Thursday, September 03, 2009

It's All in the Mind

Not wanting to upset the feelings of those who have experienced genuine hardship in the last couple of years, I will pose this thought as a question. This is an 'I wonder' post not a 'my view.'

But is it? Is this recession thing all in the mind? Is it a corporate mental illness? Not one we can do anything about of course but one from which we all suffer.

I am not qualified to answer this question. Let me clarify. In the days when I sat O Levels (1971) you could get three levels of fail - grades 7, 8 or 9. I have to admit that, in a rather poncy, public school way, I realised I had no chance of getting a pass at economics so spent a happy hour and a half trying to entertain the hapless examiner with a whimsical answer paper. It was slightly more likely to get me a job on Punch than an O level. So I achieved my Grade 9 (so proud) and eliminated the subject from my enquiries. Pity. It's interesting and useful. Incidentally, during my course work I copied an entire essay out of the Junior Pears Encyclopedia and only got a B. I sent my teacher's comments to the editors but received no reply. Or did I ever post it? Probably not.

And my personal experience of recession, notoriously unreliable as an indicator, is zero. In the boom years of the 1980s I was as poor as I have even been, trying to raise two small children on a curate's stipend with no other source of income. We felt it important that one parent stay at home for a few years while we had toddlers. Now we have two salaries, one of which is very good, and no dependents, but it is downturn out there.

So bearing that in mind, come with me to an imaginary small community where all have jobs and all have money and all spend about the same. One day Mrs Johnson gets ill and starts imagining (without any evidence) that soon nobody will buy her fresh vegetables. Maybe she read something in the paper about carrots causing cancer and fried eggs preventing it. So she takes precautions against this imaginary problem. She cuts back on her spending and keeps a little aside. The thing she cuts from her budget is Mr Robinson's chocolates, her little luxury. And Mr Robinson, noticing the dip in sales, has less money to spend and cuts back on his weekly trip to Rita's, the only restaurant in town. The emptier looking restaurant becomes a duller visit and the customers drop off night by night until it has to close and so the lovely Rita, no longer having any disposable income, stops buying carrots, chocolates or anything else. And the community, no longer having a restaurant but a boarded-up shop front, starts looking a bit worse for wear.

It doesn't take long to extrapolate that if everyone thinks things are going to get worse they pretty soon will. We can think our way into our own recession. There are a lot of us, so the connections are more complex than in my imaginary village, but every decision to cut back on spending is a decision to cut part of someone's job.

I don't believe we can, or should, look to constant economic growth and wealth creation as the solution. It has always been the big flaw of Thatcherism - a more easily digestible form of pyramid selling. There was no trickle down to the bottom and even twelve years of a genuinely anti-poverty regime such as New Labour has found it hard to change hearts and minds sufficiently to reach the deep poor.

In this wonderfully complex world some organisations do well out of recession - takeaway food, pound-shops and lipstick to name three unlikely bed-sharers. But I believe that the only big fix is our mental health. When we feel sufficiently confident that the recession is over it will be over.

It's only a question. If you are unaffected by it so far, will you risk acting as if the recession is over? Crowds. Wisdom. Bingo.


Chris said...

throw into the mix a bit of borrowing and it makes the situation a bit worse though doesn't it? someone from out of town comes along and convinces the people of the community they can have better lives if they borrow money from them and can then afford to buy more things. this is fine while everyone is still spending the same, they are able to repay the money they have borrowed. but when the spending stops they aren't getting the money they need to pay off the money they have borrowed, so they spend even less to pay it off...

our governement's solution? encourage everyone to borrow more money so they can spend more money...


dmk said...

The trouble with our economy is that consuming stuff is the main sign of 'consumer confidence'.

We need a new version of consumer confidence: folk who are sufficiently secure in themselves that they don't need to spend squillions of borrowed quid on new clothes, cars and built-in-obsolescent gadgets to provide scaffolding for their self-esteem.

Chris said...