Don’t Just Sit There—Addressing the Economy

| May 7, 2010 |

Just from my recent experience with batteries, I have to say, “Thank goodness life is not made in China.” The cell phones my carrier mandates are made in China. After two months, the first battery could hold no charge. The earlier phones were made elsewhere and lasted seven years. Similarly, the 17-inch Apple laptop made in Taiwan and purchased eight years ago is still going strong with its original battery operating at 70% capacity. The Chinese-made 17-inch Apple laptop bought two years ago is already on its third battery.

Some of us prefer to pay for well-made products that operate effectively, yet when we try to buy a cell phone, landline phone (or almost anything else you care to name) that has not been made in China (usually with as many short cuts as possible to maximize profits) it proves practically impossible. The ubiquity of it all makes for a grim shopping experience.

Extrapolating into the hospitality world, imagine if hotel ratings were adjusted so that two-stars were reported as five-stars because occupancy rates were insufficient in “higher-end” hotels to justify the service levels of “old-style” five-stars.

Well?

China is not the target of this little question, by the way—it takes two to tango: if the West did not demand cheap, then manufacturers would not close down their US and European operations (and economies) and move to the Far East. One could say the same about street drugs: No demand, no traffic from Columbia, Afghanistan, etc. We have brought these conditions upon ourselves.

Take the current economic collapse. China didn’t create that, although the new US Treasury Secretary, Mr. Geithner, implied as much recently regarding their alleged currency manipulation and factual underwriting of the US housing boom with their subsequent excesses of cash. No, it was people like Mr. Geithner who did, simply by being ignorant of the fundamentals of economics, espousing instead theories so arcane and abstruse as to turn a simple subject into a cult with membership only for the cognoscenti (knowledgeable). Again, my intent is not to target or finger point individuals when it has been a group effort that has led us down this path. Instead, my gnarly (knobbly) fingers are pointing at the lack of a manual for life that highlights fundamentals; in this particular case, regarding economics.

What a mish mash of half-baked ideas, what a sea of information that does nothing but confuse by its contradictions and impracticalities! No wonder we seem to muddle our way from one crisis to another. Mankind is not pre-ordained to succeed, but intelligent action goes a long way toward improving our chances. So, what is intelligent, what is fundamental, about managing economies?

I don’t normally write about economics: as a trainer of butlers around the world, I usually sit down to write on subjects relating to quality of service and subjects that impact butlers. I have not written an article for the last five months, because the subject that seems be front-and-center for hotels focusing on quality of service has been this financial vortex we are sitting in front of, mesmerized, wondering how much longer, and how deep, it will spin. In a way, butler trainers could be regarded among the canaries in the mine of hospitality. For when funds become tight and hotels hunker down, training, together with marketing and PR, are the first things to find themselves on the backburner.

Reviewing conversations over the last three months with GMs, HMs, HR Directors, and butlers, the trend conceivably points to butlers in hospitality as an endangered species. Maybe high-end hotels able to afford the perks and luxuries of old are an endangered species, too. One article written recently showed that affluent travelers are still traveling. There will always be enough wealth to allow some to travel, but how many large, high-end hotels will be able to survive on the basis of the numbers who will still be able to travel, and be willing and able to pay extra for the perks? By reducing rates by 70% and putting on hold everything but bare essentials, many luxury hotels are being forced to do the equivalent of not supplying soap and shampoo that some low-end hotels are now resorting to.

When the financial markets, with their derivatives and packaging of junk assets into “valuable assets” by a process of necromancy (black magic), created US $1.4 quadrillion in wealth that is suddenly without value, one can see that trying to create a soft landing by making the real world economy (you know, people doing an honest day’s work) absorb such a sum, is not a possible feat and not a bright direction to be moving in. That’s why this article is about the economy, rather than the quality of service. Because the latter cannot exist in the absence of the former, and I’d hate to see the ground gained over the last three decades lost for want of an understanding of basics by our betters.

Kindergarten Economics

Money is a symbol that allows us to move away from the restrictions of bartering. To have value, we have to consider that currency has value: we have to believe that the money is exchangeable, and not just Monopoly® paper, and that it’s value will not erode.

The supply of money has to balance the amount of product in the market place, otherwise inflation (too much money) or deflation (too little money) result. When the Federal Reserve stopped reporting M2 (the money-supply statistic) in the U.S. about three years ago, they effectively hid just how much new money they were creating.

An economy relies on real products and services being produced, which are then exchanged for money. When a large portion of the economy is froth (money made by creating extra “value” out of paper money), then a) production is not encouraged or rewarded, b) the country produces less and less, and c) the economy bankrupts. The reverse is true, too: valuable products and services produced result in a truly booming economy.

If the creation of money is in the hands of the government (per the US Constitution), then it will be managed for the common good by administrators appointed as public servants to execute the will of the democratically elected government. If, however, it is in the hands of private groups, such as the Federal Reserve in the U.S., then money creation will be used for the benefit of that private group, just as any company will look after its interests, and that group will control the government. This has been true for the last 800 years, ever since the Venetian bankers took control of European countries by bankrupting them over the Crusades—that they initiated covertly through Church officials (who spoke to the Kings who then began the wars against Muslims that they had, up to that time, lived with peaceably in the main).

Don’t spend money you do not have, or have backed by real assets. A debt is not an asset, it is a debt. The apparent genius of modern banking and corporate accounting is that it can claim a debt is really an asset.

There are other fundamentals, but if the above had been in place, we would not now be in a pickle. We have all benefited from this half-baked state of affairs, in that those made wealthy through economic fudging have spread that wealth into our hotels and pockets. But, like the person who buys Chinese products because that is all that is available, and so helps collapse his own economy, we should not beat ourselves up for other people’s transgressions and excesses. Recognizing the root of the problem and taking effective action would be more productive.

Meaning…?

Well, let’s start by demanding that elected officials work with other governments to cancel the US$1.4 quadrillion in financial-froth-debts by those who gamble with and manipulate money instead of earning it; and demand they revamp the world’s financial system. Support any actions designed to bring back real productivity to the economy. Maybe demand that the high-flying business colleges, universities, and think tanks, start teaching and thinking with fundamentals.

And perhaps more than anything, let’s support any activities that nurture morals and ethics, because, if we look for the fundamental fundamental (in life, not just economics), which is behind this financial maelstrom we find ourselves in, it is that we would all be better off if we looked out for the other guy as well, not just for ourselves. The people reading this article do not have this problem, but I’ll wager those who try to enrich themselves by taking much and giving back nothing of value to society, are laboring under the misapprehension that happiness results.

This article moves beyond the “mere” managing of a hotel, but at this stage, we need to do something (as it is our economy, too, and does impact our microcosm), instead of waiting or expecting others with perhaps a too-complicated grasp of their subject, to bring more of the same solutions to bear.

Published in:

  • Airline News Resource (www.airlinenewsresource.com)
  • http://www.hotelschool.cornell.edu/research/chr/news/newsroom/detail.html?sid=36925
  • http://www.hotelonline.com/News/PR2009_1st/Feb09_EconomyHotels.html
  • http://www.4hoteliers.com/4hots_fshw.php?mwi=3747
  • http://www.younghotelier.com/articles-reviews/the-economy-explained-don’t-just-sit-there
  • http://www.hotelnewsresource.com/article36925.html
  • http://www.htrends.com/trends-detail-sid-36563.html
  • http://www.thetalentjungle.com/hospitality_blog
  • http://www.hospitalitynet.org/news//4039739.html
  • Hotelexecutive.com

Tags: collapsed economy, economic basics, Hospitality Industry, Made in China, Valuable Assets

Category: General, General Hospitality Industry, Inspiration, News, Published Articles

About the Author (Author Profile)

Steven Ferry is chairman of the International Institute of Modern Butlers and the author of bestsellers "Butlers & Household Managers 21st Century Professionals" and "Hotel Butlers, The Great Service Differentiators." He also trains and consults for the profession around the world.

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