What else can the public sector do to respond to the immediate and longer term effects of recession? 

An obvious answer is business support.  Businesses, big and small, are suffering, resulting in the very painful sight of job losses, factory closures, and the disappearance of much loved brands.  It would clearly be good to prevent this pain.  The problem is that public money can do little of use – other than, perhaps, to offer palliative measures and a slowing down of the inevitable.  There is an argument that even this response is entirely counter-productive, cluttering up the marketplace with subsidised, weaker players; preventing the fittest from flourishing as they should.

A generation of government funded business support has focused on addressing the apparent market failure in small business advice: the reluctance small businesses show to seek out information and consultancy in support of their success.  The issue is not whether this is a problem: it clearly is the case that too many business people aren’t as sharp as they should be and don’t sufficiently value the idea of getting advice.  The problem is what public money can do in response.  It is far from obvious that making something free means that people will value it – quite the reverse.  And it is also far from obvious that the ranks of state-funded, state-specified advisors, on limited state-determined salaries, will have the edge, insight and credibility to make a real difference to business.  They may even act as a brake on real enterprise and risk.

The public policy makers have spotted a real issue, but have designed the wrong answer.  Why?  Firstly, because the public sector has a paranoia about failure – but there can be no enterprise without lots and lots of failure.  Secondly, because the public sector values consistency (e.g. of the business support process), over individual vitality – but enterprise is about energy, obsession, opportunism; not structures.

We have seen a public sector recession response which emphasises the support available from the Business Link network; which has sough to make equity and loan finance more available; and which has intervened to prop up large institutions (e.g. banks) or ease the pain of company closure.  These may or may not be valid initiatives.  They probably lack the scale required to have a real impact.  They may be politically necessary.  But they are certainly less than conducive to the longer term development of a robust enterprise economy.

An effective public sector response to recession is consistent with longer term public sector support for enterprise.  It is clear that governments cannot pick winners – businesses or sectors.  The job of the public sector is to ensure the marketplace is characterised by robust competition – through regulation and enabling measures.  Robust competition, in such a mediated environment, is the best quality control known to man.  It results in innovation, risk, wealth generation – and, necessarily, failure.

So what are the enabling measures?  I take you back to my analysis at the start of this piece.  The future basis of competition will be fluid networks of individuals, coming together around specific opportunities, and reforming around a successor opportunity when the first passes.  So any public funds must recognise that the individual is the target, not the “business”.  Investment in the competitiveness of the country must be focused on: the infrastructures which support fluid networks of individuals.  This means, for instance, investment in technology supported communications tools, local authorities planning for more cafe space at the expense of traditional office accommodation, and speeding up the ability to form businesses and to close them.  Public funds should also be focused on the ability of people in general to connect with each other, to connect with the sources of information, and to work in teams.  The development of these three attributes has become, in this information age, the fundamental requirement of the education system.

In addition, we must as a culture get over our dislike of the salesman.  Selling, done well, is an honourable pursuit: the identification and resolution of customer needs.  I make this point since, in recession, and in what is likely to be the new paradigm in a post-recession world, a particular set of skills or dispositions will be at a premium.  These are the skills of an “architect layer”: the ability to identify potential customers and their needs; to engage with them and gain their trust; the ability to broker between those needs on the one hand and the potential solutions on the other; the ability to cross reference need, solutions and possible financial models.  In a short-cycle world, where no opportunity lasts for long, these abilities become of significantly greater competitive value.  Would it not be wise, while there are no jobs for newly graduated architects, web-designers, designers, film makers, social workers and others; would it not be wise to invest in setting them free to be free ranging opportunity brokers?  Small amounts invested now in such individuals, or small teams of such individuals, would enable them to interact with possible markets, gain a sense of what’s possible, give them a sense that they can take control of their worlds.

More specifically, the public sector should face up to the effects of its own expenditure.  From meeting room sandwiches to large scale infrastructure projects, the public sector has a significant impact on the economy at all levels.  But its procurement processes are not used strategically.  Trying to be objective, the public sector procures in ways which act directly counter to innovation and competition – and which often are also deeply unfair.  Trying to be cost effective, the public sector spends more than it should. 

The proper requirement for objectivity results in unnecessarily bureaucratic procurement processes, which preclude smaller (perhaps local) businesses.  It brings with it a (correct) belief that EU legislation precludes the favouring of local suppliers, and the (incorrect) belief that the specification cannot include the requirement for “soft” benefits which have a positive effect on the local economy (see the earlier points around housing spend).

In attempting to keep a lid on its own overhead costs, the public sector reduces its contract management resource, resulting in fewer contract managers managing bigger budgets, resulting in a smaller number of bigger contracts, resulting in smaller businesses being unable to compete.

1 2 3 4

Go Back to Previous Page