Let me begin this week’s post by thanking those of you that took the time to read my series on London’s Underground. When I began researching the problem and then writing a mini Game Plan in response, I was unsure if anyone would find the work of interest. Yet, judging by the number of blog hits, media inquiries, and comments expressed to me privately and online, I could not be more pleased with the result. Clearly Londoners care about the conjoined issues of poverty, homeless, mental health and addiction, and the people affected by them. I am also very grateful to those thoughtful insiders who shared so much information with me about the state of our most vulnerable and the services that support them. I confess that I do know near as much as I could or should about this problem, and acknowledge that I have much more to learn. Still, I am pleased with my improved understanding of the issues and now have in place the foundation of a plan designed to resolve them.
The Underground series also proved timely in light of recent reports on the state of London’s economy and the causal link between the city’s economic health and the overall health and wellbeing of its citizens. And based on the local economic performance that I am seeing, the corporation we collectively call London is comparatively not well.
For instance, at a time when the entire country has enjoyed impressive increases in gross domestic product, record growth in housing starts and the lowest unemployment levels in a decade; real wage growth and household income levels in our own city have been largely stagnant, and even declined. Worse yet, local labourers are permanently exiting the workforce while the number of people seeking social assistance has increased. This troubling trend of a growing economy that is leaving so many of our citizens behind is turning our once thriving middle class into an economically dependent one that has been increasingly reliant on debt and/or social assistance to make ends meet.
There are also several potentially damaging economic cold fronts now appearing on the horizon. For example:
- The US stock market, an indicator of global economic health, is entering its 9th year of positive returns, an uptrend that usually lasts an average only 7 years before undergoing a major correction.
- After several years of double-digit growth, the Chinese real estate and credit markets are under severe constraint as investors grow impatient awaiting returns that may never materialize.
- Several high-growth countries in South America are experiencing significant political and economic upheaval and charges of corruption erodes public confidence.
- The current US administration is actively engaging in the re-negotiation and withdrawal of several economic and environmentally sensitive global trade agreements.
- This same US administration is actively considering several rather ill-conceived tax reform and infrastructure investments that will increase the US economy’s inflation risk, debt exposure and vulnerability to recession.
- North Korea continues to test missile capabilities with little regard for the economic and military consequence should one of these tests inadvertently land in and damage another nation.
Given the interdependency of global financial markets, the exacerbation of any one of these situations, or ones not included above (terrorism, severe weather, Brexit, etc.) could trigger a long overdue stock market correction, materially constrain the flow and cost of capital, and actually worsen London’s economic standing and those dependent upon it.
As such, London needs to focus much more attention on its economy and plan for a potential cooldown. It also needs to break out of its malaise and find a way to return to its economic leadership position in the region.
To this end, over the next six weeks or so, I plan to mimic my work on our Underground and release a second multi-part series I am calling London Inc. And much like its predecessor, I plan to outline through a series of consecutive posts my perspective on London’s current economic issues and market opportunities; recommend a list of goals, strategies and tactics designed to pursue those opportunities; and the civic investment required to deliver on the proposed plan.
I am comfortable with this approach because unlike my limited background working in and around London’s Underground, I can confidently speak to this subject matter having spent the better part of the past 15 years working in and around London’s economy. And while I am not at all comfortable talking about myself, I do believe that a brief introduction as outlined in Part 1 of this series (tomorrow), is necessary to help establish my credentials and lend credibility to my proposal.
In my view, London Inc. has an tremendous mix of assets and talent, and profound willingness to compete and win in the global economy. Our city now needs to commit to this purpose, focus its efforts and fulfill its promise.