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MARKET COMMENT
By
Carburton Street, London -- The Government should plough the £22.5b raised from the auction of third generation phone licences back into the telecommunications sector. "Oh no! Not that old chestnut again," I hear you cry. But those are not my words but the words of Andrew Rickman, founder and chairman of Bookham Technology (LSE: BHM), a maker of optical chips for the telecom networking market. In an interview with the Financial Times, Rickman added, "If [the Government] doesn't allow that money to flow back into the construction of a better communications infrastructure, they will be party to snuffing out the main growth industry of the economy... Some people might say the money should be spent on schools and hospitals, but in fact the infrastructure we are talking about will deliver things that are more fundamental to the economy." So are these just the complaints of an aggrieved entrepreneur? What Andrew Rickman is advocating is nothing less than Keynesian economics, namely the intervention by government to direct resources in times of a slump to boost demand. This will be complete anathema to fans of Milton Friedman who believe in total non-interventionist policies by government and laissez-faire economics Friedman's economic theories have been shown to be robust enough to tackle most economic recessions. The use of interest rates has been capable of injecting liquidity back into the economy. However, there is reason to believe that in this instance, because interventionist measures (in the shape of the 3G licence auction) were taken at the ouset to drain the telecom industry of its finances, then interventionist policies must be used to replace the funds. Andrew Rickman is right. The telecoms industry, and that includes the equipment makers and the networking manufacturers, was a growth sector that could have generated sustained employment and revenues for the UK for many years to come. Instead of nurturing and helping the industry, this Government has succeeded in destroying the goose that laid the golden egg.