrong. What we saw was unbalanced growth with too much dependence on financial services, excessive reliance on public and private debt, and an exuberance that fuelled short- term speculation. »


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