Saturday, 27 December 2008

Bail us out say retailers

Hot on the heels of demands for a bail out for the motor industry the retail sector has asked for help to keep their three million employees in work. Admittedly their request is focused on a 5 per cent increase in business rates due in April which does seem a bit severe in current circumstances.

We are told that the motor industry has to be bailed out by taxpayers to compensate for its inability to sell its product because so many supplier firms depend on the assemblers. But then any industry has inputs of energy, raw materials, machinery and various services. However, in the case of the motor industry the casualties are more identifiable.

When I studied industrial policy, it always struck me that the focus on industries like motor vehicles and steel rather than food processing which employed just as many people had a strong gendered dimension to it. Motor vehicles was seen as a 'real industry' making things and in the 1970s the workforce was overwhelingly male: its composition has changed since then.

Any help to firms in trouble must take the form of loans to tide them through the recession. There must be no return to the days of using taxpayers' money to bail out failing companies. Unfortunately, the Americans have not set a good example. In their present form Chrysler and General Motors are simply not viable.

1 comment:

Locolas said...

The role and scope of government has been debated since Confucius and will no doubt be debated long after our passing. The British government has tried to protect commerce by taking part ownership in various parts banking industry. Your blog seems to question the scope of private sector involvement rather than its role. The role of government in private businesses is much less obvious and potentially much more dubious in nature. Political funding is just one area that could quite easily become corrupted in such situations and I’m sure there are many more areas where undesirable practices could take place and indeed be hidden.

We have already seen how the government has attempted to excerpt pressure on banks to open their loan books and lend when this is quite clearly not the time to do so. Most bankers having been the victim of poor national and international monetary policy rather than fool hardy investments have been roundly rebuked throughout the country despite little widespread knowledge of the situation. I do not see many bad business models in the banking industry although there has been a few. Despite this the government now believes that it knows better than any banker how to run the industry, this is a development that fills me with dread.

Recapitalisation of banks is crucial to the avoidance of a depression but, having interest rates lower than the rate of inflation is one sure way to achieve capital outflow, whereas what is required is capital inflow.

While the scope of any government’s involvement in industry will be debated the first duty of any government is to protect the realm and there are industries that are necessary to do this. I read somewhere that to be a winner of a war you need to produce more steel than your opponent/s. Armies throughout the world are now mechanised so would it not be folly to except the deterioration of steel and vehicle manufacturing industries from a military strategic point of view?

We may believe that the times we live in are peaceful, consider though how many times the British Government been involved in conflicts and wars in the past half a century. I can’t imagine Churchill would ever have accepted the closure of shipyards on an island either.