How to postpone the beginning of the next recession

Editor's note: Ten years ago, in 1998, there was much frenzied talk of an imminent recession. In March of that year, the following article appeared in the very first issue of Market Leader. That the much-heralded recession didn't in fact materialise for another two years is powerful testimony to the new magazine's immediate influence on opinion formers. Foolishly, we forgot to re-print it in 2006.

There was the one that started in 1974 and there was the one that started in 1981 and there was the one that started in 1990 and there's been quite a lot of talk recently about the one that may or may not start in 1998.

What I thought you might find valuable is some actionable advice on how to keep this next recession at bay for a bit.

Like all good economic theories, this one is based on an analytical understanding of human absurdity.

In all communities – in all villages, in all families and certainly in all companies – there are two quite distinct groups of people. The first are called Go-For-Its and the second are called Toothsuckers. These names are self-explanatory so let me explain them to you.

Go-For-Its are genetically, thoughtlessly optimistic. They worship action and despise thought. When faced with a predicament, a crossroads or a choice of any kind, their immediate instinct is to say, 'Let's go for it!' They will expand, acquire, invest, gamble, proliferate, launch 17 brand variants and confidently set out to take the American retail market by storm.

All communities, particularly commercial communities, need Go-For-Its. Without Go-For-Its, little if anything would ever happen.

Toothsuckers are different. When faced with a predicament, a crossroads or a choice of any kind, their immediate instinct is to suck their teeth: 'Oh dear, oh dear, oh dear, oh dear, I can't say I like the look of this one, Chairman.' Irrespective of the intrinsic merits of the circumstance, they will argue for caution, dilution, circumspection and a ten-year test market.

All communities, particularly commercial communities, need Toothsuckers. Without Toothsuckers, companies would go bust even more frequently than they do.

These two groups are in constant conflict. And the critical factor that determines expansion or recession is the prevailing balance of power between them.

A BRIEF HISTORICAL REVIEW.

The Thatcher years did not favour the Toothsuckers. For the best part of a decade, doubt was not only unfashionable but unconstitutional. And so it was that the Toothsuckers were made to feel lowly people: derided, despised, ignored. For nearly nine years, not a single Toothsucker's name appeared on the Honours List.

With only the most muted of challenges, the Go-For-Its held the rampant stage. All over the country you could hear their cries: 'Let's go for it! Let's go for it!' While almost inaudibly, in the background, you might just pick up a weak and plaintive: 'Oh dear oh dear oh dear ...'.

And then came 1990 – and the Toothsuckers were back in business.

It is wrong to believe that everybody hates recessions. Toothsuckers love them.

Toothsuckers have their own vocabulary – and within days of the downturn, it was joyously taken out of mothballs and returned to frontline use: 'inappropriate'; 'imprudent'; 'precipitate'; 'not altogether timely, Chairman'.

So, after ten years in opposition, the Toothsuckers, in a landslide result, not only reacquired power but became doggedly determined to retain it. Throughout the land, unreported, Toothsuckers moved stealthily into top management positions.

The recession continued. Economic commentators expressed surprise that consumer confidence was so slow to return. Those of us in marketing didn't. Marketing people know a great deal more about human nature than economists do. Marketing people (although they don't like to acknowledge it) have every reason to be grateful for the existence of reluctant consumers: if it weren't for them, we wouldn't have jobs. Can you imagine if all consumers were Go-For-Its? Marketing departments and advertising agencies would become obsolete overnight. (Unless, of course, their talents were re-employed in a mammoth state-funded campaign in favour of consumer restraint.) Luckily for us, a great many consumers have a natural aversion to consumption. They are some of nature's most stubborn Toothsuckers. Often, they seem to be in the majority – and they are not stupid. Toothsucking consumers are the only ones who've rumbled what consumer confidence really means; it means re-acquiring enough confidence to get back into debt. No wonder the length of the recession continued to baffle the economists.

Because what a rattling good recession does is give congenital Toothsuckers the confidence not to consume. It legitimises caution and sanctifies parsimony. Visit any furniture showroom and look and listen. A slow shake of the head: 'I only wish we could, my love' – said with lingering enjoyment.

The reason that the 1990 bust hasn't yet turned into another boom which is about to bust is that at least some top executive Toothsuckers are still hanging on in there. But if they came to power in the early 1990s, then most of them will soon be slipping into their Home Counties cardigans to be replaced by a new, eager generation of managers; a generation who didn't (as managers) live through the pain of 1990; so a generation, as likely as not, containing an unusual number of Go-For-Its.

Maintaining the balance of power between Toothsuckers and Go-For-Its cannot be left to market forces alone: that's what induces cyclical economic turbulence. This is a job for a small, low-profile group called the 'Head-Scratchers'. Head-Scratchers honour both Go-For-Its and Toothsuckers, but value balance more.

There is bound to be another recession, I suppose. But if every company listens very carefully to its resident Head-Scratcher, it needn't come just yet.