The Cult of Short Termism
We live in fascinating times indeed. Daily we see gossip reported as news and news as gossip. I am eagerly looking forward to June when Jeff Daniels reclaims his role as Will McAvoy on HBO’s The Newsroom. I so admire his ‘civilizing mission’ to help his news program’s audience, make more informed decisions in the voting booth.
The reality however is that Will’s news program is losing audience share as he pursues this mission. Voters yearn for entertainment above information. So here in the UK, the recent budget laid before our Parliament should be viewed in that light. Our wise politicians have bought into our preference for entertainment. Ask the backbenchers who entertained us as the Chancellor proudly explained how he engineered spending to support a claim of a falling national deficit. Well that and his tinkering with the taxes on beer.
The mainstream media has fuelled our righteous indignation over attempts to force depositors in Cypriot banks to directly share in the pain in the form of taxes on deposits. This is the very media who seems to have conveniently overlooked our Chancellor's assurance that he will continue running the printing press (a.k.a. Quantitative Easing) which means that regular consumers like us will suffer exactly the same fate as our fellow depositors in Cyprus (together with the many middle class Russian depositors who helped sustain the Cypriot bubble). Ignorance is bliss I guess
As I mentioned in a previous post, the real focus shouldn't be on any budget but on strategic decisions as to where Great Britain should ally herself in the confusing maze of contemporary geopolitics. I see three views emerging.
Firstly, some say that we should stay in Europe and a look at the economic data reinforces that. Leaving Europe would have a net negative impact on our economy according to a recent piece in the Economist. Most Brits are ignorant to the fact that some of the largest manufacturers / manufacturing employers in the UK are owned by foreigners (particularly Indians) who invested here to access the EU market. Emotions rather than the hard economic numbers unfortunately, continue to drive debate
Secondly, some say we should decouple from Europe and that we should cozy up to the Commonwealth. The PM's recent forays to India appear consistent with this idea. Even Obama's second term administration speaks of a pivot towards the Pacific. But what exactly does the UK bring to the negotiating table aside from easy access to the EU via a familiar English speaking, business-friendly environment? The reality is however, that India knows that we need her more than she needs us. Even Canada and Australia are wobbling. Disappointing exports, stalled investment and fiscal austerity leave the overstretched consumer as Canada's only hope for growth writes the economist. Yes after the 2008 trauma, Canada recovered faster than any other G7 member. Its banks remained solid, while low interest rates encouraged consumers to borrow and spend. But five years on, consumer spending is naturally slowing down. The economy is expected to expand by just 1.6% this year, so authorities are searching for another source of growth. Good luck with that one.
Thirdly, some say that we should cuddle even more closely with our American cousins. Just look at the rally in the equities market, falling unemployment and encouraging housing indices. Seems like a no brainer to me. I was in Seattle last week and was reminded of some of the reasons why the US continues to drive the global economy despite claims of imminent collapse and why rhetoric about this being China's century may just turn out to be nothing more than rhetoric. I have just a single word - innovation. Washington State is apparently the largest employer of software publishing workers in the U.S and it ranks first in the nation in the creation of new software companies. The Seattle area is home to Microsoft, Amazon.com, Expedia, Nintendo, T-Mobile as well as engineering and operations for Google, Facebook, Intel, Hewlett Packard, Oracle, Yahoo!, and Adobe. The state is also a leader in RFID technology and has one of the highest concentrations of technology expertise in the world.
But the strength of the American recovery, to some extent, comes despite the Government rather than because of it. Why? Because both the White House and Congress appear to be caught up in the same short termism as the UK Parliament and Cabinet. Rather that focus on what’s best for the long term, the focus is on making the best sound bite for the nightly news cycle that feeds an audience starved for entertainment. In the US, brinksmanship is the new norm and neither side of the aisle seems prepared to give way. In the UK, it’s business as usual for our economic-fixers even though it is clear that business as usual is not working.
This cult of short termism is by no means limited to politics mind you. During the subprime bubble, no banker wanted to be the first to pull out because there was so much short term goodness to be had. After all, to underperform the market average was / is a sure way to unemployment. Similarly today, many acknowledge a bubble in the bond market while they continue to play the game. After all, to stay on the sidelines means missing out on this cycle’s goodness which means you’re going to lose your job to someone who is willing to play. Just like the news editors who take Will McAvoy’s high ground and go for content over entertainment, will lose audience share and eventually lose their jobs too.American Tax Singapore
So for the time being, the cult of short termism is here to stay. Read more on DerrenJoseph.blogspot.com