Kick Start

As the country slides back into a recession, now is probably the time to ask ourselves how to return the economy to growth because no one on either side of the political spectrum has the slightest idea. On the right, the only prescription is cutting public spending which will magically kick start the private sector. I've been on the receiving end of several lectures on free enterprise and the evils of big government by wealthy white men, privately-educated who bought their homes with  a sizeable deposit from their parents most of whom work as consultants or city financiers. Being mercifully free of self-doubt or their own lack of real world knowledge, they will happily pontificate on business and enterprise whilst having no direct experience of either. They honestly believe that moving money round in a bubble market was the same as being an entrepreneur, a notion that would be amusing if it wasn't so damaging.

Don't look for any more insight or wisdom on the left of politics, as they are drawn from same social strata, that is predominantly privately-educated white people from the same geographical area of North and West London, the only difference being they work exclusively for the state or as lawyers. Their remedy for Britain's ills is more deficit spending, more regulation of business and no job cuts in the public sector; then equally magically the economy grows again. This ideology is no less self-serving that the right winger who wants to cut public spending to retain more of his income in tax. Turkeys, to date, have not voted for Christmas. (Mind you, I'm not sure they have ever been asked or whether we would have any reliable means of interpreting their wishes if they did vote, but the point still stands, more or less). The thinking, if you can call it that on the left, is in essence jobs for the boys and girls, either directly through state spending on public sector job creation or regulation which acts as job-creation for lawyers.

If you look at the backgrounds and life experience of the current political class, left or right, what is notable is the complete absence of business experience at the sharp end. True, some have worked in the private sector, typically in large corporations and a long way removed from the messy business of managing cashflow or chasing payment; some have worked as a consultants, which whatever they might try to tell you has as much to do with real business as paintballing does to a tour of duty in Afghanistan. Not forgetting the former lawyers, the union officials and the public sector workers, all of which have their uses (except lawyers) but are not going to be engine of future growth, unless we decide that every single person in the country is going to work for the government or do the legal paperwork. Not even the North Koreans are mad enough to do that; and they are madder than a box of schizophrenic frogs on LCD.

Up until a few years ago, I had a similarly blinkered world view, never having a run a small business. Having run someone's else's firm, sold it and then started my own which is thriving, my opinions have shifted about the problems of the UK economy, particularly for the smaller enterprises. At this micro-level, the little stuff matters a great deal to your business prospects. Take for example the client who has moved their accounts department to India, which means they pay four months after invoicing. Consequently you don't get paid, your creditors don't get paid and you can't make that investment you were planning. But hey, remember those savings to shareholders. Or discover the great deals available for invoicing financing, where the bank will take 10% off 30K of invoices, even if your order book is 150K for the next three months. Let's not forget the local council, who mission as far as I can tell is not dissimilar to a LA porn actress going for the gang bang record, which is to screw as many people in the shortest time possible. Finally, if you are foolish enough to consider taking on employee, look forward to doing their tax for them, paying for sick leave, holidays and the whole carousel of benefits the government has gifted to the staff member, regardless of cost. After careful consideration, my conclusion is that only upside to the business is they are contractually obliged to turn up for work, unless of course they feel unwell. And you can only pray they don't have a child or there goes half your yearly profits in maternity leave.

Whilst George Osborne might be scratching his head wondering why the world doesn't work like Hayek claimed it did, no one running a small business is remotely surprised. Small enterprises create jobs faster and with less turnover than large concerns, yet there has been precious little debate from any party on how to help them in the current crisis. Lib Dems might talk about raising tax thresholds to £10,000 but that won't create a single job if the obstacles to growth remain unchallenged. Trying making the burden of taking on employees less onerous to employers,  make councils business friendly and force banks to lend to small enterprises on reasonable terms, then you might see some activity. Otherwise, expect nothing and be disappointed.

Turning Japanese

JK is a little bit worried that Britain might be turning Japanese. No, I don't mean we're going to eat more raw fish, have elaborate hot drink ceremonies, read dodgy cartoon porn or digitally record every waking moment of our entire lives. It's the economy stupid; it's turning Japanese. Back in the eighties, the land of the Rising Sun was the nation which produced the Walkman, the compact disc, the Honda Civc and of course everyone's favourite karate grandfather figure Mr Miyagi. There were even those Benihana restaurants (not strictly Japanese, but as close as the Americans could manage), where the chefs juggled knives at your table, which was also a metal cooking plate. Amazing!

Being Japanese was cool; they were the future, even if Hello Kitty was and still is, deeply weird. They were also the richest nation on Earth and we decided to forgive them for the genocidal war they launched a mere generation ago, on account of Nintendo's Super Mario being so much fun.

No one wants to be Japanese any more.  Over the last twenty years, Japan has experienced no net growth whatsoever and by some measures they are worse off. They had a massive property boom, followed by a huge slump, banking bailouts and wholescale state intervention in the markets, leaving Japan with a whopping 200% sovereign debt. Politician after politcian has ducked the difficult choices, sound familiar?

The recent fiasco with the American Debt Ceiling, which despite it's name is nothing to do with DIY or loft extensions, is only a taste of what's to come. Notice the UK latest's growth figures, which were zero in all but name. Now apparently there were lots of exceptional factors: the Royal Wedding, warm weather, wet weather, the price of fish. This, to use a technical economics term, is a load of bollocks. We're hosing down the country with money, borrowing £165 billion a year, and interest rates mean that with inflation, money is virtually free. Yet the growth figure we managed is... wait for it...0.2% - a rounding error, the sort of money the Chancellor might find down the back of the metaphorical Treasury sofa. The lousy growth figures  do not necessarily mean we should scrap the the austerity plan. Like the new boy in the prison showers, surrounded by a group of burly, tattooed men, we are screwed whichever way we turn.

There was no way we could start trying to reverse the largest credit boom in human history and not expect a little  pain re-adjusting. Going cold-turkey off a debt binge is going to produce some scary side effects, the economic equivalent of the dead baby on the ceiling when Renton kicks smack in Trainspotting.

But one habit we should definitely quit is the childish whining that it's all our politicians fault. It isn't. We chose to pay too much for houses, again - remember the other housing bust and the one before that? We bought things we couldn't afford, we preferred cheap credit and cheap mortgages to responsible behaviour. As nations, the British and Americans behaved like a drunk teenager given access to dad's credit card.

If we want to avoid wasted decades like Japan experienced, then perhaps we should take a little responsibility for own actions which means allowing politicians to talk openly about the problems, instead of the pantomimes which currently pass for TV interviews.  Note to Newsnight producers and presenters, finding small inconsistencies in what one government politician said relative to another is not investigative journalism, unless your aim is to achieve Stalinist orthodoxy in all organs of government.

Here's another thought, why not try electing someone on the basis of their abilities rather than how good they look on camera. You must have noticed that David Cameron, Nick Clegg and Ed Milliband are basically the same person and not even an interesting one - just a vapid, focus group's idea of what politicians should look like: the margherita pizza of leadership candidates. Perhaps the reason Cameron kept inviting Rebekah Brooks round for dinner is he was short of guests, because unless you wanted a government contract or a tax break,  you wouldn't want to spend three hours with the man, a waxwork has more personality.

The first step in beating an addiction is to admit you have a problem. We're debt junkies, time to face facts. Or we could bury our heads in the sand and blame our politicians. As The Vapors sang in 1980, 'I'm turning Japanese, I think I'm turning Japanese'