Letter from the Editor

EDITOR’S LETTER

Since 1972, the Himalayan kingdom of Bhutan has set its economic and social strategies not on the basis of maximising GDP but according to ‘gross national happiness’. Modernisation and development of the country has been planned to maintain its traditions and social cohesion, rather than to make the maximum profit for business owners.

That all sounds very admirable, though measuring happiness seems to be a rather subjective affair. More fundamentally, though, despite more than 45 years of concentrating on its population’s happiness, Bhutan scores 5.2 out of 10 according to the 2016 World Happiness Report, putting it in 84th place in the world, just behind China but ahead of Kyrgyzstan.

Traditional economic metrics seem to offer a firmer picture of the real world. What could be more objective than counting the aggregate output of all businesses and authorities in a country? Well, for one thing, individual corporations can – and often do – manipulate their accounts in order to reduce their tax liability, or to time one-off costs during a good year (or perhaps a year that is already bad).

Furthermore, the science of economics is founded on the idea that humans are rational beings and respond to market signals (price, especially) in a rational and predictable way. (I don’t know about you but I know plenty of people who could not in any way be described as ‘rational’.)

It seems that economists – some of them, anyway – are beginning to take note. Last December a group of academics posted 33 ‘theses’ to the door of the London School of Economics, in a conscious echo of Martin Luther’s actions on the door of All Saints’ Church in Wittenberg 500 years earlier. The LSE economists also challenged entrenched orthodoxy, though whether their actions will lead to a reformation of the accepted tenets of economics remains to be seen.

There has, in recent years, been a growing acceptance in the business world of a broader range of metrics than the blunt profit-and-loss and assets-and-liabilities double entries. Many corporations, especially those active in areas of business that are being seen by consumers as ‘dirty’ (such as petrochemicals), are taking corporate social responsibility more seriously and include reporting of sustainability metrics in their annual reports. Many too are adopting the mantra of the ‘triple bottom line’ – People, Planet, Profits – though KPIs in this regard have not yet been established.

Nevertheless, at this time of year, when our inboxes are overflowing with annual results, it is instructive to see that most still focus on traditional financial items. Perhaps that is not surprising: business directors are beholden by law to their shareholders, not to the planet (nor even to their employees, suppliers or other more vaguely defined ‘stakeholders’).

So, we might ask, how have they done over the past year? It is, as might be expected, a mixed bag, but there are some broad trends. Capacity over-supply in many markets (tank containers, chemical tankers and VLGCs, for example) has held back earnings. Even independent storage terminals, normally buttressed against the worst of the market, have mostly had a desultory year.

All, though, are optimistic of an improvement in business conditions, if not this year then in 2019. Fundamentals seem to support that confidence. Perhaps we are at last coming to the end of a decade-long slump. That might make us all a little happier. Peter Mackay