Cutbacks, investment, or both?

The president of the US enterprise once told me the reason he felt his outfit had been so successful over the 20 or so years that it had been in business.

In times of recession, he said, he made no cutbacks in research spend whatsoever. Instead, he actually increased the amount of money he ploughed into the development of future products, so that once the economy turned around his company would have a clear advantage over its rivals.

Over the years, the strategy seems to have worked. So much so that the company has demonstrated year-on-year growth and increased profits ever since he founded it.

In many ways, the tactic taken by the president of that company doesn’t appear to be too much different to the one currently adopted by the Obama administration, which is currently ploughing millions of dollars into all sorts of new industries that it hopes will ultimately bring the US back to its former glory as one of the world’s leading developers of technology.

That’s right. Not a day goes by in which the US government doesn’t announce that it is going to finance a new factory to build solar panels, fund a whole bunch of carbon sequestration projects, or develop new methods to create fuel from thin air or algae. 

Despite the fact that US householders are still smarting from the financial effects of the recession, their government seems intent on buying back the good times by making huge generous investments in high-technology companies that might eventually employ them.

Over here, the UK government is taking a less liberal approach. Despite some small-scale investments that see the odd few shillings thrown at the development of a new wind turbine project or an electric car refuelling station on some obscure part of the moors, the UK government is attempting to revive the financial health of the nation through the reduction of the massive public debt via numerous cutbacks.

Only time will tell which government – the one in the UK or the one in the US – has come up with the correct formula for success. But perhaps the actions taken over the past few years by the president of that smaller company in the US might provide at least some indication of what the optimal solution might be.

You see, like Mr Obama, the president of the US enterprise hasn’t stemmed the investment in research during this latest recession. Once again, his company has increased its research-and-development spend. But, like the UK government, cutbacks were necessary too, and I’m sad to report that to support his investment strategy, many of his employees have had their salaries slashed by 10 per cent.

Could there be a lesson for both governments here? Could it be that the long-term viability of both great nations is dependent on a massive investment as well as some short-term personal financial cutbacks? If the president of the US enterprise’s track record is anything to go by, I know what my answer to that question would be.

Dave Wilson
Editor, Electronicstalk

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