[long termism] the incentives need to be attractive

Long-term planning takes courage and lays potential burdens on posterity, whilst providing them with benefits which must be paid for now. In other words, your balance sheet in this and the next quarter are not going to show any tangible result for the investment, under current accounting methods.

Business think tanks have been urging long termism for a long time, e.g.:

1. Pension fund trustees should develop internal governance practices consistent with a long-term investment outlook. 2. The transition from antagonism to engagement of certain long-term investors-especially regarding long-term strategic discussions-should be fully explored.

Taking British industry as an example, Roderick Moore says:

Will Hutton is absolutely right when he says that we would all benefit if British companies invested more in research, development and training, and formed long-term relationships with their workers, bankers, suppliers and customers. However, I would like all this to be achieved by voluntary agreements between the people involved, because they perceive that it is in their best interests, rather than being forcibly imposed by the state, as stakeholding theorists believe it should be. This will only happen if taxation and company law are reformed so that companies are freed from the pressures which are driving them into short-termism.

Ditto in the U.S. Lawrence E. Mitchell, writing today in Business Week, takes the long view and diagnoses a problem at the heart of the American business system:

“The real culprit is the growing preeminence of finance over operations. It causes stock market considerations to trump those that improve the actual workings of a business. And the quicker the stock payoff can be engineered, the better. Until that changes, don’t expect CEOs to stop gaming the system.”

So that's a known known, still relevant in the current crissis, as is political short-termism, which is far more insidious for the planned economy. Andrew Leigh and Glenn Withers say:

Four attitudinal conditions are identified as restricting implementation of good policy in Australia. These are: short-termism, divided responsibility, risk aversion and lack of trust [in politicians and institutions].

Commonwealth Bank Chair John Ralph said at the 2004 AGM that “In today’s climate it takes a brave CEO to promote a long-term risk R&D project that will reduce current earnings and deliver the benefits well past his or her tenure.”

Today it would be seen as lunacy. Here are some other areas which need to be addressed:

The press exacerbates the problem. Leigh and Withers:

The media as an institution also has a role to play here. Regrettably Australia has amongst the most concentrated newspaper ownership, most advertising dependent television and most parsimoniously funded public broadcasting amongst the OECD countries.

Social safety nets are a huge drain:

Social safety nets are in place as they were not in the nineteenth and earlier twentieth centuries, but there is fear that these may be wound back severely as pressure on government budgets increases, including through demographic ageing [and] growing numbers on disability support and single parent payments.

The failure of the two party Westminster system of government:

The political wisdom has been that oppositions should present “small targets”, offering not bold visions of the future, but small increments on the status quo.

The Westminster system, with its loyalty-based preselection sidelining of talent, the adversarial, grand-standing political debate from entrenched positions and that "small target" presentation, is inimical to brainstorming and sound long term strategy.

Evidence based policy testing never shows its face:

[Governments don't] work to improve the evidence base from which we build our economic and social policies. Cost-benefit analysis for all large public investment projects should be obligatory and made publicly available. Similarly, randomised policy trials.

It's all very well for Jamie Saunders, of Bradford City Council to state:

Successful councils ensure that the voices of all get heard – not just the most vociferous, powerful or well-established… it means safeguarding the interests of future members of the community. Many decisions made now will have long term implications. These need to be identified, understood and designed into local policies.

.. but as more and more people are realizing, the new hierarchy of available money dictates the pecking order and today it runs like this:

1. EU loans and grants rule, especially outside London and the regions, e.g. Yorkshire Forward, allow only people to have a voice who are onside with the Common Purpose mindset, i.e. the EU rules;

2. The only long-termism is stemming from EU policy and it's not a long-termism which is healthy for "Britain as Britain" or for its new serf class.

Steps

Seems to me that there are a few immediate changes required:

1. Kill off Lisbon in Ireland and start the road back to regaining control of Britain by British money reinvesting in infrastructure, production and R&D, despite the allure of EU money;

2. Cross-party agreement to make mandatory a percentage of annual revenue for long-term infrastructure based on all interested party recommendations;

3. End to confrontational Westminster politics, retention of premier minister and council of ministers, cross party;

4. Elimination of stealth taxes, VAT, capital gains tax and implementation of flat tax rates with reductions to reward incentive on start-ups involved in national manufacturing.

That's a start.

Now of course you're going to say that they'll never get their snouts out of the trough [N3 here] so what incentives could you offer the two party system to end itself? The only way I see is for an external threat to galvanize the parliament into an enforced working arrangement, with personal financial incentives in the medium term to create a vote in parliament which would allow this to happen.

Only then could there be, not so much a covering of butts but a joint attempt to find solutions.