Idea's space

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Long term objectives and short term concerns

with 2 comments

General Motors assembly line

General Motors assembly line

These times, we are hearing that the economical recession is finished and everybody seems to be happy to see the business restarting….as usual ! I have no habit to be pessimistic. It is a fact that in such time, it is better to have a positive mind in order to start new challenges and to influence positively the market. But for all the people who lost their jobs and who have difficulties to pay their bills at month end, to feed their children, to pay medical costs, the recession is not finished at all.

One of the major activity sectors which was hit by the economical crisis is the automotive industry. With the GM bankruptcy, we saw the American government trying to find solutions in order to save the company and in order to limit the social disaster of such bankruptcy. Other governments in Europe, like Germany and Belgium, are ready too to bring some financial helps to Opel. Nevertheless, is it a good idea to invest so much money in a industry where there is an overproduction of 35% ? If there is overproduction, it means in this case that there is too much player in this industry segment. Should not be interesting to invest in industrial segments which present good potential for the future, like renewable energies?

The problem is that governments have to face to a dilemma. They have to struggle with budget deficit. In order to limit the social expenses, and to find a short term solution, they are intervening financially in order to sustain some industries, like automotive industry. But by investing in some industries having structural problems, they are reducing their capacity to invest and to sustain long term projects developments.

How did we come to such situation?

We can observe that when some government find important source of revenue, they do not think for how much time this source will make earning money. Let us take an example related to the automotive sector. For instance, in Belgium, around 50% of cars are company cars. Company cars are given to employees as a less taxable benefit than an equivalent gross salary complement. These leased cars are important sources of revenues for the government, and the gas used by these cars too. Nevertheless, they have three major problems related to this. First, it is a fact it will be more and more difficult to extract petroleum, as a result of which, the price will increase progressively. It will represent a cost increase for companies, and will affect they results. The companies will have to replace such benefit by another. But if the number of company cars is decreasing, how the government will compensate the revenues decrease? The second problem is the one of mobility as in many cities and countries. The traffic jams are constantly increasing, and it represents also a cost for companies. Do not forget the third problem of  the environment. We are consuming more petroleum than the earth produces, and there is a negative impact with CO2 rejections.

It seems that governments have short term views, and as far as they find some important source of revenues, they have the feeling that it will be forever. Now, it becomes more complicated to finance long term project developments, when you have even not enough money to close your annual budget.

This remembers us that when the problem appears, sometimes, it is already too late. We have not only to consider things as definitively acquired, and not only to think about tomorrow, but also the day after tomorrow.

(Picture source: www.e24.fr)

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Written by Eric Saint-Guillain

October 4, 2009 at 15:37

Posted in Economy

Tagged with , ,

2 Responses

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  1. Your site is excellent. I m gonna come back again, thanks.

    Danuta Scarpino

    January 18, 2010 at 05:07

    • Thanks a lot !

      Best regards,

      Eri

      Eric Saint-Guillain

      January 18, 2010 at 23:13


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