.png){kind=small}
Businesses need customers to pay staff and to survive, writes Conor English. Photo / Alex Robertson
NZ Herald
By: Conor English
There are four things politicians should think about right now.
1. Customers matter.
Henry Ford, the famous American automobile manufacturer, is quoted as saying, “It isn’t employers who pay employees, it’s the customer”.
If a business doesn’t have a customer, usually it doesn’t have revenue, so it is difficult to pay employees. If you don’t have revenue from customers, you either need cash from investors, cash from the bank, or cash from the Government.
Ford is right. Businesses need customers to pay staff and to survive. Burger King, butchers, independent fuel stations, start-up companies, and every businessperson taking a risk running a business knows this, but do our politicians and officials?
The shutdown was the right thing to do. There are different views on the gap between perceptions and the reality of the execution of that shutdown, especially border controls, testing, tracing and availability of PPE.
But shutting our borders stops international customers. Shutting down all so called non-essential businesses is stopping domestic customers getting access to products and services and starting the cash merry go round that Ford refers to.
The Government and Reserve Bank understand some of this, and have thankfully put in place a number of new policies such as, wage subsidies, facilitating loans, deferral of mortgage payments, and quantitative easing to name but a few. This costs money.
2. Money doesn’t grow on trees.
Businesses don’t have a tree out the back of the shop that just prints money to make up any cash shortfall for wages for example, so they make staff redundant. Zero or less revenue means zero or less cash. Business balance sheets are thin. Like many, often business owners live from week to week, and earn less than their staff. I’m not sure all our politicians understand this.
Governments also don’t have a tree in the back yard either, although globally, many politicians seem to think so. So when the Government spends money, it needs to collect taxes, borrow, or sell something to pay for it. Sometimes it can kick that can down the road, which is the usual preference. But like any business it still can’t escape the fact it has a liability that needs to be paid for.
Recent Treasury scenarios included a suggestion that 690,000 New Zealanders could become unemployed. If those jobs were subsidised by $585 per week, that’s over $400 million a week, or $20 billion a year. Over say three years that’s $60 billion. This is just one potential example.
3. Health is about the whole body and mind, not just the lungs.
We all have a very complex human mind and body. So to service it and keep it working, we have a very complex and competent health sector. It costs money. Vote Health was $19.871b in 2019/20 to cover off the ailments that afflict our whole body.
In simplistic terms, the Covid-19 virus attacks the lungs, and for people with some underlying conditions this can prove deadly. No one generally wants to be dead, which is why politicians invest so much in health spending. Or so we assume. As financial, domestic and mental health pressures mount, we will see people get sick and we will see some tragically lose their lives because of the impact of the policy response to the virus, not the virus directly.
4. ‘The why’ matters.
Focus on the outcomes sought, not solely the initial rules to achieving those outcomes. They don’t matter except insofar as they achieve desired outcomes.
So maybe we should forget “essential” services and focus on “safe” services. This simple word change could be worth billions and enhance overall health outcomes. The constraints on business operations and our personal movements have been defined by what is deemed “essential” or not. Safety has not necessarily been the defining criteria.
There are many examples that suggest why “essential” doesn’t necessarily make sense. Rules are a means to an end. Isn’t it about the why? If a job can be undertaken safely, let it be done whether so called “essential” or not.
The Government has done some things very well in responding to this virus outbreak. But as Charles Darwin suggested, “It’s not the strongest of the species that survives, nor the most intelligent, but the ones the most adaptive to change.” Let’s keep adapting.
Conor English is a director of Silvereye Communication.