austerityThe Anti-Austerity Voice is Powerful

You will be familiar with the saying: 

"Never put off till tomorrow, what you can do today”.

Perhaps it needs a tiny re-write to ‘Irishise’ it as follows.  

Never put off until tomorrow, what you can put off until the day after tomorrow”.

Let me explain…

The Data:

Despite studying economics at undergraduate level, I definitely don’t understand the topic. In fact, based on the recent experience with my kids, I very much doubt that I would even pass Leaving Certificate math’s.  However, on a more confident note, I am really good at addition. See if the following adds up for you:

Income Deficit:

Annual costs to pay for the combined current government services  = circa €55 Billion. Current Income (annual tax receipts from all sources) is around €43 Billion. In simple terms, this means that the State is spending around €12 billion more a year (€230 million each week) than it receives in income. This is money that we borrow – and pay back tomorrow - for services which are consumed today. A billion here, a billion there. Pretty soon it starts to add up to big money. 

Managing by Numbers:
There is no dispute about the above. The numbers don’t lie. Like 2 gravediggers discussing capacity, the size of the hole we are in is agreed. Where it starts to get complicated, is deciding how to make this a temporary rut rather than a grave. At a recent speech to MEP’s in the European Parliament, President Michael D. Higgins said: “The logistical strand of economics which today holds sway and stands as a hegemonic model of economic theory is the flaw of our times. This strand of neoclassical economics is of course useful for limited and defined tasks. It is insufficient however as an approach for our problems and our future”. Decoded this means that we need to ease up on austerity (perhaps President Higgins needs to take a communications lesson from that great management philosopher David Drumm, of Anglo Irish Bank fame, who suggested: “You need to get into the f***ing simple speak”). Central Point: There is a growing clamour of voices arguing ‘ease off on austerity’. Lets try to understand this a bit better.

Understanding Austerity:
There are 2 dimensions to the anti-austerity argument. There is a  ’head’ part i.e. austerity takes too much money out of the economy. Like siphoning petrol from a car, when too much money is extracted, the economy grinds to a halt. Then there is a ‘heart’ stance i.e. austerity has a hugely negative impact on the population, particularly the poorest sections who cannot fend for themselves.

Austerity Proponents: 

Those in favour of what is usually referred to as a hairshirt (pro-austerity) solution, argue that the current level of debt creation is unsustainable. You cannot ignore a debt which is growing by €230+ million a week and continue eating Choc Ices. By refusing to take the pain now, we build up a huge store of future grief for generations to come.  Paul Mooney 5th  (along with your great, great, great Grandchild) will be paying off our collective debt.  Central Argument = we don’t need less austerity, we actually need more.

Who’s Right?
One of the dilemmas in unpacking complex economic arguments, is that you are essentially speculating about what will happen in the future. In every TV and print media debate there is competitive shouting, but often no serious listening or exploration. People start by coming to a view on the situation. Then they search for the ‘facts’ that fit that particular worldview. The debates which follow are often a dialogue of the deaf – no real listening to alternatives – just waiting for an opportunity to score the next point.  Is it any wonder that people who cannot fully ‘follow the science’ of economics (i.e. most of us) become confused or bored or both?

So What?

That’s mildly interesting you might say, but how does this impact me? It impacts you in 2 ways.
Firstly, a key job for any executive is to create economic literacy in the workforce. Without being (too) patronizing, you need to make sure that complex financial information in your business can be understood by Tony or Theresa in the Warehouse. While your Financial Director might be able to wrestle with the nuances of the Balanced Scorecard, you need to make the numbers easily digestible for the mere mortals.
Secondly, Politicians have to get re-elected.  While I’m not an apologist for politicians, it’s easy to understand their dilemma in pushing a ‘take the pain now agenda’ (versus stalling this off for the next generation of politicians to wrestle with). But, as an executive, you don’t have to get re-elected. So, you have no excuse to avoid tackling underperformance in your organisation. You need to face up to this.

Executive Survey: 

In a recent survey around Executive Expectations (MERC Partners, 2013), a range of executives were asked ‘In hindsight, what is the one thing you would have done differently?’ (during the recession). The single biggest response: ‘Make cuts earlier’. Ignoring a problem, doesn’t make it go away. I keep attending meetings where ‘chickening out’ is masquerading as economic policy. If your organization is struggling, you need to face that head on and help secure the future. Why?  Because that’s what you are paid to do. Today, not tomorrow. It’s the central difference between being an Executive and being an Ostrich.

Easy, isn’t it?