When what we have to fear is fear itself
It is the panic-inspired responses to a collapse that do the most damage. So for those with jobs, now is the time to buy flowers, to keep shopping, to eat in restaurants, to get the house repainted, and, by doing so, help keep the economy afloat
Wednesday October 15 2008
Fear is the enemy. Fear enables what we fear most to become reality. It is the ultimate in self-fulfiling predictions: scared of an economic collapse, instead of spending our money, we keep it in the banks, where it achieves nothing. And by not spending our money, we force the cafe to close, the restaurant out of business, and the florist to put up the shutters.
The suppliers, from the manufacturers of confectionery to the tea merchants and the market gardener, are soon hit, and they too, like the original outlets, lay people off, or even fold.
And thus the house of cards collapses, not because of a crash in the stock market, which is an event which time and the alert intelligence of city brokers will remedy, but because of the hysterical response to it.
That is the great lesson from 1929. Stock market collapses are painful, but they do not cause recession. No, it is the panic-inspired responses to a collapse that do the most damage. The fire in the factory's admin wing was bad -- but not nearly as catastrophic as the million of tons of water that the fire brigade poured over the flames to quench them, in the unfounded belief that there was gelignite in the basement, next door to a hospital for sick children who couldn't be moved.
So the air was full of sanctimonious terror and lethal self-righteousness, as the fire brigade continued to pump water out of the mains, till there was no water left, and the hospital had to close, and the children were moved, while their parents who were employed in the factory were all laid off.
For there is no gelignite in the basement, only in our imaginations, the very location which makes this thing called "money" possible. Money is one of the greatest of all human inventions. It depends for its existence on mankind's ability to imagine that a piece of paper has an intrinsic value, which can be exchanged for goods and services around the world.
That fantasy, far from being an object of ridicule, is accepted as a fact by people almost everywhere, though it is no closer to reality than the fictional gelignite in the factory. But by a common subscription to this fantasy, all sorts of powers are liberated within the human mind. Property changes hands, services are bought, crops are grown, buildings constructed, roads built, cities raised from tidal mudflats, and seas expelled from the polders, all at the command of a shared illusion called "money".
But money only has a value if it is being used. If some toxic fear paralyses the faith in money, if people think that they should not spend their income, then the currency itself becomes the enemy of the common weal.
Excessive unspent money loses its power, like the water behind a sealed dam in a hydroelectric power station seeping into the soil beneath. At a certain point, even to re-open the sluices is of no avail, for the water-level will have dropped below the requisite level. And the only way for the dam to function again is for the waters to flow from the highlands again, to fill the reservoir behind it. The equivalent for money is some fresh confidence emerging in the highlands of the common imagination. But at the moment, there is no prospect of such confidence emerging. Fear is rampant. Shopping centres are empty, staff in restaurants gaze at empty tables, and unbought blossoms wilt in the flower shops.
Fear is making a bad situation worse. Fear is bringing about what we actually fear most: for nothing that has happened in Wall Street or the City of London should of itself cause any widespread unemployment or poverty. Yet these are the certain portion of western societies in which we allow fear to suppress that creative part of our imagination, and instead of using money, we hoard it in banks, thereby rewarding the very institutions responsible for triggering the crisis.
Here follows a proposal. We must spend money. One way for governments to get people to do this is to partly pay its employees in time-expired bonds which have to be used by a certain date, or they become valueless.
Naturally, those heroic institutions, public service unions -- whose members are of course protected from the vagaries of the private sector economy whose wealth-creation has made their lives possible -- will resist any such proposal, so there will have to be a sweetener: a lower level of tax, say, on the voucher-payments.
No doubt a separate discount market will emerge for the vouchers, but that is a side-issue.
The public sector must now be seen to be doing its duty to the economy which has given its employees permanent and secure employment, followed by comfortable pensions, for the rest of their lives, while the enterprising trader, whose taxes have made the public sector possible, is now contemplating bankruptcy and ruination.
And for the rest of us with jobs: now is the time to buy flowers, to eat in restaurants, to get the house repainted.
For, as Roosevelt said, the only thing we have to fear is fear itself.
kmyers@independent.ie
