I have to admit that it is quite a while since I was last brave enough to face the London Underground. However, I believe that there are still recorded announcements advising passengers to ‘mind the gap’ between the platform and the train.
We do seem to live in a world where a sort of confidence gap is opening up between the so called Western world and the emerging BRIC countries. Obviously nothing is ever as simple as that but what you can say, with some degree of confidence, is that confidence is more badly shaken in the US and Europe than elsewhere and this is shaping attitudes at both a political level and the all important consumer level as well.
This confidence gap was evidently reflected in the discussions that took place in Davos with the Chinese and Indian representatives apparently very confident about the direction and management of their own economies and the major role they have played in leading the world out of this horrible recession.
The good news was that the world, and even perhaps Gordon Brown deserves a little credit for this, did get together at the right time to cobble together a sufficiently unified response to deal with the banking crisis and the subsequent aftershocks to the world economy.
Also the world has moved to a much more G20 (G2?) position rather than inadequate and unrepresentative G7 format. Most commentators feel that this more multi-polar approach to the regulation of the world economy was in any case overdue in recognising changing economic reality.
However, experience and age has taught me to be wary of the sort of conventional wisdom that equates one country’s (or group of countries) success with the seemingly inevitable failure of others. I remember years ago when visiting clients in Antwerp the topic of the day was invariably that the US economy was washed up and Japan would overtake not only Detroit but the world. This was all very much focussed on the US automobile industry’s problems and disregarded the other vital elements of American creativity and economic diversity. Who would have thought that we are now in a situation where the American automobile industry is (hopefully) recovering from almost total wipe out and it is the much lauded Toyota brand and its much imitated model (The Toyota Way) that is facing the most difficult test of its entire history with its Chairman being called to explain his position to the US Senate.
The idea that the US would shortly be overtaken by Japan was also very much based on the fact that there had been the most extraordinary exponential increase in sales in the Japanese market as a result of the De Beers marketing efforts in promoting the diamond culture in Japan converging with a booming Japanese economy.
So while, of course, we should be impressed, enthusiastic and heartened by the extraordinary progress the BRIC economies have made and what that means to the rest of the world, we should not be too hasty in writing off Europe and the US, although sometimes the Americans and Europeans seem so confused that this reinforces the impression that they’ve lost confidence in themselves, which will certainly be serious if it affects their political leadership’s will to address their own problems.
Take the UK economy, as we approach an election it is interesting to note that in both the Sunday Times and the Financial Times there have been letters from groups of eminent British economists who disagree strongly on the timing of when deep financial cuts are made to restore health to the UK economy by bringing debt under control. However, neither groups of economists disagree on what needs to be done; it is all about the crucial question of timing and also possibly the political sympathies of the economists in question.
Greece has been having a pretty torrid (and horrid) time in economic terms and the Germans don’t seem to be in too much of a hurry to bail them out.
The Spanish government, who seem to have been effectively in denial about their own situation following the near collapse of their building based sector, have been so concerned about how their economy is being viewed that they sent their Economy Minister to London to reassure leading financial houses and the editors of the Financial Times as well that the situation will be brought under control.
Let’s look further at Spain. Undoubtedly the 19% unemployment, the highest in the Eurozone, is a huge and rightly worrying reflection of the structural rigidities and problems that they need to address. But this is also a country that has one the best and most extensive high speed rail networks in the world, so impressive that the highest US transportation officials have studied it as a model for their future planning.
Anybody who knows India will agree that while the transport infrastructure (roads, railways and airports) are definitely improving, there is an awful long way to go for Indian railways to catch up Spanish standards.
We now seem to be in the situation where the immediate threat of the collapse of the world economic order has undoubtedly been avoided and we live in a world that is much more realistic about the risks of uncontrolled exuberance, over confidence and hubris. Back to Spain again, the Spanish banks (in particular Santander) and the Canadian banks have both been held up as examples of responsible and conservative banks who avoided the excesses of the US, British and other banks. One thing does seem to be clearly emerging, as the world economy slowly and stutteringly improves, is that while co ordination will still be essential for global recovery and trade, countries and blocs of countries will have to address the problems that have arisen in the aftermath of the world economic crisis. The confidence gap will continue to be an issue to those countries whose politicians do not walk the talk and deliver what’s required of them.
