Friday 24 June 2011

Short Termism

One of the greatest problems of the UK economy is short termism: that our investors are far more concerned with making a quick profit in the City than with long term investment in enterprises that will create a stream of income in the future, along with employment, innovation and general prosperity. As Harold Wilson put it, it is easier in this economy to make money rather than to earn it. In half a century nothing much has changed.

The same short termism exists in our politics. After less than a year as Labour leader Ed Miliband is being battered from all sides, including his own, by accusations of ineffectiveness. In my view he would be wise to ignore them. To quote Wilson yet again,"A week is a long time in politics," and the likely four years before the next election is a very long time indeed. Miliband is therefore right, in my view, to have set up commissions for comprehensive reviews of Labour's policies in all areas and we can hope that his party will put a series of distinctive and credible programme for us to consider at the next election. In the meantime my advice to him is to keep as low a profile as possible, cut down on the sniping at Prime Minister's questions and elsewhere, concentrate on getting Labour's policies right and relevant, and in general play the long game.

I sincerely hope that we Liberal Democrats will do much the same. Last weekend's opinion polls showed us down to 12%, but a week is a long time in politics for us too. I hope we are not so obsessed with the short term problems of taking the minor role in the governing of the country that there is not time and energy left over for looking ahead. When Nick Clegg achieved the miracle of getting the media and public to pay some attention to us at the last election, out policies were found to be wanting. We need to be able to put forward a more robust package next time, viable, relevant and in keeping with our Liberal ethos.

Nick Clegg's suggestion that the government equity in RBS and Lloyds TSB should be shared among all adults, to the tune of about £700 apiece, so I've read, seems to me to have short rather than long term consequences. In the short term it might produce a bit of popularity but, as with the demutualisation of the building societies, most of the shares would be quickly cashed in, go into the hands of the existing financial institutions and wealth holders and nothing much would change. Better in my view to turn the banks into the equivalent of those German ones charged with a duty to provide credit to enterprises for long term investment at low rates of interest.

1 comment:

  1. i fully agree with you about the bank shares. We have excellent alternative models of ownership like the Mondragon savings banks that Jo Grimond was so impressed with as well as the German model. Personally I favour the utility banking bit of the nationalised banks being re-mutualised in regional packages. Banks dedicated to serving their customers(members) will look to the long term and be prepared to build up long term relationships with SMEs in their area. We have enough banks who put building shareholder value first all the associated risks and too few mutuals