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3 September 2011

Forty Years On

Tag(s): History, Politics & Economics

In August I celebrated forty years in business and I fell to musing on what has changed in that time. I have worked on hundreds of brands with thousands of people. So what has changed apart from my thickening waist and thinning hair? Like any year 1971 had its stand out events that would tickle the fancy of any amateur historian. The Vietnam War was still in progress even though 60% of the American public were opposed to it. Idi Amin deposed Milton Obote as President of Uganda and went on to be one of the continent’s worst despots. Norway began oil production in the North Sea. Rolls Royce went into bankruptcy and was nationalised by Ted Heath’s Conservative government. And for the Trivial Pursuit buffs 1971 was the year Disney World was opened in Florida, Margaret Thatcher snatched the milk, Spaghetti Junction was opened, the first ever one-day cricket international was played between England and Australia, and Harvey Smith was disqualified for a V-sign.

But on closer analysis we can detect major events in 1971 that were to trigger or continue the development of long lasting changes. Here is my list of ten.

1.                   COMPUTING

 In 1971 IBM launched the floppy disc, Texas Instruments the first pocket calculator and Intel the first microprocessor. Perhaps as a consequence the NASDAQ stock market index was created.  These innovations augured a transformation first in the way we do business and then in ways that touch all our lives. As a young salesman I could not afford that first calculator which weighed 2.5 kg and cost $150 so I did my calculations on a slide rule.

2.                   COMMUNICATION

In 1971 a home telephone was essential for my work as a Sales representative who only occasionally went anywhere near our head offices. One could only get this from the General Post Office which had been turned into a nationalised industry by Tony Benn two years before. Waiting times for service to be connected could stretch to weeks and so as I moved around the country one of the challenges was to find rented accommodation with access to a fixed wire phone. British Telecom was not to emerge until 1977 and it was not partially privatised until 1984 and wholly in 1991.

Radio telephone was developed sporadically over many years.  AT&T's 1971 proposal for Advanced Mobile Phone System (AMPS) was approved by the FCC in 1982. After that countries quickly adopted analogue standards of the first generation of cellular telephones. Vodafone made the UK's first mobile call just past midnight on 1 January 1985.  I got my first mobile phone in 1988 and it transformed the way we did business. 2G phones using the GSM digital standard were launched in the early 1990s, and then 3G came in the 2000s allowing much more data transmission including video. Clever marketing and pricing policies have meant that in developed countries mobile phone penetration exceeds 100% of the population with multiple ownership and in developing countries mobile networks are being used to leapfrog the development of fixed wire circuits avoiding the need to lay thousands of miles of cable.

3.                   BROADCASTING

In 1971 there were only three TV channels in the UK: BBC1 which had first been broadcast in 1936, ITV which arrived in 1955 and BBC2 which in 1964 inaugurated the UHF 625 line Colour service as opposed to the VHF 405 line monochrome system. There is now an assortment of free and paid TV services over 480 separate channels via different delivery methods including satellite, cable, mobile and internet. Analogue is being phased out in favour of digital broadcasting. The range of channels has changed the market for advertising as it is no longer possible to reach audiences exceeding half the adult population with a single advertising slot as it used to be but in contrast it should be possible to target more precisely different segments of the audience as they can choose highly specific programmes about gardening or food or whatever.

In 1971 in Switzerland the first Liquid Crystal Displays were built. However it took a long time for the traditional type of television, the Cathode Ray Tube (CRT) to die and be replaced by flat screen technologies. As the fashion developed for larger screens this was inevitable since the depth of the CRT monitor must increase in proportion to the size of the screen and eventually it became a monster incapable of being lifted and unwelcome in the average living room.

In 1971 the BBC still had a monopoly of legal Radio broadcasting in the UK and only offered four stations: 1, 2, 3 and 4. Offshore pirate commercial broadcasters ran a running battle with the regulators who regularly closed them down. In 1973 land-based commercial radio began with LBC and Capital Radio. Now there are countless radio stations both publicly and commercially funded meeting a variety of tastes and again permitting quite targeted advertising to tightly drawn segments of the population.


4.                   INTERNET

 In 1971 the first internet chat rooms appeared and the first email was sent by Ray Tomlinson. Of course it took many years for this to become pervasive but it certainly is now and for most of the world communication has been transformed.

 

5.       INFLATION

 In the US inflation that year was over 4%, a historically high figure. President Nixon detached the dollar from gold bringing to an end the Post War Bretton Woods agreement. Since then compared with the current price of gold the dollar has lost over 98% of its value. The pound sterling has lost a third of its value against the dollar so has lost over 99% of its value against gold. In the UK inflation reached over 8%, again historically high and Heath’s government started to introduce price controls on such items as rents. Qatar, Bahrain and the UAE all declared their independence from Britain that year and later strengthened the OPEC negotiations that led to the massive price increase in oil. Petrol in 1971 was just 33p per gallon at the pumps, or about 7p per litre. Today it is 20 times that. The price of an average house was £5632 and provided I could put up a deposit of say 20% I probably could have borrowed the balance on my starting salary of £1344 pa. The average house price has gone up to £168,231, a factor of 30 times.

