Saturday 25 November 2017

Maeve Dineen: Need for confidence can't be just an article of faith

Maeve Dineen

Perhaps no important economic indicator is as nebulous as confidence.

We are being told every day that confidence is an important step towards finding a solution to our problems but most of the debate seems to ignore the fact that confidence, like charm or sex appeal, cannot be conjured out of thin air.

There is no simple way to make people feel confident and, unfortunately, there are many reasons to feel far from confident right now. Consumer and business confidence figures produced by the ESRI and ISME last week showed that neither the man on the street or the woman running her business are feeling very good right now. We're not a happy lot at the moment.

Personally, I'm more than a little sick of the Taoiseach and his ministers telling me I should feel more confident when things are so difficult, but there is some truth in what these overpaid ministers with no business experience are telling us.

We do need confidence so that more people return to the streets and start spending. But we need grown-up reasons to feel good, not just shallow pep talks. Plummeting consumer confidence is indicative of the Government's inability to provide a sense of reassurance to the public that it can effectively improve economic performance.

Obviously a four-year Budget with cross-party support would go some way to restoring confidence. That this is only being considered because the European Commission wants such a plan is frustrating, but anything that forces the Government to act and explain themselves to the people and to business is a good thing.

In 1931, in the depths of recession, John Maynard Keynes delivered a radio address in which he suggested to housewives that they should "sally out and enjoy themselves in the sales" -- in other words, spend more and help the economy. Even though economists today are slightly more circumspect in their language, their message appears to be the same.

But the public will only start spending again when they have paid some of their debts, when they believe their jobs are safe and the Government won't increase taxes too much and, above all, when they see value.

Business cannot really influence the first, second or third reasons to spend but they can provide value though often fail to do so.

For every excellent business that is struggling through no fault of its own, another is struggling because it is still failing to offer value.

One of the clearest sectors to reflect this reality is the restaurant trade. There are restaurants and cafes all over the country offering great value and they are packed to the rafters as that large part of the population who treasure good value flock to their establishments day after day.

Of course, many of these restaurants are still doing little more than scraping by -- but they do manage to muddle through, while others fail.

Value for money, and by value I mean price, quality and service, will go some way to increasing spending.

But the Government can not rely on higher spending as a long-term palliative for an economy overly reliant on an indebted consumer.

Spending is only a defence against an even weaker economy, rather than a source of long-term economic growth. Sound economic solutions are what will bring real confidence back.

Irish Independent

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