City & Business: Financial turmoil? Don't worry, be happy

THE DEFLATION virus that put the world economy on the critical list from mid-August until October has been contained. We are now seeing Group of Seven officials exchanging knowing smiles: "Worldwide financial crisis? What worldwide financial crisis?"

But the virus has jumped from the financial sector to the corporate sector. So far it's not so virulent in its new host. G7 officials, indeed, are predicting no more than a mild dose of the flu for the world economy in 1999, but no recession unless we talk ourselves into one.

Still, the world - and consequently that part of the world having to do with money - looks an uneasy place this weekend. If the brinkmanship between the Anglo-US alliance and the murderous, probably insane Saddam leads to bombing, we can expect oil prices and the dollar to rise, and airline stocks to fall over the fear of jet-fuel price hikes.

Beyond that, however, the prospect of B52s and Tornadoes flying sorties over the Gulf reminds us of something we forgot during the financial crisis: the world is not an econometric model.

Central bank interest-rate reductions are to be sincerely applauded. G7 efforts led by Gordon Brown, the Chancellor of the Exchequer, to tighten up on the most excessive of hot money flows in and out of emerging market economies can only be backed.

But these policy initiatives are not stopping students, thugs and soldiers from fighting it out on the streets of Jakarta. Nor are they stopping the diversion of badly needed resources away from productive sectors into security.

I do not want to sound like an old-fashioned bleeding heart liberal (although, to come clean, that's what I am). I've sat in enough government offices in enough G7 capitals talking to enough officials to respect the sophistication, resourcefulness and plain intelligence that occasionally crops up in such places. Riots, mad dictators, surgical strikes, the thudding feet of millions of economic migrants - this is all part of the post- Cold War world. It is not entirely external to the econometric models in use today.

I appreciate that doom-mongering can be an irresponsible luxury for journalists - as Mary Poppins once told the King of Siam, we must whistle a happy tune.

But still. The recent round of results from our high-street retailers tells us that the collapse in consumer sentiment is no mirage. When Storehouse - owner of 135 BhS stores and 272 Mothercare shops - reports its interims this week, the trend is likely to be accentuated. How much of a fall- off in pre-Christmas retail spending, I wonder, do the Treasury and Bank of England forecasts for 1 per cent growth in 1999 anticipate?

The decline of our heavy industries continues. BMW thinks it can reach an accord with Rover car workers this week. But that still leaves the question of what sort of aid the Government will offer Rover after productivity rates are out of the way as an issue. And that still leaves the even larger question of whether BMW capital, government aid and worker concessions can save Rover in a world rife with automotive overcapacity.

Meanwhile, on the international front, there is an outbreak of trade boils on the corpus economicus. In isolation, an EU-US banana war is funny. Couple it with the bully-boy tactics employed by Washington to prise open Heathrow for the US airlines and the laughter becomes a little hollow. Couple both those situations with the hardline stance adopted by Washington going into this week's Asia-Pacific Economic Co-operation summit in Kuala Lumpur, and the laughs rather die away.

The sophisticates in the think-tanks around Washington's Du Pont Circle wink and tell us not to worry about American protectionist breast-beating. It's pre-emptive, they say, meant to satisfy the blood lust of the America Firsters out there in Nebraska. But this is casuistry.

As the pressure to open up Heathrow demonstrates, Washington is not only playing to its hinterland audience. It is responding to pressures from its Fortune 500 companies, worried that their sales are drying up in Asia and Latin America.

There are happy tunes to whistle. Whatever the cyber-Luddites may say, the information revolution looks real. Putting the world on the internet - giving billions e-mail addresses - and plugging telly owners into the digital, interactive age is bound to have positive economic consequences. The Government's recent commitment of pounds 430m to link every school to the internet is a wise investment of taxpayers' money.

All the corporate news is not bad. Zeneca's announcement on Thursday that it was putting its speciality chemicals business up for sale breathed new life into the ageing adage that companies need to focus. Zeneca's idea is to concentrate on pharmaceuticals and agro-chemicals like Novartis, BASF and other continental rivals. It is a bit late in making its move, but it wanted to clean up the special chemicals division before putting it up for sale.

Still, the deflation virus is causing dyspepsia in corporate boardrooms. Maybe the dust-up at LucasVarity can be discounted. Perhaps the idea of moving the motor parts maker from the UK to the US was just a brainwave by the company's chief executive, Victor Price, which was properly rejected by UK shareholders.

But what about Marks & Spencer? Boardroom power struggles are not supposed to happen in a company consistently voted "most respected" and "best managed". You can discount the eruption as an aberration. Put it down to the frustrations of one man - the deputy chairman, Keith Oates, who, according to published reports, felt he had nothing to lose in kicking up a public row over the question of who is to succeed the current 62-year-old chairman and chief executive, Sir Richard Greenbury.

Or you can take it as a sign. Many of us are stretched to breaking point in our jobs. Many companies, it therefore stands to reason, must be stretched to breaking point in the pursuit of sales and profits. If this is so, large parts of the world economy may be running on reserves. If this is so, the world economy is accident-prone.

Accidents do not fit neatly into econometric models.

Jennifer Lawrence was among the stars allegedly hacked
peopleActress among those on 'master list' of massive hack
Radamel Falcao
footballManchester United agree loan deal for Monaco striker Falcao
A man shoots at targets depicting a portrait of Russian President Vladimir Putin, in a shooting range in the center of the western Ukrainian city of Lviv
voicesIt's cowardice to pretend this is anything other than an invasion
Arts and Entertainment
The eyes have it: Kate Bush
Louis van Gaal, Radamel Falcao, Arturo Vidal, Mats Hummels and Javier Hernandez
footballFalcao, Hernandez, Welbeck and every deal live as it happens
Arts and Entertainment
booksNovelist takes aim at Orwell's rules for writing plain English
Arts and Entertainment
Al Pacino in ‘The Humbling’, as an ageing actor
filmHam among the brilliance as actor premieres two films at festival
Fifi Trixibelle Geldof with her mother, Paula Yates, in 1985
Arts and Entertainment
Downton Abbey fans rejoice, series five returns later this month
ebooksAn evocation of the conflict through the eyes of those who lived through it
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Application Support Analyst / Junior SQL Server DBA

£40000 - £45000 per annum: Ashdown Group: An established professional services...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Business Development Manager / Media Sales Exec

£28 - 32k + Uncapped Commission: Guru Careers: A Business Development Manager ...

C# .NET Developer (PHP, Ruby, Open Source, Blogs)

£40000 - £70000 per annum + Bonus+Benefits+Package: Harrington Starr: C# .NET ...

Day In a Page

Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor