Teresa Hunter: Great innovations can come out of the toughest times

Published on Saturday 14 February 2009 12:32

RECESSION is when your neighbour loses his job. Depression is when you lose your job, or so they say. And recovery is when the Government loses… I'd better stop there.

Little wonder that former Economic Secretary Ed Balls is talking of the worst depression in 100 years. Is it the country he is describing or his own career?

In truth, none of us knows what lies ahead, but senior Government ministers behaving like panic-stricken schoolgirls doesn't help. Imagine if, after Dunkirk, Churchill had run around screaming: "The German's are coming… the German's are coming. We'll all be put in concentration camps and gassed."

I can make one prediction with 100% certainty. The good times will roll again. Despite Gordon Brown's decade-long boast about abolishing boom and bust and taming the economic cycle, you never do.

But the country and economy that emerge from each downturn are different, and so it will be this time. Individuals have a choice: embrace that change or be destroyed by it.

Our collective memory of the 1930s is one of mass unemployment and hunger marches. In 1931, 2.5 million were out of work, and only 500,000 of them had found jobs by 1935.

But the 1930s were also a time of unprecedented technological advances and sharply growing affluence for the majority who remained in work.

It was the dawn of the age of the consumer. If you had a job you had never been richer, because although wages fell by 3%, prices were down 13%.

Nearly three million new homes were built, cars on our roads doubled and sales of radios trebled. The first holiday camps appeared. By 1935, manufacturing had grown by 11% compared with 1929.

So come on all you geniuses, inventors, scientists and entrepreneurs. Get cracking. Your country needs you.

There will be blood

IT WAS like watching the final act of The Godfather last week as bankers were blasted away with split-second precision one by one. And as the plot thickened and twisted, the wheels even came off erstwhile heroes such as former HBOS chief Sir James Crosby, who were shunted offstage.

I felt a strong sense that events are now hurtling towards a climax. Public anger has reached a pitch, and was not assuaged by the bankers' apologies before MPs on the Treasury Select Committee.

The problem is they didn't really apologise.

"It never occurred to us that markets could change," was the excuse at HBOS for believing the wholesale money tap would never be switched off. The very essence of banking is risk management, which means you have every eventuality, no matter how unlikely, covered.

"We never, as a board, considered the currency risk," admitted former Royal Bank of Scotland chairman Sir Tom McKillop of decisions to invest in the US. This "oversight" has left UK taxpayers shovelling more than 5bn into US car loan and credit operations, when they can't get a loan in this country.

Then there was Gordon Brown, who described Crosby as a brilliant mind while condemning the HBOS model as flawed. But Crosby was the architect of the model. So how does that add up?

Like the war hero Michael Corleone in The Godfather, all that most of us want is a quiet life, but we won't be treated with contempt.

"Don't tell me you're innocent, because it insults my intelligence," he shouted at those who had wronged him, before having them killed. Indeed.

Hurtling toward a climax we may be, but plenty more blood will be shed before this is over.

Duty-free

MANY years ago my next-door neighbour was an elderly teacher, Miss Hare, a formidable woman still travelling the world at 80.

She used to tell me stories about being evacuated with "her girls" during the Second World War and was of the generation of women denied husband and family by the First.

Another of her stories was the time when she was a young teacher, and the Government said it couldn't afford to pay its public servants, so she was forced to accept a substantial pay cut. "We had no choice. Our country was in trouble. It was our duty," she would proudly say.

This story came back to me when I heard about Home Secretary Jacqui Smith milking 116,000 towards the cost of her family home from the taxpayer, on top of her 140,000 salary, by claiming that a room in her sister's London house was her main residence. She also employs her husband, so you and I are paying about 300,000 into the Smith household each year.

Well-run, long-established family businesses will be a major casualty of this slowdown, but it seems one kind of family business is thriving.

And who today would dare suggest that state employees suffer cuts to pay and pensions along with the rest of us… out of a sense of duty?