The West was not going to find its way to the right economic path with a
little tweaking at the edges, the CEO said. What is needed is a wholesale
overhaul of the economic system to tackle record levels of public and
private debt. Was anyone brave enough to do it, he wondered aloud.
I asked him to send me the report. He did.
The BCG study by Daniel Stelter which is doing the rounds of corporate
C-suites does not pull its punches. In fact, its punches are really just a
softening-up exercise for a barrage of kicks and painful blows aimed at
anyone who thinks that kicking the can down the road is a suitable
substitute for radical action.
At the heart of the analysis is the issue of debt. A report by the Bank of
International Settlements, the study notes, found that the combined debts of
the public and private sector in the 18 core members of the OECD rose from
160pc of GDP in 1980 to 321pc in 2010.
That debt was not used to fund growth – perfectly reasonable – but was used
for consumption, speculation and, increasingly, to pay interest on the
previous debt as liabilities were rolled over.
As soon as asset price rises – fuelled by high levels of leverage – levelled
off, the model imploded.