Economic conditions snapshot: lowering taxes for businesses and consumers – among paths to restore market stability

According to McKinsey’s ”Economic conditions snapshot: March 2009,” 57% of the responders say that because of good management, their companies have been less hurt than most by the crisis. Although that figure probably indicates hope for better results than are entirely plausible, it also indicates a confidence in management that runs counter to many other reports. Indeed, even at companies where executives expect profits to drop in the first half of 2009, 51% say that their companies have been well managed, along with 52% of executives at financial firms.

Among the respondents’ views, there is no ambiguity about whether trust in business has fallen as a result of the crisis: 85% say it has and they blame the decline mostly on financial firms’ misunderstanding of risk. That response holds even among executives at financial firms.

When McKinsey asked respondents which one action would do most to restore market stability, the responses express a clear focus on liquidity, with various ways to achieve it. The paths mentioned by many respondents are lowering taxes for businesses, consumers, or both; increasing consumer confidence and spending; focusing on global responses in regulation, currency management, and confidence building (what one executive calls “sincere cooperation of all nations”); and cogent, long-term leadership, described by another respondent as “pick a plan, stick with it, communicate tactics, be clear.”

About half of the companies that have sought external funding since September have sought it from sources different from those they obtained from earlier. The most common new source, at 47%, is the government, followed by individual large investors, at just over a third. Executives at companies in finance are, not surprising, by far the likeliest to say their companies sought funds from the government.

Respondents also call for government actions of all sorts, as well as the reverse: “Leave the banks and companies alone. Let the bad fail and the good will thrive—this will set our globe back into balance.” Perhaps the most hopeful note comes from an executive who writes, “Have patience. Confidence and risk tolerance will improve naturally, as it is part of human nature.”

The survey garnered 1,630 responses from executives across the range of regions, industries, and functional specialties. For more details see:


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