Economics 101

As a Commerce graduate, I have been dismayed by the recent actions/inactions of companies and governments. The subsqent over-the-top media reaction has only accelerated the economic slowdown.

I studied Commerce in university. Economics was one of those business subjects that I HAD to study but never became one I loved. For me it was always the study of the obvious; a practice of making assumptions in order to track economic activity. Enterprise, innovation, that get-up-off your ass and get on with it attitude -economists and accountants don’t know what these really are – they are unknowns in their precious models. I liked IT and marketing – I felt positive after studying them.

So when a company like Sony ( for example) announce that they’re about to make their first loss and therefore have to cut jobs, I fail to see how that helps them sell more goods and generate future profit. They are making losses because consumers are frightened of losing jobs and saving their money instead of buying that LCD or VIAO. Accountants & economistd advising to shed jobs and cut costs does not guarantee sales or profit next year – lowered prices, quality products, new innovative sales techniques and conveying a positive consumer-focussed attitude does that. Apple are brilliant at this (maybe not the lower price bit though).

Recently a real estate company in Wexford introduced an amazing idea. They introduced a scheme on a new estate where potential buyers could rent houses for 4 years. They then had the option of buying them at the current low prices after the 4 years AND the rent paid was offset against the purchase price. The estate sold out as if the recession never happened. No jobs lost. No tears. Genius.

A lesson for all companies in the current climate. Losses happen with minimum effort – profits come from pushing on, innovating and not cutting the very people and resources that can help create the recovery.

Obvious.