Author: Damian Merciar

Damian Merciar is Managing Director of Merciar Business Consulting, http://www.merciar.com, a niche business economics consultancy founded in 1998. He has over twenty years experience in the areas of commercial Business Strategy. He is experienced in the transition environments of nationalized to private sector state utilities and the senior practice of commercial management, advisorial consultancy, and implementation. He has carried out policy advisory work for government ministries and been an adviser to institutional bodies proposing changes to government. He holds an MSc Economics from the University of Surrey’s leading Economics department and an MBA from the University of Kent. Also attending the leading University in the Middle East, studying International Relations and Language, for which he won a competitive international scholarship, and has a BA (Hons) in Economic History and Political Economy from the University of Portsmouth. He is currently based in London.

When art comes home…

This is one of those rare pieces that actually has personal content. The Blog is primarily a starting point for discussion of recent events from a business, economic and political perspective.

However, on a recent visit to my home city of Liverpool, I went to take a closer look at the standing sculpture of Antony Gormley’s “Another Place”.

Feelings have been high over this installation; feelings that it has little or nothing to do with the industrial heritage, indeed commercial present, of today’s Liverpool. In this photo, we see a serene and beautiful panorama. If one does a 180 degree turn, you will look directly towards the brute commerce of Liverpool’s container docks. What was the centre of maritime commerce not only for Great Britain, but for the world. At the start of the 19th Century over 40% of the world trade – and more than this by way of value – was passing through Liverpool. What, other than gazing at times past, does Antony Gormley’s iron men signify for Liverpool?

Well, I would argue that this isn’t the point. I know this beach profoundly well – in fact here on this website it shall first publicly be cited as “my beach” (I claimed ownership approximately aged 8). I grew up here and knew every eddy, the tidal reach, the coldness of the water and the danger of the sands. I am uniquely qualified to say that this stretch of land has never looked so good. The high power wind turbines in the distance are precisely indicative of the fact that Liverpool is very much part of the modern world. Out of shot to the right of this, further out in Liverpool Bay, sits a large incandescent gas rig. One energy source replaces another: Liverpool becoming critical as a centre for the UK offshore energy industry. New industries of multimedia, stemming from Liverpool’s centres of excellence at two of its three universities – another important revenue and creative force for the city – and television production through Granada Studios, show that perhaps the city has finally turned a corner. Few people would believe that Europe’s largerst property development project has just been completed this summer at “Liverpool One” a gargantuan shopping and office complex, generating thousands of new jobs. For the lower skilled there is now employment in call centres dotted around the city, themselves leading change in what had previously been a criticised work environment, but one that has the capacity to soak up many of the displaced workers from the city’s heavier industrial past. With European Capital of Culture 2008 also now securing a strong and proud base from which to venture, back into the whole of the world that was originally only accessible from this port.

Alistair Darling’s first Budget…

Today, the Chancellor Alistair Darling delivered his first budget, prompting what can only be described as a lacklustre response. Financially cautious with limited social engineering intentions, it aimed to be a budget that halfway nodded towards the preoccupations of the moment.

These include green levies, such as the “aim” to levy a charge on plastic bags. Fuel tax manipulation has been put on hold, with an acknowledgement of $110 oil having pushed petrol prices to an already recent high. On Growth, the forecast for this year has been lowered to between 1.75 and 2.25 per cent. On Inflation, recent fuel and energy prices will stoke inflation during 2008, though he predicts a return to target (Target – 2%), by 2009.

On Public Spending:  to grow by 2.2 per cent in the next three years. On business, an interesting aim: target for small and medium-sized businesses to win 30 per cent of public sector contracts in the next five years. On Tax – new charge (anticipated at £30,000) on non-domiciled residents to be introduced from April and to remain in place for present and the next parliament. Beer duty to increase by 4p per pint, wine up 14p a bottle, cider up 3p a bottle and spirits up 55p a bottle. This could put the price of a pint in a typical pub, up by 12-15p, once VAT and margins accounted for – and the price of a bottle of spirits by 80p in a supermarket. These are significant increases and reflect growing Parliamentary acknowledgment of the need to “do something” to halt the permissive and pervasive attitude to drink in this country. Campaigners are not convinced that the tax system is the mechanism for achieving this change.

