system two

system two
start-up thinking in the enterprise

Thursday, 6 May 2010

The public sector cash pipe.....

A friend who heads up the marketing for a decent sized organic food retailer, was detailing some of the shocking headline figures her business was trying to cope with. Double digit declines in sales, massive staff redundancies, huge cut backs. Businesses shrinking to their bones - and many not surviving.

Her expereience seems to be in sharp contrast to that of other friends in the private - and public sector. But then organic food is alone - "fully private" if you like. A sector which receives virtually no government support, and is fully dependent on discretianary spending. They've not been shielded from the reality of our continent's fiscal position. Other sectors, whose bottom line is, in part, helped by direct or indirect government cash have been luckier. The ad agency with the juicy NHS trust PR gig, the printers who have the council contract, the garage which maintains the fleet of police vehicles.....

Once the government cash pipe stops pumping - probably at around the same time as a relief well is dug in the Gulf - it is these "part private" enterprises which will be tested.

How much of these businesses are built on easy, poorly accounted for government cash? How much of our economy is built on an embedded, 35 year old psychology that governments (since the decoupling of the dollar from the price of gold in 1973) could keep printing cash

10%? 30% 50%.....70%?

From experience, I suspect many part private businesses are bloated and inflexible - in as poor state as their public sector counterparts - and the loss of government contracts will be the end for them. How much of what we now consider to be fully private businesses - the pizza chain in the Mall, the high end clothes retailer, the garden planning much of their trade is based on a generation's assumption that the life they were living was "real" - when in actual fact, all of us have been being subsidised by virtual money for nearly 40 years.

How many people do they employ? How much virtual money were they contributing to the exchequer? What happens to a country when 30% of us are out of work? What do we do?

We're just about to find out.

Its election day

The last bottle of wine at the money printing party has been quaffed. The sun is coming up. The party is over.

The unavoidable consequences of 30 years of printing money are just about to kick in....