We do seem to live in a world where a sort of confidence gap is opening up between the so called Western world and the emerging BRIC countries. Obviously nothing is ever as simple as that but what you can say, with some degree of confidence, is that confidence is more badly shaken in the US and Europe than elsewhere and this is shaping attitudes at both a political level and the all important consumer level as well.
This confidence gap was evidently reflected in the discussions that took place in Davos with the Chinese and Indian representatives apparently very confident about the direction and management of their own economies and the major role they have played in leading the world out of this horrible recession.
The good news was that the world, and even perhaps Gordon Brown deserves a little credit for this, did get together at the right time to cobble together a sufficiently unified response to deal with the banking crisis and the subsequent aftershocks to the world economy.
Also the world has moved to a much more G20 (G2?) position rather than inadequate and unrepresentative G7 format. Most commentators feel that this more multi-polar approach to the regulation of the world economy was in any case overdue in recognising changing economic reality.
However, experience and age has taught me to be wary of the sort of conventional wisdom that equates one country’s (or group of countries) success with the seemingly inevitable failure of others. I remember years ago when visiting clients in Antwerp the topic of the day was invariably that the US economy was washed up and Japan would overtake not only Detroit but the world. This was all very much focussed on the US automobile industry’s problems and disregarded the other vital elements of American creativity and economic diversity. Who would have thought that we are now in a situation where the American automobile industry is (hopefully) recovering from almost total wipe out and it is the much lauded Toyota brand and its much imitated model (The Toyota Way) that is facing the most difficult test of its entire history with its Chairman being called to explain his position to the US Senate.
The idea that the US would shortly be overtaken by Japan was also very much based on the fact that there had been the most extraordinary exponential increase in sales in the Japanese market as a result of the De Beers marketing efforts in promoting the diamond culture in Japan converging with a booming Japanese economy.
So while, of course, we should be impressed, enthusiastic and heartened by the extraordinary progress the BRIC economies have made and what that means to the rest of the world, we should not be too hasty in writing off Europe and the US, although sometimes the Americans and Europeans seem so confused that this reinforces the impression that they’ve lost confidence in themselves, which will certainly be serious if it affects their political leadership’s will to address their own problems.
Take the UK economy, as we approach an election it is interesting to note that in both the Sunday Times and the Financial Times there have been letters from groups of eminent British economists who disagree strongly on the timing of when deep financial cuts are made to restore health to the UK economy by bringing debt under control. However, neither groups of economists disagree on what needs to be done; it is all about the crucial question of timing and also possibly the political sympathies of the economists in question.
Greece has been having a pretty torrid (and horrid) time in economic terms and the Germans don’t seem to be in too much of a hurry to bail them out.
The Spanish government, who seem to have been effectively in denial about their own situation following the near collapse of their building based sector, have been so concerned about how their economy is being viewed that they sent their Economy Minister to London to reassure leading financial houses and the editors of the Financial Times as well that the situation will be brought under control.
Let’s look further at Spain. Undoubtedly the 19% unemployment, the highest in the Eurozone, is a huge and rightly worrying reflection of the structural rigidities and problems that they need to address. But this is also a country that has one the best and most extensive high speed rail networks in the world, so impressive that the highest US transportation officials have studied it as a model for their future planning.
Anybody who knows India will agree that while the transport infrastructure (roads, railways and airports) are definitely improving, there is an awful long way to go for Indian railways to catch up Spanish standards.
We now seem to be in the situation where the immediate threat of the collapse of the world economic order has undoubtedly been avoided and we live in a world that is much more realistic about the risks of uncontrolled exuberance, over confidence and hubris. Back to Spain again, the Spanish banks (in particular Santander) and the Canadian banks have both been held up as examples of responsible and conservative banks who avoided the excesses of the US, British and other banks. One thing does seem to be clearly emerging, as the world economy slowly and stutteringly improves, is that while co ordination will still be essential for global recovery and trade, countries and blocs of countries will have to address the problems that have arisen in the aftermath of the world economic crisis. The confidence gap will continue to be an issue to those countries whose politicians do not walk the talk and deliver what’s required of them.
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