Red pencil or cheque book?
von Heinz Gupta
That was the thought behind a commentary in the German economy newspaper Handelsblatt, where the author wanted to draw a distinction between cost savings and investments. A dilemma now faced by many companies.
There are the fraction that expects a recovery soon and those who fear that everything will get much worse. This for and against is clear to see in the fluctuations of the stock exchange index. Investors see the low prices as a call to jump in and others sell, shocked at the crashing banks and wait for further falls in the index.
The pessimists see no comparable break-downs in the past. At the most comparisons are drawn with the banking crash in the 1920s. We should also take into consideration the fact that through the globalisation of the flow of goods, the flow of capital and, above all, the speed of the flow of information through the WWW, shocks go around the world very quickly. Previously they only advanced slowed and consequently probably weakened by national frontiers, frontiers in information and differing political systems from one economic zone to another. Just as quickly as the collapse occurred, so one should conclude can a rebound break out explosively. Whoever is not economically prepared, “the market will punish”. Just a short while ago a great Chinese company wrote:
“The most difficult times often breed the best development opportunities. In the face of the global financial crisis, when some enterprises wait-and-see, Zhejiang Xinan Chemical Industry Group Co. Ltd. struggles and creates glyphosate and organic silicon industries.
A few days ago, the company and the world’s second-largest producer of silicone, “high-step map material”, started the joint investment with an annual output of 100,000 tons of organic silicon………”
It is easily forgotten that world war two caused an even more drastic collapse. Destruction of producing plant in industrial countries and even the dismantling of the remaining production plants in Germany by the allies. The German industry was forced to invest anew and rebuild to survive. Thereafter, though, they had the most modern plants, while the allies worked with the old dismantled equipment.
Professor Erhard encouraged the Germans to consume. And, because they listened to him, they created the German economic miracle. There was no money available from the banks then just as today. Then the Marshal plan financed investment through the Credit Institute for Reconstruction (Kreditanstalt für Wiederaufbau). Maybe the KFW should take over responsibility from the commercial banks today to assure financing.
And people should continue to buy just as they are already doing now. Isn’t our situation today much better than after the war? We can buy what we want, also of course, what we can. We do not need a financial umbrella, which only serves the banks, some of whom, have caused the current misery.
No, we need waterproof boots, because we are standing up to our knees in water. And that is the reason why financial help should benefit the people directly so that they can start consuming vigorously again in the Erhard manner and crank up the economic motor. We should not allow our vision to become clouded by the scaremongers, as it is certain that a rebound will come.
It is not certain how long it will take. It is up to us to determine how quickly we rise again. I suggest replacing the OR by AND in the phrase “red pencil or cheque book”: consolidate, throw ballast overboard, streamline operations on the one hand but, also invest and rebuild on the other.
Your Heinz Gupta