PROPPING UP A FAILING INDUSTRY
Four-time Walkley Award winning political commentator and Churchill Fellow, has returned to the fray over concern that the integrity of news dissemination is continually being threatened by a partisan media.
In a regional centre in the Soviet Union in the 1950s a manufacturer of glass tumblers had a small problem. The glass tumblers were of excellent quality and the company had successfully traded for over a century
The regional centre had become entirely dependent on the tumbler factory as it employed 100 of the locals including apprentices.
The locals of course spent their wages at the general store, the bakery and the butcher and all was well in the micro financial village until... well, until other soviet States simply stopped buying their tumblers.
The factory was owned by a nice man called Ivan who would never even consider sacking one of his loyal workers. So the factory continued to manufacture unsaleable tumblers until there was nowhere left to store them.
Ivan went to the bank and borrowed money to build warehouses to store the tumblers. The village continued to prosper.
After a few years Ivan knew he had a problem when, after having built four large warehouses, he was again out of storage space and the bank was sending him nervous letters.
Ivan knew he had to do something so he engaged a Swiss business management consultant.
When the consultant arrived, Ivan told him he was prepared to do anything to rescue his business except lay off his employees, which would mean the death of the village.
The consultant spent a whole day going through Ivan’s factory and books and finally sat Ivan down that evening to relay his simple advice.
"Tomorrow you must tell your loyal staff to stay home on full pay until further notice."
Ivan followed his advice.
His manufacturing costs immediately vanished. He didn’t need to borrow more money for warehouses.
His backlog of stock started to slowly diminish and he was able to sell his warehouses as they progressively emptied. After a few years he was able to ask his staff to return to work.
Many had retired and his apprentices had moved to other villages. But the numbers were exactly right to satisfy the smaller demand for his tumblers.
He was able to repay the bank and most important of all not one of his employees had been sacked. The village remained, replete with Ivan’s now thriving tumbler factory.
I was told this was a true story. I don't know.
Our successive Governments’ bankrolling of inefficient industries to save jobs prompted me to recall this story.
When a government doesn’t require $2 billion of taxpayer funds to be repaid by a motor car company who can’t sell motor cars, it has to end in tears.
The industry, the jobs and the money are eventually lost to another inviting Government with more money.
But one thing is certain, this company will continue to produce motor cars until this Government runs out of money... or has it already?