Charlotte Street Partners

VIEW FROM THE STREET

VIEW FROM THE STREET

Recovering towards enlightenment

Written by Andrew Wilson, founding partner
31 March 2020

In the second world war, my mum was evacuated from her family in Glasgow’s Possil Park to a place and people in the countryside she did not know. She was six. I remember what she told of those times and it helps me know that we – this society, these countries, this world – have been through worse, much worse, before.
 
Here, we have endured bloody war on a global scale twice. We have endured pandemics much deadlier than this one. We have used our collective endeavour and imagination to improve the lives of all of us through education, health, nutrition, science and industry. Our democracy has civilised the lives of many once oppressed and subjugated by the accident of birth. The process of civilisation continues and ebbs and flows depending to which nation you look at any one point in time.
 
This current experience will shape all of our lives; especially the children for whom the full enormity of the situation will only truly dawn as people we know and love become ill and perhaps even die. I am at home looking after three. They have been through a lot in their short lives already. They are resilient, at least I think they are. Right now, they are caring as much for me as I for them. I worry about them every day and chiefly about what happens if I get ill. Everyone will be feeling this same thing, in one way or another.
 
Judging by distance from birth, our society has never been older. Judging by distance from death, we have never been younger. Together we will get through this.
 
The crisis will pass someday, but for us in the UK not anytime soon. I expect we will be locked down like this until the spring turns to summer. After this, restrictions may loosen and tighten again in waves.  Right now, the focus of our elected leaders is rightly on the health emergency first and foremost. This means that economic considerations play a subordinate role – as they should.
 
Governments across the world have intervened on an unprecedented scale to secure the wellbeing of their citizens. Here, the chancellor’s announcements last week and this have helped ease anxiety, but stress levels remain unusually high. The money is yet to flow in material sums and the systems that facilitate that flow are probably struggling to breaking point.
 
When my grandmother was born, such an event would have led to large scale starvation. We are not going to starve. What is not yet clear, though, is how much this will ultimately cost and who will pay and when. The level of intergenerational inequity was already too high. These events have accelerated that gap exponentially. We will visit a great financial burden upon my children’s generation, not just in the finances of the government but in the way we save for retirement and how we live.
 
In my opinion, this means that everything is going to have to change fundamentally and on a grand level. It was changing anyway; this crisis is an acceleration. We can come out on the other side better or worse and that will be determined by the choices we make now. As Sartre noted, “we are our choices”.
 
But first some perspective: our public debt levels are not high by historic standards at all. In war we peaked at national debt levels of between two and three times higher than now. After the first world war, we made poor choices and everyone paid the price. After the second one, we made good decisions and rebuilt society on better terms for all. We should ponder that.
 
I have very little time in my heart right now for finger pointing. It is a waste of time. I am certain that policy mistakes will be made and significant ones at that. For me, it is the intent that matters and as far as I can see, it is all good.
 
I also have little time for the keyboard warriors who believe that moments like this endorse their own pet theory and who rush to condemn those who hold an alternative position. Everyone’s world view will have to change now. Reinventing the policy mistakes of the past in the name of reform will destroy my children’s future and their children’s and theirs again. Learning the lessons of history could mean they grow old in a far better country than the one in which they live now. Getting there is going to be tough.
 
In the meantime, it is all about how we behave in this moment. For now, that is all we can control. The first instinct of managers is to fret, to get out the books and figure what can be cut in the face of loss. This is understandable and, in most part, completely necessary. But if that is all the leaders of businesses think about then failure will come at us fast.
 
Clear-sightedness is essential at times of duress. I sit on the boards of organisations facing into the reality of existential challenges. The boards of many organisations will need to manage their winding up and re-creation. This will not be easy, but what will see us through is the devotion of our minds, hearts and spirits to doing what is best and right, and trusting in that.
 
So, in our little company we start and end every day talking about the clients we serve and thinking what we can do to help them and some others who would otherwise have nowhere else to turn. Our entire focus as a team is on that. If you are in the privileged position of being in a job right now, focus on that.
 
Now is not the time to reinvent the world, now is the time to survive. Do so as well as you are able. But soon we will need to reinvent the world.
 
I think it possible that our national debt could exceed £4 trillion in the UK when this is over, maybe more, and the wage support will be very high. I think the next issue looming will be making choices about what happens to businesses, companies and industries; which are allowed to fail, which are propped up, and the practicalities of it all.
 
It strikes me that given the debt levels, a key question will be what is on the asset side of our national balance sheet. What do we get back for the debt? State investment in businesses and industry seems unavoidable to me now. Get it right and manage it well and this could secure the funding of public services going forward. Repeat the mistakes of the past and we could enter a long inter-generational slump.
 
The Enlightenment taught us many things that apply as much today as ever. We need to reshape the best lessons of history as we recover into the second enlightenment. The stakes are extraordinarily high. But so is the opportunity.
 
If we invest in or nationalise companies, they must be run commercially but in the public interest, as Equinor in Norway is today. They must pursue their purpose well and not be creatures of politics.
 
The basic income of our citizens will have to be secured now, forever. For me that makes a policy of an actual basic income now inevitable, desirable and urgent. If we had a system of that nature already then maybe turning the taps on in crisis would be easier. I wish for this, but as my dear late mother always told me, “if wishes were horses, beggars would ride”. We need practical plans, not flights of fancy.
 
The means by which we pay for this will need to be carefully thought through. In the decades to come, we will work much less and therefore it must be more productively. Many won’t work, at least not as now. Society will have to shoulder more of the burden.
 
Taxing the rich rhetoric will see us through maybe one election, a satisfying, reckless, and ironic self-indulgence. The truth is that this is a burden all will have to bear. The state will be larger, but it must also be better.
 
The relationship between business and the state will need to integrate dramatically. The social democratic models of Europe will need to be remade and adopted for our conditions. The acceleration of reforms in how society works will be very far-reaching.
 
The risks are obvious. Get this wrong and we reap jobless inflation followed by populist insanity and generations of pain, debt and misery. A banking crisis is a genuine possibility if the wrong choices are made. That would compound the agony in manifold ways. Balancing that risk is the fact that we have the best generation of central bankers this world has ever seen, applying their minds to a mission that is clear and free from day-to-day political manipulation.
 
Get it right and we can recover into the transformation we all know was coming anyway. A new enlightenment for us all.
 
This is easier said than done, I know. When the health crisis subsides, the economic one will not. It will weigh heavily on all of us and every sector of this economy will change.
 
Many putative leaders will pop up, offering salvation through blame. We must focus our lives on the truth that only the hardest of effort in the common interest will see us through.
 
The American poet Hayden Carruth imagined life as an hourglass. The upper chamber is represented by our ego and self-interest. As we age, our sands drop into the lower chamber that is our love for others, our children and all that we care for. He writes from his old age that “now I am almost entirely love”.
 
This thought will define much of what happens next. As families and communities, we will love a whole lot more. I can already see this happening in real time. The trick will be to pull that off as a country, society and economy. I believe we can.

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