It is true. This is not a playground, kinder-garden experience…
As we don’t live a purely Command and Control or 100% Free Market environment we have to constantly adjust our actions and interactions with the market around us based on factors such as:
Jurisdiction and cultural norms
There are many other factors to add to the list above, but we are referring to the behavioural aspects inherent in any market interaction.
One of the greatest challenges facing the political class in the UK at the moment is the Truth or Dare conundrum.
We are specifically referring to the urgent need to cut public sector spending, yet the painful reality that it is:
a) Very difficult and not politically expedient to admit the ‘Truth as seen by any politician’ (see the ‘Forces of Hell’reference uttered by Alistair Darling on trying to speak the truth
b) People cost money (and a lot of money)
c) Efficiency savings are akin to an admission of guilt and proof of mismanagement
Most public sector jobs are not subject to ‘market-forces’ at the best of times, therefore the automatic adjustment mechanism and signal that ‘price’ sends is not a factor in the equation.
What do we mean by this?
In a free market driven environment, price is the single most important signal and measure against which both suppliers and ‘demanders’ (consumers) measure value. In the absence of all other qualitative factors, price has a very important role to play in ‘clearing the mismatch between supply and demand.
So when we experience either a supply or demand shock, as the Credit Quake of 2008 – 2009 has proved; we need to face harsh realities and make serious behavioural changes.
We are still not able to face up to the difficult ‘adjustment phase’ that both ‘deleveraging’ and the new economic reality, post-election 2010 has in store for UK plc.
Many a household across the length and breadth of the UK (and beyond) has had to come to terms with the stark realities of the ‘market mechanism’ and adjusted their behaviours and ‘prices’ to move towards a new economic equilibrium, yet the public sector has not had to face this tough reality.
Maybe because the Public Sector in Britain now accounts for between 52.1% – 53.4% (depending on which economic Think Tank’s research you believe), the crowding out of the private sector and ‘loss of touch’ with the economic reality of market mechanisms has been softened.
However, irrespective of who governs Britain and runs UK plc after the ‘expected’ elections in May 2010, the winner will have to make a few very hard choices:
- How to reduce the dependency on and of the Public Sector and bring the percentage that the Public Sector ‘consumes’ of GDP to below 40%
- How to ‘financially engineer’ the public debt and bank guarantees the current administration dished out in 2008 – 2009 (Anywhere between £200 – £350 Billion)
- Run the country along more traditional market disciplines,
Therefore managing the country along market principles as opposed to a ‘socially engineered’ artificial egalitarian level playing field.
The ‘ladder’ exists for a reason in the true market environment, to help set aspiration and make the system work in order to ensure progress, growth (over the long-term) and advancement.
This all favours innovation as a driver for feeding the need for progress, growth and advancement.
In our next article we will continue our theme of Innovation, with part 6 of the series.
Let’s keep on ‘following the money’ on this occasion
- Pension gap increases between private and public sector (moneyexpert.com)
- Bonuses in public sector under review – BBC News (bbc.co.uk)
- How spending cuts will impact house prices (confused.com)
- Achieving better results from public sector institutions (apperi.org)