The French government has just announced a bailout for the French car industry. This involves LENDING Renault and Peugeot-Citroën a grand total of £5.2bn (at 6% for up to 5 years). In exchange the carmakers will be obliged to maintain existing French production facilities and not make any existing French employees redundant.
Ignoring the various special lending schemes and what not running into hundreds and hundreds of billions, the British government has already INVESTED £37bn in 3 banks (i.e. no fixed interest payments and the value may go down as well as up). These investments will be managed at arms length from the government. Aside from the huffy restrictions being placed on bonus payments the staff recruitment and retention strategies of all 3 (now 2) banks are not in anyway formally connected to the taxpayer bailout. Indeed, recent headlines make clear the bailed out banks are already in the process of making a significant proportion of their existing workforces redundant.
So there’s a wee cheeky bit of a difference between France and Britain with the logic of the British approach as I understand it being as follows – we are investing billions of our taxpayer pounds in these companies to limit the extent of the current recession in which people wil loose their jobs. The companies we're investing billions off taxpayers’ pounds in are already making thousands of people redundant and will continue to do so for the foreseeable future because this is a very , very good way of them sorting themselves out.
So letting people be made redundant is going to stop people being made redundant. Or am I missing something? I know, first off it shows government isn’t intervening in the management of banking, which is a good thing obviously because . . . . . . . . . . Aye anyway, we’ll have a bash with something else . . . . . . . Here, got one. Letting these businesses sort themselves out will ultimately benefit us all. The taxpayer will make a healthy return on their investment as the banks once more return to the job of creating wealth and in due course employ more people. Ignoring the reality of what bank profits will look like in the far more heavily regulated future (here’s a clue – SMALLER!!!!!!!!!!!!!!), this combines 2 glaring fallacies.
First, it’s a long-term view and in the long run we are all dead. Cute quotes aside with the number of vacancies per worker currently plummeting and unemployment rising at a horrendous rate thats set to continue into 2010, the “right-sizing” of banking will contribute to the creation of a new generation of long-term unemployed. This is a bad thing even from a purely economic perspective given the permanent loss of service sector human capital it entails in what after all is a service led economy.
Second, as JK Galbraith elegantly put it, this is trickle down theory writ large - “if you feed enough oats to the horse, some will pass through to feed the sparrows”. We’ve plenty of horses in Britain what with all the hedge fund managers, private equity directors, non-domiciled (or tax paying) billionaires, corporate executives and so on, so there should be plenty of manure for the rest of us to eat. Even better, thanks to the joys of tax efficient solutions the Joseph Rowntree Foundation found in 2007 that economic inequality in Britain had reached a 40 year high, so we really have been stuffing those horses. Yet according to the IMF in January Britain will experience the worst recession of any advanced nation signalling the Anglo Saxon model of capitalism has put the horse squarely before the cart (ouch).
Despite the existence of a French alternative all we have is the ghastly prospect of government mebbe establishing an emergency-working-group-task-force, preferably chaired by a recently resigned non-exec bank director, charged with coming up with a re-employment strategy for redundant bankers.
Or not as the case may be. Lets be honest bankers don’t vote Labour, aren't that popular right now and are reasonably well placed to find other jobs (Christ there’s going to be a lot of applications to teacher training college). Bankers, like me fer instance, are also geographically scattered, reducing the likelihood of the kind of concentrated outburst Rover workers did so well.
What gives all this particular personal meaning, give or take my own expectation of losing my job in due course, was a txt from a friend yesterday working in RBS. He told me the first he heard of the planned 2,300 RBS redundancies (on top of the existing Ulster Bank cut backs which is RBS/taxpayer owned) was reading about it on the BBC website. Today he txted me to say he was in the staff grade being lined up for redundancy.
I’m clearly old fashioned because I think finding out stuff like that via the news is repugnant. There again with the former bank execs on display yesterday in front of the Treasury Select Committee it was certainly a good day for a bank to bury bad news. So from a PR perspective go go RBS, they finally got something right.
Clearly, it’s a challenge reconciling such behaviour with the open and honest communication so integral to the laws of leadership executives espouse, but then what is leadership if it isn’t about making difficult decisions?
Pish like that aside my personal favourite is still Barclays recent decision to announce 2,100 redundancies in one area one day and another 2,100 elsewhere shortly afterwards. Presumably this was in the hope that people would confuse the two headlines and think the total cut was 2,100 not 4,200. Here hang on the Barclays logo is blue so allez les bleus it is then, British style.