We sneeze and the UK gets a cold

That’s the line I’ve often heard in London when anything bad happens to the U.S. economy. I’m here again. And, these days the US and UK are both very sick. So, I’m now hearing a different type of analogy that goes something like this, “We’re both taking medicine, but our (UK) sickness has taken hold and won’t leave our bodies for a long time, while, you Americans will find a way to be healthy very soon.”

It’s an interesting (maybe the word should be sobering) time to be living and conducting business in the UK. In many ways, this country took even more risks in key spots of its economy than the U.S.  Among those egregious areas are: Personal housing mortgages (some loans were given for more than the property was even worth), credit cards (given out to anyone like umbrellas on a rainy day) and private equity (acquisitions and financing made with outrageous amounts of debt).

The feeling I’m sensing is that while both of our countries are in a heap of trouble, the belief is that the US will move beyond these choppy waters in much quicker fashion than the UK. This is because our appetite to learn and create quick solutions to problems is more a part of the American way of life. More specifically, the American culture will always be entrepreneurial and one that evokes real capitalism. And, while unbridled capitalism run amok got us into this mess, it will also help lead us to the new fertile ground that our economy can focus on. Many people (including this blogger) feel that this is true even though our government now owns some percentages of many US banks.

The Brits (on the other hand) have had enough of this ‘capitalism thing’ and do not have the stomach for so much risk, even if the rewards can be plentiful. I’ve heard this from a few leading business executives here. And, have now watched it over and over again on local TV and read it in the newspapers.  The UK economy has always been one that nervously straddles the line of free market capitalism versus serious government intervention and regulations. Taxes have always been more onerous here. Government intervention and ownership of such things as a socialized healthcare and a pension system have never changed. And, now it seems that while the government’s new role as owner of many banks/financial services entities may not last, it certainly instills an economic landscape with long lasting regulations and laws that will look down upon any type of financing, business methods or economic strategies that allow markets to take any real chances.

The net result could be a British society that looks much more like that of France or Germany- very little risk taken, with little to no upside as well. It also could mean that the next time the US sneezes, our transatlantic friends over here will just turn their heads politely and smile.

Comments

[Steve]

To disagree with one comment, Ed:

"More specifically, the American culture will always be entrepreneurial and one that evokes real capitalism. And, while unbridled capitalism run amok got us into this mess, it will also help lead us to the new fertile ground that our economy can focus on."

There's a common assumption that capitalism and entrepreneurship are closely linked, whereas in reality, the former is a precondition for the latter--but also a precondition for inefficient and pernicious economic systems as well.

Capitalism is simply private ownership of the means of producing wealth (capital, labor, land, IP, etc.). An entrepreneur is someone who puts skin the game--who takes significant risks into order to (hopefully) reap the rewards.

You can't have entrepreurs without capitalism; but you can easily have capitalists who are the very antithesis of entrepreneurs, such as oligarchs, monopolists, etc. Or: is a corporate executive who has never taken a risk, never invested his or her own money, never created a new business, an "entrepreur"? Or do they actually have more in common with government bureacrats or even old-style party apparatchiks?

I agree that an entrepreneurial spirit and entrepreneurialism are powerful engines for technological and social development, as well as for wealth creation. However, not all forms of capitalism are socially desirable, and a good argument could be made that the largest U.S. corporations, such as the big banks or auto industry, are run in a way that would make any good entrepreneur cry or bang his/her head on the table.

[ed]

I stand corrected on the difference between entrepreneurs and capitalists, Steve.

Thanks

[Steve]

Yeah, I get pedantic sometimes...sorry.