Wednesday, 12 August 2009

Leanomics - looking for signs of recovery ...

There is currently a great deal of searching (and spin) associated with the 'green shoots of recovery', but what should we really be looking for ...? House prices increasing again ...? Stock Markets rising again ...? Well this post seeks to answer this question, by using one simple Leanomics test, known as the 'BUTS' test.

The BUTS 'economic' test looks at a number of factors ... and combines individual well-being & community indicators with financial indicators too. For instance it looks at:

B - Borrowing
U - Untapped Talent
T - Trade deficit
S - Stress

Whilst Government borrowing continues to rocket, and the Bank of England prints more money, to 'buy' more UK Government debt, it is not hard to see how bad borrowing is, and how it's now likely to be with us for decades to come ... and the trade deficit, and budget deficits, are also the worst they have ever been too ...

Stress is also growing rapidly, and even before the current crisis started, it was already (using the most simple and conservative of measures) standing at 1 in 4.

So what about the last one, 'untapped talent' ... well despite official unemployment figures being manipulated downwards for the last decade (e.g. by pushing numerous people to claim 'invalidity benefit' instead), the figures are continuing to show unemployment rising rapidly - reaching 2,400,000 people already and it's set to go well beyond 3,000,000 next year. Yet such figures are just tip of the iceberg, as the real level of 'untapped talent' it is actually far greater than this (and well over 50%).

There is growing concern about this, not just from a financial perspective, but from an individual point of view too, as more people lose self-confidence, belief and self-worth. There is also concern about all the social implications too, as stress increases and motivation reduces ... and as people's natural desire and ability to add value (and make a difference) to other people's lives reduces, reducing the overall well-being of the community, as well as the nation's economy, too. There is also the risk of growing frustration & anger, particularly from younger generations, as youth unemployment rates are much higher, they have been saddled with debt (e.g. due to tuition fees) and given little prospect of a job, house prices are still expense to rent/buy and they are also the ones who'll have to pay most of the Government current borrowing back (through future tax rises).

With all the government spin, the BUTS test is the real one to look at for signs of recovery, i.e. not house prices appearing to stabilise or stock market prices rising again (see my previous post to see more explanations for this), and because the Government have changed very little in terms of the 'leadership', 'management practices' & 'policies' they apply ... the actual unemployment, debts, deficits and stress levels all tell us that the real situation is continuing to get worse ...

But the youth are also more savvy, and are far more effective at using 21st century communication technology too ... so they have the power to change everything, and it will only be a matter of time before they do ... which is what the current 'politicians' are actually really worried about ... i.e. as it will change the balance of 'power', create a new form of 'politics' and a new 'economics' too ...