With the invisible hand of the market withered, our economies now need to turn to intellect and imagination
HASSO PLATTNER, the 64-year-old multibillionaire co-founder of German software giant SAP, says of 2009: “We’re all in a complete fog. We have no idea anymore how things are going to turn out.”
Gary Nickelson of the American Academy of Matrimonial Lawyers notes that US divorce lawyers “used to fight about who gets to keep the house, now we fight about who gets stuck with the dead cow”.
Dead cows in a complete fog? Time to fasten seat belts in advance of a bumpy ride.
We need a word for that flash, that nanosecond, in which mammoth industries – from banks to car manufacturers – instantly freeze solid. Since German gave us blitzkrieg for “lightning war”, we may yet be offered blitzlähmung for “lightning paralysis”.
Unblocking the paralyses we have already experienced and the ones currently gestating – steel production in the US fell by 50 per cent in the last quarter of 2008 – without totally wrecking the planet’s climatic balance is going to keep our governments, if not our people, off the streets. While resources and courage, will be available in multilateral abundance, intellect and imagination can neither be internationally guaranteed, nor supplied.
Many leaders have displayed unexpected audacity and flexibility over recent months and will be reinforced when president-elect Barack Obama takes over in just over a fortnight. Although he is expected to part the Red Sea in the morning and multiply the loaves and fishes during the afternoon, raising the economy from the dead may take a little longer. Expect the unexpected from Washington and as the world’s largest economy blazes new trails, other more hesitant leaders will find it easier to follow suit.
Resources are no longer a practical problem as governments are now the only ones capable of attracting capital. They have entered a new reality where they can raise and spend resources with a degree of freedom hitherto unknown. Our banking systems are becoming effectively state-controlled. Even in Germany where chancellor Angela Merkel has persistently been reluctant about embracing bailouts, the Special Fund for Financial Market Stabilisation (Soffin), is ponderously chomping its way through the country’s €480 billion bank rescue fund from a villa in the Taunusanlage area of Frankfurt.
Unblocking the financial system and getting industries turning again are our governments’ collective goals. Infrastructure investment is one obvious key, since construction projects create hundreds of thousands of semi-skilled jobs. The pay packets from those jobs will funnel into local businesses, while the purchase of steel, cement, fibre-optic cables, construction machinery and dozens of other items could preserve our economies from paralysis and collapse.
We can spend our way out of this recession by investing intelligently in electrified rail systems, urban light-rail transit networks, high-speed fibre-optic broadband provision, modern schools, roads, hospitals and bridges.
Or we could seek to cut minimum wages, rein in state spending and throw ever-increasing billions at parsimonious social programmes while waiting for the invisible hand of the market to weave its magic once again. Governments who opt for such ignorant and unimaginative responses will be swept away. Watch for imaginative mould-breaking responses from Washington, London, Berlin and elsewhere.
The US air force issued its requirement for an advanced tactical fighter in 1991. The first operational F-22 Raptors took to the skies in 2005 for a price tag of $340 million (€240 million) each. The US navy’s development contract for a joint strike fighter was signed in 1996, and the first F-35 Lightning flew in December 2006. An F-35 costs $100 million.
The US armed services therefore have two combat aircraft, designed to counter Soviet aircraft which were never built, entering into production. It is clear the country neither needs, nor can afford, both. The F-35 would be the more difficult to scrap since the United Kingdom, Italy, the Netherlands, Canada, Turkey, Australia, Norway and Denmark all participate in, and finance, its development. Will the Obama White House have the imagination to cancel the F-22?
I wonder if Gordon Brown has ever watched the 1991 film Backdraft? If not, he should add it to his 2009 “must see” list. Donald Sutherland plays a convicted arsonist up for parole. His reasonable, almost suave, pitch dissolves into insanity when the word “fire” is mentioned. David Cameron’s Tories struggle to present a reasonable image of themselves to the parole board of the British electorate. A parole board which would take flight if the Conservatives’ dysfunctional fanatics seeped out from under their tight wraps. Ardent Tory Eurosceptics would slavishly mimic Donald Sutherland’s madness at the mere mention of the word “euro”.
The political and economic arguments for UK membership of the euro are stronger than they have ever been. Lord Mandelson not only recognises this, but must be additionally attracted by the possibility of landing a killer punch on the Tories. Saving the world would be a minor achievement when compared to winning a blitzkrieg general election fought on the euro.
Which brings us back to Germany and “Madame Nein”, as Chancellor Merkel is increasingly referred to in European capitals. She vetoed a European bank bailout, arguing German taxpayers should not be burdened with the bills of irresponsible others. Although she has continued to articulate a cautious, even reluctant approach, she now faces an economy forecast to contract by 2.7 per cent and federal elections next September.
In her new year address, she hints at surprises to come – “We Germans have mastered bigger challenges than this” – and reminded us that 2009 marks the 60th anniversary of the creation of the Federal Republic and the 20th anniversary of the fall of the Berlin Wall.
When cautious Germany sprints, Plattner’s “complete fog” will get blown away.