Will the policy of muddling through continue?

Head of the World Bank Robert Zoellick has condemned what he interprets as the policy of muddling through. While Herbert Simon once argued that muddling through was a logical approach to complex problems when actors had bounded rationality, Zoellick has associated the approach with delays in taking decisive economic action. Zoellick has suggested that the international economy is at serious risk because of dithering in Europe, the United States and Japan.

At Cooper Matthews we know how hard it is to foretell the economic future. The reason there has been a muddling through policy has been that many nation states accumulated huge debts as a result of the Great Recession of 2008. This sovereign debt limits the scope of policymakers to act in the face of economic headwinds. This diminished room for manoeuvre has not led to more cohesion among decision makers.

It is impossible to know whether or not policymakers will begin to tackle the economic problems in a more coherent way. This uncertainty only makes it trickier for struggling firms to plan ahead. It is no shock that many good businesses are becoming distressed. Volatile stock markets and fears of a possible double dip recession only dent confidence.

Confidence is obviously critical in a modern economy. In its absence, growth slackens. With low or negative growth, it is hard for companies to prosper. It can only be hoped that the business environment begins to improve.

Business debt services have the capacity to assist distressed firms. They can establish if a company has sufficient assets to cover its debts. They can calculate how best to deal with the business debt. It is not possible to achieve turnaround overnight, but it is feasible to begin making headway with a company’s problems. Business debt services have the detailed and indispensible knowledge about the potential options going forward.

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