New Start editorial September 24 2008

Saturdays are a time to cook bacon and mushrooms and mull over the pundits’ analysis of the week’s events.

There’s nothing like a good fry-up to put the collapse of global finance into perspective.

The shock waves of recent weeks will be with us for a long time.

As always, people are quick to blame: the hedge fund specialists and derivatives experts we once lauded as the driving force of our knowledge economy are now the enemies of the people.

One Lehman employee, a recent graduate who had arrived with high hopes of top prospects and an enviable salary, described their experience as being ‘screwed by the greed of a few’.

Look beyond chief executives’ bonuses and the top traders’ bling, though, and you’ll find the greed of the many.

It’s just a question of scale – few argued that this might not be an intelligent or sustainable way to make a quick buck when the going was good.

Planners and economists have frolicked in the same pool.

Last year’s sub-national review saw the future in terms of the UK’s comparative advantage in ‘high value-added, knowledge intensive activities’ including business, legal and financial services.

Well, there’ll certainly be work for the lawyers.

Our cities, too, have bought into the idea of regeneration through ever-expanding financial and business services.

But no matter how clever the instruments being traded, if the basic product is faulty the house of cards eventually collapses – and you can’t get more faulty than US sub-prime mortgages or some UK buy-to-let investments.

Perhaps we’ll soon need a financial services decommissioning agency to match the nuclear decommissioning agency.

Financial services are clearly necessary and important to the economy, but we all pay the price of an uncritical approach.

It’s taxpayers on average or low incomes who subsidise the bailout of institutions like Northern Rock and underwrite the government’s guarantees.

And it’s their livelihoods that are at greatest risk.

Knowledge must remain at the heart of our economy, but perhaps it should be directed to more prosaic ends: sustainable food and energy production, decent housing and public transport, and education that fosters invention and enthusiasm.

Strategists and masterplanners should revisit Maslow’s hierarchy of needs before getting starry-eyed about the latest Wirtschaftswunder.

Charles Leadbeater, one of New Labour’s inspirations, once wrote a book about the knowledge economy called Living on thin air.

He may have been closer to the truth than he realised.

Julian Dobson, editorial director, New Start Online magazine

- News UK