Tonight:
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One of life's current mysteries is why people are so surprised at the abrupt decline of sterling, and in particular the weakness of the past few weeks when the markets came to the conclusion that the Bank of England would like to see the rate lower.
Perhaps it does — the Treasury certainly seems to — but who can blame either party? The Government will shortly have to sell a vast quantity of bonds to foreign buyers as we do not generate enough savings at home to absorb them all ourselves.
However, if foreign investors think sterling is overvalued, they will be reluctant to buy. Tactically therefore it makes far more sense to get sterling down a bit now, so that those buyers might reasonably look forward to a bounce next year. Our debt will be a lot easier to sell if we can offer the hope of a bit of currency appreciation as well.
In the longer term, it is hard to see the pound getting back to the levels of a couple of years ago. The truth is that it was overvalued for a decade — since around 1997 when its then strength caused much angst in the early deliberations of the Bank of England's monetary policy committee. That strength was inflated still further in recent times by the inflows of foreign bank lending to fuel our consumer and housing booms. Now the world looks a different place.
Just how different was underlined in a speech by the former head of the World Bank, James Wolfensohn, in Merchant Taylors' Hall two weeks ago, in which he put some numbers to the shift in economic power from West to East. Currently, India and China together account for about 10% of global gross domestic product. However, by 2025 — which is just 15 years away — these two countries will account for 25% of world GDP. A quarter century after that, in 2050, the forecast is that they will account for almost half of global wealth production.
The other way is to look at this in terms of the relative decline in the share of the G7 countries — the US, Germany, Japan, Britain, France, Canada and Italy. For years up until 2002, these countries accounted for 65% or two thirds of global economic activity, and therefore called the shots. Between 2002 and this year, the share dropped to 53%. In 2025, it will be 42% and in 2050 only 25%.
The UK is already one of the smaller players in G7 — battling with France for the number four slot — so imagine how small and inconsequential Britain's share of that total is going to be in 40 years' time.
An ITV solution may lie within
Given what has been done to ITV in the recent past by a succession of executives, the fact that the company is about to have a period with no one officially at the helm ought to be a matter of some relief, rather than being greeted as it has been by much wailing and gnashing of teeth.
Any business would struggle if it had been hit as ITV has been by a drying-up of advertising and a big increase in competition.
But as it is not immediately apparent that the countermeasures planned and executed by its generals have helped much to alleviate the situation, the business will probably survive just as well for quite a long a time if it is left to be run by its junior officers.
The more serious point is that we expect too much from business leaders, and we have allowed ourselves to be conned by headhunters into believing that there is always a genius out there waiting to be hired if we the shareholders will only pay the recruiters enough to go out and find him or her.
It is a regrettable but unavoidable truth that a good leader will probably be dragged down by a bad business, while a bad leader will look like a star in a good business, and our judgments are normally far too superficial to be able to tell the difference.
As Napoleon said of his generals, luck is a lot more important than skill. Yet we persist in looking for people and paying them as if they will make a fundamental difference. In most cases they don't. They may mind the shop competently but they don't make a difference.
It is interesting to note in this light that some of the most successful businesses in this country, as well as being among the biggest, actually elect the person they want to run them. I'm not thinking of the Co-op or some friendly society but the big accounting firms. PricewaterhouseCoopers, for example, is a huge business in the UK employing tens of thousands of people but the senior partner Ian Powell was elected in a contested election against three other candidates.
The result is that you get leaders who know the business, command a measure of support from their colleagues, and who are elected to maintain and grow the franchise, not shoot the lights out. Perhaps that would be the solution to the problems of ITV.
Forget this nonsense of bringing someone in from outside, who will have no idea what makes the business tick. Ask those already within it to take over.