Tobacco duty to rise tonight by 11p per packet of 20 cigarettes and 4p for five cigars.

Supporting Budget 2008 documentation can be obtained  from the  UK Treasury’s own site at http://www.hm-treasury.gov.uk/budget/budget_08/documents/bud_bud08_docsindex.cfm

We would argue that this is a profoundly flat budget, short on ideas, limited in scope and desperate for inspiration. Financially it states that extra revenue gleaned through additions to Duty will be re-directed to pulling more poor children out of the definition of poverty. Raising Child Benefit to £20 for the first child being the chief means of achieving this end, coupled with micro measures such as adjusting Child Tax Credits. These, however, are small beer and seem if anything, to be the tired and heavy breathing of a Government in much need of the recuperation of Opposition.

Clinton v Obama – The World Series…

Presidential politics is not very different to seeking a mandate from your local Parish – there are simply degrees of inertia and scale to contend with. Then there is what are disobligingly called the “retreads” – those who have already been around the block and muddy the recognition factor with a presentation of ‘wisdom’ and ‘experience’

This is dubious – because of course, the corollary to that is that we simply didn’t want them last time either! Hilary Clinton is a hard act to follow: she has spent years now, casting out the perceptions of her as a dangerous and un-costed Liberal. She has become, or at least allowed herself to be perceived as being (the two are not typically the same) – an astute and worldly politician: one whom America could feel proud of representing her interests in far flung and commercially sensitive places. The sort of places where President George Bush could easily embarrass both himself and his country. The swagger and general self concern won’t wash any more – as recent fight backs on environmental policy have shown – American politics need to get into the 21st Century.

Barack Obama is a different deal altogether- he may well be the future if he doesn’t quite manage it this time around. Certainly, the Democrats have been more impressive overall than the Republicans. As John Gappers say’s in a recent FT article:

“Then there is Mr Obama. Hardly any business leader can hope to match his skill as a speaker. He has displayed perfect pitch in his oratory, including his rejoinder to Mrs Clinton’s barb about “raising false hopes” during his concession speech in New Hampshire: “In the unlikely story that is America, there has never been anything false about hope.”

The World Stage needs a new leading actor – we tired of the old one a long time ago. Let alone the fact that that very stage will be his (or hers) for less than they realise, as up come India and China, bounding along. Let alone a new spirit of political independence across the US’s backyard in Latin America – following the Chavez model of sloughing off the weight of their northern neighbour. Times remain interesting….

Which way is the economic tide flowing?…

At a time when there is little consensus on the severity of the storms that approach us – the prevailing view at least, appears to be for a hold in Interest Rates by the UK Monetary Policy Committee (MPC).

The comparison with the US economy, in relation to the housing market, is necessarily limited – as the relation of demand and supply is very different. In the UK, we still have demand way ahead of supply, so any house price fall is likely to be more muted and subject to corrective limitations. Prices are unlikely to fall substantially – even if the rate of increase has itself dropped noticeably over the last few months.

However – of course, it is not only for the sake of house prices that the experts comprising the MPC will determine Interest Rates; it is for the general feeling of wealthiness – and the prevailing inclination to retail consumption – that house prices are the best indicator. If a person’s main asset is falling, then they are less likely to consume – further undermining impetus for growth.

Moreover – the link between the Pound and other currencies is also a key determinant: if Interest Rates are lowered, then internationally the Pound seems less of a good option than before – lowering its exchange rate. This in turn has inflationary effects, as consumption from imports become correspondingly more expensive – causing further tightening and concern. As has been noted also – the UK Chancellor (Finance Secretary), Alistair Darling, has very limited room for manoeuvre with Fiscal Policy: UK Government debt is at too high a level to start easing the fiscal reins….we wait in anticipation.

Rock Climbing in Canada…

A friend said to me a number of years ago that one of the definitions of bravery was to be afraid, and then do it anyway…..On that basis, I seem to be a very brave person!

