• Business Confidence – Or Confidence Trick?

    Business is a centrally important part of our economy – and business leaders, who are assumed to understand it, are usually listened to with great respect.

    At the same time, it is understood that business leaders are not necessarily impartial commentators on the public scene.  They have of course “their own axe to grind” – they are, not surprisingly, pretty much in favour of profits and capital gains, and they don’t like trade unions or workers’ rights or higher wages very much.

    In the wider political landscape, they tend to locate themselves in the camp that believes that the market is always right and should not be challenged and they are somewhat resistant to the notion that government should do what the market cannot or does not do, and should intervene to ensure that the market does not produce outcomes that are unfair and that leave some of our fellow-citizens behind.

    When it comes to general elections, business leaders – though not all of them – will throw their weight behind parties of the right; if those parties don’t win power, then business is disappointed and is not slow to say so.

    We saw all of these attitudes and prejudices played out in last year’s general election.  It is a fair bet that the result was not the one hoped for by most business leaders.

    But the story does not end there.  Whereas most people, on the principle that – in a democracy – “you win some, you lose some”, will have accepted the result whether they liked it or not, many business leaders still seem to be “grieving” over the loss of the National government which had so clearly tilted the playing field in their favour.

    They continue to try to turn back the tide, by warning that they “lack confidence” in what the new government is doing.  So constant has that refrain become that it has assumed considerable significance in charting our economic future.

    Almost all economic commentators agree that our economy is doing well and is likely to go on doing so – with Trump’s “trade wars” the only really dark cloud on the horizon.  But, at the same time, we are constantly told that surveys of business confidence show that business lacks confidence in the economic future, to such an extent that the supposed lack of confidence has become – in itself – a possible threat to that future.

    Business sentiment, in other words, is not based on anything concrete but is rather a reflection of the disappointment felt by business leaders at having to deal with a Labour-led government – a matter of political prejudice rather than economic fact.

    It is almost as if, having lost the election, they want a second crack at it, to see whether they can unsettle the elected government and push it off its stride, through the simple mechanism of proclaiming that they don’t like it and would have preferred to carry on with the easy ride offered by the previous government.

    The tactic will not work if it is seen for what it is.  But the danger is that expressions of doom and gloom can all too easily become self-fulfilling; business leaders could end up convincing (and depressing) themselves, as well as everyone else, and important investment decisions could be delayed or abandoned for no good reason, so that a short-term political tantrum on the part of a few becomes a long-term economic loss for the rest of us..

    There is a further danger – that the new government will be so keen to gain at least some support from business (at least to the extent that the bad-mouthing will stop), that they will abandon the reforms they have undertaken – reforms that, as every day that goes by shows, are long overdue and desperately needed.  The last thing the country needs is a new government resigned, for fear of upsetting business, to continuing the mistakes we thought we had got rid of.

    We now need a government willing to fund a safe environment, better and healthier housing, more effective schools, an end to child poverty, and a health system that looks after the most vulnerable.  Business can support or oppose such goals, but – like the rest of us – business will benefit when they are achieved and suffer if they are not.

    Bryan Gould

    27 June 2018