Tuesday, 25 November 2008

Lead us not into deflation

The late President Eisenhower is reputed to have defined leadership as "the art of getting someone else to do something you want done because he wants to do it". Many others have defined it in different ways but I rather like old Ike's description because consent is at its heart.

Consent is what distinguishes a leader from a bully and can take many different forms. You might consent to follow your leader's judgment simply because you have faith in him without having formed a clear view yourself of whether his proposed course of action is wise or unwise. Alternatively you might think his proposal is the wrong thing to do until he has talked it over with you and persuaded you it is the right thing to do. Or he might conduct himself in such a way that you believe it was your idea all along. There are countless other scenarios in which good leadership results in consent to what the leader wants done. By contrast, a bully forces you to do something without your consent for fear that not doing so will leave you open to unpleasant consequences.

Some of us are simply no good at leadership. We don't feel comfortable asking people to do things and we feel even less comfortable trying to find ways to persuade them to do what we want when they are reluctant. I suppose it is a matter of personality as much as anything else, if you are not comfortable with being in charge there is a pretty good chance that your discomfort will be apparent and will make others question you rather than follow you.

One of the biggest contrasts between Tony Blair and poor Gordon Brown is that it is easy to see people consenting to a Blair initiative whereas that option never comes into the equation when poor Gordon speaks. He is not interested in seeking consent. If asked a question to elucidate why he proposed a particular policy Blair was able to explain himself in clear English, poor Gordon simply refuses to engage in any such discussion. Of course there were occasions when Blair would evade questions where he knew his position was weak but most of the time he engaged in debate in an intelligent and civilised way. For poor Gordon every question is seen as a challenge to his authority, a sneaky trick to undermine him, an act of impertinence. At least that is how he appears to treat questioning. My suspicion is that he does not really look on questions in that way because it is just so utterly irrational to do so. More likely is that he does not believe he can carry consent through argument and so uses evasion and aggression to prevent himself having to try.

For much of his decade as Chancellor of the Exchequer the economy appeared to be performing well, at least in the eyes of those who did not question the massive expansion of credit. Evading questions and shouting "I am in charge of the economy, the economy is doing well, therefore I am doing the right things" can work while there is a feel-good factor about what you are doing. Indeed, there is no need to do anything other than say that the proof of the pudding is in the eating, at least in the short term. When things turn bad that reasoning is no longer available to you. The enquiry "surely you should do X rather than Y" suddenly requires an answer because Y is not working. That it might not have needed an answer in the past is neither here nor there, it needs an answer now.

We have heard and read much recently about a lack of confidence in many sectors of the economy, most noticeably in banking but increasingly in other areas too. What is going to make the difference between a small business employing a further person or laying-off an existing employee? The answer is obvious - the confidence of the owners and managers in the future prosperity of that business. And a significant factor in having confidence in the future prosperity of any business is having confidence in the future prosperity of the country as a whole. This is something that goes to the very heart of decision making in business: if I expand production will there be sufficient customers, if I take on staff how much extra will it cost me, if I switch my supplier how will the exchange rate affect the prices I pay? And so on for every possible change a business might think of making. It is only if you are confident for the future that you will take risks, if you are not confident you will retrench and seek to preserve what you have or even make cuts to your expenses to prepare for stormy times ahead.

Political leadership is essential in a recession. Businesses must be persuaded that they want to expand otherwise it will simply never happen and the path out of recession will be long and slow. Poor Gordon cannot give that leadership because he does not engage in the exercise of persuasion. Mr Darling tries but it is becoming increasingly apparent that even he is shocked at the consequences of poor Gordon's tenure at Number 11 Downing Street, and his room for manoeuvre is limited by having his incompetent predecessor as his boss. More evasion and more bullying will make things worse because they will depress confidence and there will be no consent to business expansion. A whole new approach is needed from the government to how they present their position. This is quite separate from the argument that they need to adopt a radically different set of policies. Even if we assume their present course could succeed, I believe that assumption will nonetheless prove false unless it is presented in a way designed to gain consent. In fact I would go further, even the right policies presented in the wrong way can turn recession into depression because of the effect on business confidence.

The task for the Conservatives is to argue a coherent case that builds confidence and consent for their alternative course of action. For a long time they have not needed to put forward much of a positive case, just as the Labour Party under Mr Blair did not formulate policies until a year before the 1997 election. When the Conservatives have done so, as with the Inheritance Tax proposal in their 2007 party conference and the freeze on Council Tax this year, they have gained enormously in the opinion polls. But they know too much detailed policy too early can undermine an opposition because a change of circumstances can lead to an embarrassing abandonment of something they said was important. As the next election approaches they have the perfect opportunity to show the leadership so lacking from the current government. I just hope their definition of leadership is the same as Eisenhower's.

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