29 November, 2012

2012 Year end summary

In the following article, I have made observations and drawn conclusions from a variety of recent reports (that I have provided links to) produced mainly by independent leaders in their own fields.  These reports come from a mix of professions including renowned Global Investment analysts such as Jeremy Grantham of GMO, economists, educators and news reports mainly in UK, Europe or USA.  One thing is for sure – urgent and radical change is essential.

This has been a troubling year for the UK Government with the slow realisation that economic growth is unlikely while consumer confidence in the economy continues to fade in the wake of ongoing spending cuts and inflation and wage constraints that erode disposable incomes causing consumer demand for goods and services to further weaken.  Moreover, as Europe drifts into a double dip recession, the global economy remains weak and shows little sign of recovery from the 2007/8 financial crisis, dashing hopes for substantial growth in exports to emerging overseas markets. 

Debt reduction or elimination becomes the most sensible focus of attention on a personal and national level when credit becomes difficult to obtain in a weakening and shrinking economy already overburdened with debt. 

The consequences of austerity measures are beginning to be felt throughout the nation as welfare budgets are squeezed and the poor and handicapped take on the brunt of austerity.  But, this is just the beginning – there is far more austerity to come as tax revenues continue to steeply decline.  The costs of unemployment benefits are expected to rise with growing unemployment as more people in the public sector are made redundant with continuing cutbacks.  More and more people will find it harder to find permanent employment as the jobs in the private sector are just not there.  Consequently, there will be a growing trend towards under-employment by those managing to only find part-time employment, as well as self-employment and short-time job sharing in order that businesses can keep people in work with much needed skills and experience until the economy picks up.  In the meantime, this is unlikely to fill HM Treasury coffers with sufficient funds for some time to come.

As I have said before, in these circumstances there is no way that the Government can afford to allow cheap foreign labour into UK, whether they be seasonal workers or not, while there are already large numbers of unemployed on taxpayer sponsored Government benefits and the highest ever number of young unemployed in particular that are perfectly capable of doing the work that economic migrants come over here to do.

It is therefore essential that we re-gain control of our borders and prevent further migrations from anywhere in the world and from Eastern Europe in particular where new member nations are shortly due to join the EU, in order that the settled population of UK unemployed have the first opportunity for employment in preference to economic migrants.  To encourage this, benefits should only be available to the settled unemployed on the basis that they are prepared to study, train and re-skill for whatever Government identified work opportunities arise in their neighbourhood.

This calls for a much stronger partnership between local government, local businesses and educators that clearly identify demand led skills required to expand and diversify local sustainable economies for the long term.

This also means that our secondary school system must better prepare students and school leavers for the rapidly changing but practical world of work with much improved career advice and guidance relevant to the skills in demand in their local economy.  This should also include a more scientific approach to assessing student aptitudes and attributes (strengths and weaknesses) followed by a process to match aspirations with the individual’s education and skill capabilities that suit particular career path local opportunities in order to reduce time, effort and money wasted trying to fulfil unrealistic expectations.   Individual career choices must be realistic and achievable from the onset.  A much better understanding of the world of finance and how to manage their life finances must also be an essential part of school curricula.

None of this can succeed without clear national and local government economic strategic direction and support in partnership with local businesses, which should be constantly under review and able to adapt as circumstances change.  This presumably is the role of Local Enterprise Partnerships in recently announced Local Enterprise Zones.  However, it is not yet entirely clear how these organisations will work and what powers they will have to influence or stimulate growth in their localities.

Meanwhile on a global scale, non-renewable resource depletion continues unabated and growing evidence suggests that, based on current consumption rates, we will exhaust these resources well before the end of this century with dire consequences for humanity.

With ongoing drought conditions in North America, the devastation caused by Hurricane Sandy along the Eastern US Seaboard and storms causing widespread flooding throughout UK and Europe in November, Climate Change is very much in evidence.  Reliable scientific analysis suggests that the frequency of extreme weather events is likely to increase causing major economic and social problems as well as possibly insurmountable financial problems within the insurance industry as storm damage compensation claims become unmanageable and property insurance becomes unaffordable for many people living in flood prone regions.

The combined effects of a prolonged economic crisis, Climate Change and accelerating non-renewable resource depletion coupled to population growth, herald growing insecurity and the increasing probability of a catastrophic global food crisis.

With all this in mind, the political preoccupation with perpetual economic growth does not make any sense and looks increasingly short-sighted and foolish.  We will simply use up dwindling and already diluted finite non-renewable resources on this planet that much more quickly and deny future generations any resource heritage thereby ensuring the demise of the human race.

When will common sense prevail and a more ecologically sustainable approach to economics be recognised as the only acceptable way forward?

Strong leadership is required to prevent a tipping point towards catastrophic change and a major step in this direction came with the passing of the Localism Act in November 2011.  However, it will take a few years for authorities and the electorate to adjust to new roles and responsibilities before any results will be apparent. 

Capitalism as we know it in the West must adapt or perish.  This, in conjunction with population growth controls have become the most pressing issues for all governments including that of UK which is an already overcrowded and overpopulated small island nation that cannot feed its current population being entirely dependent on imports to do so. 

Food and energy security will dominate our future in the wake of the impending Euro collapse or downgrading of our own international credit rating.  The risks of this happening are too great to ignore and urgent contingency planning is essential to ameliorate the high probability of these events.

It is common sense that we should massively reduce our vulnerability to long and complex international food and energy supply chains by developing local resilience.  This can be done by ending a century of centralisation and expanding and diversifying local economies, as also recommended by Lord Heseltine in his recently published report into boosting UK growth that could help reduce our dependence on imports generally and so improve our balance of payments.

It is now time that UK manufacturing in China is repatriated back to UK, just as is beginning to happen in USA. 

These are the only areas of short term economic growth that our politicians should be concentrating on which must focus on small and medium size businesses that our economy depends on.  Not the large and often predatory international players that tend to avoid paying their fair share of taxes and thus have an unfair competitive advantage over smaller UK based firms.

New decentralised local energy, water harvesting, food production and distribution systems are essential to our survival when our older technology centralised utility systems come to the end of their design life cycles, begin to fail or cost too much to maintain or upgrade.  Communities with multiple and diversified distributed utility systems and local food production and distribution channels that substantially reduce food miles (now in excess of 30 billion kilometres per annum) are by nature less vulnerable to failure than single large high output centralised systems that impact large populations as and when they fail.

New advances in energy storage batteries may soon enable off grid storage of intermittent renewable energy that every household or community local grid can take advantage of, especially those households or industries that have installed rooftop solar panels.

Rigorous energy conservation and energy efficiency also present business opportunities that have great growth potential within the economy.  This includes effective home and work place insulation (including shops and factories), zero carbon new housing and LED lighting installations.

Commuting daily to and from work consumes about 50% of our energy needs and therefore massive savings can be made by allowing people to work on line from home now that fibre optic Internet and video conferencing services are becoming common place.  Most London commuters I am sure would welcome this, especially if the companies they work for allow local team hubs to form in remote locations from their central head offices.

New 3D printing technologies have the potential in the medium to long term to enable local cost effective manufacture and production of whatever is needed thereby hugely simplifying product distribution channels and reducing freight miles by replacing remote centralised mass production with custom local production where and when it is needed.

It is essential that every facet of business moves away from the traditional brittle centralising model dependent on vulnerable and complex long supply and commuter chains to a more resilient distributed local model for the 21st century and beyond.  The sooner this is done the better it will be for everyone as this will at the same time ensure a fairer and better distribution of employment, wealth and power throughout the nation!

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