Why government and business don't really mix
'No right-thinking person would these days feel comfortable with the idea of un-elected trade unionists running the country. Why should we feel any happier if it is businessmen pulling the levers of power?'
Saturday 26 July 1997
But in the end public policy is for civil servants and the politicians who control them, and business is for businessmen; the two usually and rightly make uneasy bedfellows. No right-thinking person would these days feel comfortable with the idea of un-elected trade unionists running the country. Why should we feel any happier if it is businessmen pulling the levers of power? Within their own organisations their control is already almost absolute. Do we really want them dictating public policy, too?
Even accepting that they do have a valuable contribution to make to formulating policy (which they plainly do), the appointment of particular individuals to key positions carries obvious dangers. The potential for conflict of interest and embarrassment is already apparent.
One of Mr Blair's business buddies - Robert Ayling, chief executive of British Airways - already finds himself embroiled in strike action, his handling of which has so far proved questionable, to put it at its most charitable. Now Martin Taylor, chief executive of Barclays Bank and recently appointed to head the Government's review of tax and benefit, finds himself facing strike action, too. It would be silly to suggest Mr Blair's association with these two people means the Government is wholly in support of whatever they do in their own businesses. Crony-ism nonetheless invariably involves a set of shared views, attitudes and a high degree of mutual support. One man's inclusion is another's exclusion.
Nor is it just the forces of Old Labour that feel disturbed by it all. John Redwood's attack on Lord Simon, minister for competitiveness in Europe, may seem nit-picking and petty, but the former BP chairman was indeed less open than he should have been about his substantial shareholding in BP, and arguably he shouldn't have the shares at all now that he is a government minister. Furthermore, the wider potential for conflict of interest in Lord Simon's position is only too obvious in a world where the power and influence of the oil companies is a constant source of controversy and friction.
The same sort of niggling doubt might be expressed about the appointment of Peter Davis to head up the welfare to work review. He's the man from the Pru, which lest it be forgotten has one of the worst records in the industry in clearing up the pensions mis-selling scandal. Strangely, the Pru has been largely untouched by the "name and shame" campaign to force the industry into action launched by Helen Liddell, Economic Secretary to the Treasury.
The Government may also have underestimated the degree to which these appointments would anger businessmen not summoned to the burdens of public office. The latest example of this effect is the grandly named "Music industry and new Creative Industries Task Force" being established by Chris Smith, the Heritage Secretary. Mr Smith announced the task force at the same time as changing the name of his department to the Stalinist- sounding Department of Culture, Media and Sport. "My department's old name was backward-looking and did not do justice to the range of work we cover," Mr Smith insisted. Tee-hee, went everyone in the music industry.
Until they learnt who was going to be on the task force, that is. With Richard Branson, Sir David Puttnam, Alan McGee (of Creation Records) and various other assembled luvvies nicely tucked in to the action, the task force begins to look more like an opportunity for the promotion of self- interest than anything else. This observation would seem a little unfair but for the fact that the task force's objective has been defined as that of increasing "creative activity and excellence in the UK". Wooliness like this rather invites such cynicism. That's certainly how much of the music industry views it.
I shouldn't perhaps be overly critical about all this. The Government is at least showing willing in attempting to establish a partnership with business. Moreover, the attempt to engage traditionally detached business people in finding solutions to complex social and economic problems is one that obviously deserves support. On the other hand, the Government may be storing up all kinds of trouble for itself with its business-led task forces. You can hardly blame business people for getting upset when their main competitor is helping to set government policy.
What ever happened to "irrational exuberance". You remember. That was the thing Alan Greenspan went on about late last year when the Dow Jones Industrial Average was at just 6,400. If the chairman of the Federal Reserve Board thought the market was too high then, what does he think now with the Dow more than 25 per cent higher at more than 8,000.
Whatever it is, he's not saying. He was silent on the matter during his Congressional testimony this week. There was no talk of a stock market bubble, or of pricking it with a sharp rise in rates. Indeed, he had nothing but praise for the US economy, which seems to be jogging along with the ease of a highly trained long-distance runner.
So has he changed his mind? Or is it simply that he doesn't want to be the cause of a stock market crash, as he nearly was last time he opened his mouth on the matter? It is probably a combination of the two. Mr Greenspan has already qualified his remarks about irrational exuberance in markets by suggesting the exuberance could be justified by strong earnings growth.That is what corporate US seems to be delivering right now.
Even so, you have to believe the business cycle has been abolished for good to think stock prices justified at these levels. Perhaps because the US is the US - easily capable of accommodating the whackiest of sects and ideas - there are some quite respectable economists who actually believe this. Most of us will continue to take a rather more sceptical view, however, and for us, awaiting a big stock market correction has become a bit like waiting for the death of Deng Xiaoping. Everyone knows it will happen eventually. It is just a question of when.
Personally I'm rather hoping it won't be for fortnight or so yet, because I wouldn't want to miss the fun. I'm off to France for a few weeks to take advantage of the soaraway pound, another phenomenon lamentably unlikely to last for long. Unless, of course, you believe that Britain too has discovered economic nirvana. Mmmm.
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