We need to ignore those who say we are in a crisis and find solutions

There is a distinct possibility that this will be the case, particularly if we don’t return to robust economic growth and the contribution of the finance sector keeps on shrinking. But this is by no means inevitable and so there’s very little to support the impression given in some quarters that the Island is in a crisis.

Certainly if you listen to some of the radio moan-ins and the Letters to the Editor of this newspaper, you could be led to believe that everything is falling down about our ears. But if you maintain a cool head, you will realise that the problems facing Jersey are no different to the problems facing most other countries. The difference is that Jersey is in a better position financially to tackle these problems, although the way the Council of Ministers sometimes behave makes you wonder if we have got much of an advantage.

Certainly some taxpayers get very upset when, for example, they see hundreds of thousands of pounds given to pay off senior public servants who will no longer be contributing to the Island. You can understand their fury, but they should be more realistic.

I have sometimes criticised our political leaders for lack of judgment, but I’ve never thought they were totally stupid. They are certainly not stupid enough to hand over thousands of pounds which they sorely need, unless they absolutely have to.

You might be able to criticise them for putting the Island into the position where it has to honour these pay-outs, but they are only abiding by legal agreements which, if ignored, could be very much more costly.

However, this is by no means just a Jersey problem. Most of our ‘little local difficulties’ are replicated in other jurisdictions. The UK, for example, is struggling with escalating senior pay in all areas, and not just the public service. This would not be a major problem if everyone was enjoying healthy increases in pay, but they are not. The gap between the lowest paid and the highest paid is widening considerably, and that causes dissatisfaction in both the public and the private sector and helps to destroy trust.

This was one of the themes of the OECD annual forum last week, the results of which will be featured in June’s Business Brief.

Former UK business secretary and EU trade commissioner Lord Mandelson was particularly good at summing up the reasons for the current malaise in the UK and elsewhere, including Jersey.

He made the point that despite the strong economic growth and increase in social mobility in the past 50 years, ‘our citizenry are not exactly celebratory’. The recession is partly to blame but there is also a great deal of apprehension, pessimism and scepticism targeted almost equally at politicians and business leaders. Certainly the same could be said about Jersey, where many people are sceptical and pessimistic, although their anger is almost entirely focused on politicians. Perhaps more emphasis should be put on how our businesses are performing and what they are doing to restore trust.

For example, Lord Mandelson’s own think tank, the Policy Network, found that most people in the UK, US and Sweden believed that companies were more concerned by short-term profit and not the wider community or environment.

‘If left unchecked this could sap the ability of countries over the next 50 years to make the same leaps that they have been made over the past 50,’ he said.

This lack of confidence and trust would not correct itself, he said, and although he did not believe in the politics of envy, there was a need for ‘management and regulation’ in four key areas.

Shareholder rights, which have been greatly improved in recent years, should now be balanced much more by shareholder responsibilities. Too many shareholders are transitory and disengaged from the companies in which they invest, concentrating more on short-term growth rather than the long-term building of value.

Secondly, executive pay has become disconnected from reality and not just in the banking sector, Lord Mandelson said. In the UK in 1998, company CEOs were on average paid a multiple of 48 times average pay in their companies. A decade later it had grown to more than 100 times, outstripping any growth in the company or its share price.

The third area to look at involved mergers and acquisitions where the concentration also seemed to be more on short-term shareholder value in order to ‘make a play’ on the stock exchange rather than long-term benefits.

Lastly, Lord Mandelson said that lazy and incompetent managers should not be protected from angry shareholders.

All of these factors identified by Lord Mandelson have an impact on Jersey.

Elsewhere at the OECD forum, other issues were being discussed that also have great relevance to the Island. This includes the paradigm shift that needs to be made from concentrating purely on economic growth and switching to sustainable ‘green growth’. This is a global trend, or perhaps even global necessity, that we’ve hardly started to discuss in the Island.

So there are many issues that Jersey has to deal with to avoid a crisis. As ministers keep on telling us, we are not alone in having fiscal and economic problems, and we’re not even alone in having social and demographic ones. Few of these problems are as a direct result of stupidity or a failure to listen to the electorate.

However, just because other people have the same problems does not mean that we can avoid trying to solve them ourselves. Of course we can learn from what happens elsewhere, but imposing an alien solution picked up from another jurisdiction that just happens to be nearby could be as bad as not tackling the problem at all.

Most of all, we need to keep our head, ignore those who say we are in a crisis, and go about finding our own solutions.

Peter Body is editor of Business Brief magazine