I began my trip to Canada, with 135 Independent Geographic Squadron (Royal Engineers), filled with anticipation and excitement at the prospect of doing a mountaineering course. This excitement changed somewhat when I volunteered instead to do a 5 day rock climbing course….it became trepidation, mixed with terror – although there was also a fair dose of excitement in there aswell…

This was easily borne out – although yes, pretty scary – it was exhilarating. It did take some time to sink in, but the course itself was excellent – our Guide was a world standard Mountain Guide, with International Accreditation – and also a deeply serious climber.

The technical skill involved in climbing is never ending: the knowledge to be gained is so vast and the discipline so rigorous, that one could easily spend a lifetime climbing and still feel you had so much more to learn. I am a lifelong and skilled hiker, and yet the relationship to the land between that of a hiker and climber is so very different: for the hiker it’s usually the views and to be involved with the land, that drive us on. For the climber it’s the challenge and the respect of the climb, the respect that is, for the rockface itself.

Hanging by my fingertips on more than one occasion, during these five days, I found myself asking “did I really volunteer for this??” – one of the first maxims of the Army is never volunteer for anything! But, if you don’t, sometimes you miss out on the spectacular – and that is precisely what the views from the cliff face above Banff in Alberta were. To be on top – literally – of a World Heritage Site, looking down, below the tree line, to these distant buildings. It really did look like a map, but one that you were deeply embedded in.

During the course we learned how to use the various and very complicated pieces of kit – what to expect of their strengths, which in some case were 2.4 tonnes of weight…..! How to use this equipment and the various scenarios for using different bits of kit. We learned about the rope – far more intricate than I might first have imagined. We learned how to belay, and we learned – almost most importantly, to rely on the equipment. To trust in it. That is easier said than done, for it seems an alien thing, to be hanging hundreds of metres above a vertical drop, broken only by the occasional outcrop of sharp, jagged rock, by a piece of rope 10MM in diameter…..

And yet we did, and here am I to tell the tale! Even if only as a course in “Fear Management”, it was exhilarating, and I do hope to climb again with the Army – it was a privilege.

Adam Smith & Edmund Burke – a meeting of minds

Who better to write an introduction to the writings, thoughts and significance of Adam Smith, than Eamonn Butler – the Director of the Adam Smith Institute (ASI).

The ASI is one of the most important Think Tanks in the UK, and through the work of Adam Smith himself, in Europe more broadly. For 30 years they have been leading the field in “injecting choice and competition into public services, extending personal freedom, reducing taxes, pruning back regulation, and cutting government waste.” Yet reading Adam Smith can be daunting – his language, though beautiful and precise, can easily be offputting to those unaccustomed to reading late eighteenth century economics…. And so we have “Adam Smith – A Primer” (feel free to download it, free of charge, from http://www.iea.org.uk/record.jsp?type=book&ID=414)

This is not an idiot’s guide, for Mr Butler has both more respect for his author and his reader, than to presume such a thing; but what it is, is a bite sized, excellently edited and incisive insight into Smith’s more considered subject areas.

On “Self-interest and virtue”, Butler quotes Smith, writing:”some people today wonder how the self-interest that drives Smith’s economic system can be reconciled with the ‘sympathy’ that drives his ethics. Here is his answer: ‘How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.’ In other words, human nature is complex. The baker does not supply us with bread out of benevolence; but nor is it selfinterest which prompts someone to dive into a river to save a drowning stranger. Smith’s books are complementary attempts to identify how self-interested human beings can – and do – live together peacefully (in the moral sphere) and productively (in the economic).”

We heartedly recommend this timely and accessible synthesis of Smith’s most significant contributions to the key field that evolved into Economics.

As an addendum, we urge you to attend the dinner held in part to promote this book, and discuss the link between Smith and Edmund Burke – the practical and learned politician, to Smith’s moral  philosopher. From the Burke Society:

“Yet the economist and the politician found synthesis in a common philosophy based on natural law, limited Government and a distrust of ‘men of systems’ because ‘commerce flourishes most when it is left to itself’.  Such was their mutual admiration that Smith would say of Burke that he ‘agreed with everything he said’ whilst Burke said of the Wealth of Nations that it was the most important book ever written.”