Tuesday, September 16, 2008

The Fundamental Truth about Business.

A few months ago I ventured into the City of London, a place almost as unfamiliar to me as a hypermarket. But there was I, trained as a hill sheep farmer, discussing 'Corporate Greed' with a man of very different background, but of similar outlook. We were instinctive 'capitalists' concerned about the 'greed' which seemed to becoming commonplace within our financial institutions. The discussion had been 'triggered' by reports of the first billion pounds bonus, and a speech by Peter Hain, a then Government Minister condemning the unacceptability of such massive rewards. OK, so he was contesting Labour's Deputy Leadership at the time. My friend and I contemplated the resentment that might be felt by those involved in under pressure manufacturing, compared with the massive sums being paid in bonuses to those employed in financial services. We felt that Peter Hain may have a point. Neither of us had any inkling that a day like yesterday was just around the corner. And there's plenty more to come.

Now, there are some fundamentals about capitalism, to which Jeff Randall refers in his blunt speaking way. Truth is that there is no real difference between running an international bank and a sweetshop, a toyshop or a hill sheep farm - except for the collateral damage that might be caused when they go bust. A good hill sheep farm business, not over borrowed, competent farmer, good record of profit and efficiency will survive a year like 2007, when Blue Tongue Disease played such havoc with profits. An over borrowed hill sheep farm, with a farmer taking too much out of the business, and with no allowance being made for future financial squalls, will sink. Its the same with financial institutions - when it comes to fundamentals. And when the tornado arrives its too late to worry about the foundations, if all the money has gone into flashy redecoration. Even with the biggest financial institutions in the world, if the managers forget the fundamentals, they go bust. That's how capitalism works. It looks as if there are going to be an awful lot of casualties.

Its the same with Government. Gordon Brown is the political equivalent of Lehman Brothers. For years he rode the tiger, informing the world that he had ended the concept of 'boom and bust' and spending taxpayer's money with little regard for value. But the tiger fell sick, and the Prime Minister has been caught out. The Scottish Emperor has no clothes. He may well go the way of Lehman Brothers - and for the same reason.

1 comment:

Anonymous said...

"BROWN (in a Scotish accent) AND BUST"