In the UK decimal currency was introduced which I also believe has contributed to inflation. The smallest unit of currency had been an old halfpenny. It now became a new halfpenny, 2.4 times the value. Thus if a baker wanted to increase the price of a loaf from a shilling previously he could have increased it to 1s ½d, an increase of 4.2%. Now he had to go from 5p to 5½p, an increase of 10%. Such increases in basic foodstuffs fed through into wage inflation.

 

6.       COLD WAR

In 1971 both the USA and the USSR conducted nuclear tests underground and sent exploratory rockets to Mars, both symptoms of the Cold War that had run continuously since 1945.  By 1989 it was over. It was finally won by Ronald Reagan without firing a bullet. Instead he had ratcheted up the cost to a level not sustainable by the USSR. While the aftermath has not all been peaceful most of the Warsaw pact nations have been freed from their position as vassal states and are gradually signing up to membership of the EU. The criminal elements in Russia that were there under the Tsars and continued under Stalin, himself a gangster, have not gone away under the present regime. While ultimately successful in the Cold War US adventurism as the world’s policeman has remained cack handed and the increasing militarisation of the CIA is a huge concern.

7.       GLOBALISATION

In 1971 the People’s Republic of China took its seat on the UN Security Council and the US ended its ban on Chinese trade. President Nixon announced that he would visit China and the foundations were laid for the globalisation that has since taken place. One of the counters to inflationary pressure has been the moving of manufacture to low-wage countries like China. Consumers have benefitted while their working colleagues have lost jobs and skills which have not been replaced. Of course it is not a zero sum game and if a toy is designed in Britain, manufactured in China and sold in Britain more than 90% of the ultimate retail price will have been retained in Britain including VAT.

8.       EUROPEAN UNION

In 1971 the UK began negotiations to join the EEC and late that year Parliament voted to join. Entry was actually signed in 1973. Much of British life has been transformed by this act. The debate about the benefits and otherwise of membership never goes away and many believe they were deceived by politicians who described the EEC as  just a common market for goods and services when in fact it has always been bent on ever closer political and economic union. No doubt Britain has gained a market for its goods and services as the other EU member states are collectively its largest trading partner. However, other countries like Norway and Switzerland have gained that too while not giving up so much sovereignty over every day activities. Much of the criticism is no doubt ill-informed but the costs are enormous and the fact that the EU’s own finances have not been properly and independently audited for fifteen years is a scandal. 

9.       CONCENTRATION

In 1971 when I began my career by selling to supermarkets no single chain in the UK had a market share in excess of 4% although the Coop movement accounted for about 20% but through nearly 200 disparate societies. The Coop has declined to about 5% while Tesco has grown to 31% accounting for 12% of all retail sales in the UK. The concentration of retail power in the UK is exceptionally high and despite numerous enquiries few suppliers are willing to act as whistle blower and bring the predatory practices to an end. The growth of out of town shops has had a devastating effect on the high street of most towns and the outlook is for this to get very much worse. Of course the consumer votes with her purse and the supermarkets have broadened their offer and increased their convenience levels.

It is not just retailing that has become concentrated. Financial institutions too have grown to the extent that some of them were judged as too big to fail in the crisis of 2007/8 which is arguably still going on. Some of the largest banks domiciled in the UK have balance sheets in excess of GDP and we saw in small countries like Iceland and Ireland what happens when a bank‘s ambitions exceed the ability of the local economy to support it.

When I started work banks globally accounted for about a tenth of all assets. That has grown to over a third and is climbing.

But the state has also concentrated its power through its spending. In 1971 public spending as a proportion of total GDP was 42.03%. That grew to 48.28% in 1975 and of course the IMF had to intervene in 1976. First under their regime and then under Margaret Thatcher public spending was reined back to 34.25% in 1989. Under John Major it rose slightly to 37.63% in 1997. At first Labour maintained Ken Clarke’s spending plans but after the 2001 election Gordon Brown lost control of the purse strings and spending rose to 45.04 % of GDP in 2010. The true figure was much higher because of Brown’s addiction to Private Finance Initiatives which meant public sector projects would have been classified as private sector even though the state would have to pay later at a premium estimated as fivefold in some cases. GDP is an imperfect measure because it is really about current spending and so when the government increases expenditure GDP increases by that amount even though the government can only raise money by taxation, selling assets, borrowing or printing it. Much of the so-called growth in the Brown years was simply increased borrowing to maintain a bloated state. It will take many years of painful austerity to correct this.               

10.   ENVIRONMENT

In 1971 Greenpeace was founded, one of the most active of the environmental activist groups that has emerged. Forty years ago few of us were that concerned about the long term damage to the environment or understood issues of sustainability. Now fortunately it is much better understood despite many attempts to muddy the waters. However in those forty years the human population has nearly doubled to around 7 billion and is set to increase to 9 billion in the next forty years. I think the greatest challenge in the next four decades will be how to feed and water that many people let alone satisfy their other consumer wants in a sustainable way.

Copyright David C Pearson 2011 All rights reserved

 

 

           




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