The New York-based Conference Board said Tuesday that its consumer confidence index fell almost 7 points to 103.2, down from the revised 109.8 in April. Still, May’s reading was better than the 100.9 expected by analysts. ~Seattle P-I
This bit of somewhat bad economic news has Charles Morris, author of Tycoons, remember the not-so-halcyon days of the 1870s and issuing this warning:
But as the 1870′s suggest, economic well-being doesn’t come just from piling up toys. An economy has psychological or, if you will, spiritual, dimensions. A conviction of fairness, a feeling of not being totally on one’s own, a sense of reasonable stability and predictability are all essential components of good economic performance. When they were missing in the 1870′s, in the midst of a boom, the populace was brought to the brink of revolt.
Reihan Salam at The American Scene, he of the bizarre metaphors and “strong-government conservatism,” offers this bizarre comment on Morris’ op-ed:
Such a revolt, were it to interrupt the extraordinary scientific and material progress we’re seeing today worldwide, would be nothing short of tragic. Forestalling it is the great political challenge. And if this calls for Bismarckian means, well, we happen to have very little choice.
Um, okay. What? Consumer confidence drops a few ticks and we’re on the road to “Bismarckian means” to save Progress (extraordinary progress at that)! What does this mean? Will we start persecuting social democrats? Enacting more of the same broken Prussian welfare programs we already have? Will we invade France? Will we solve our problems with Blut und Eisen? There ought to be some kind of basic blogging rule when invoking historical analogies and figures: your reference has to make a bare minimum of sense to those who know something about the thing to which you’re referring. On this score, alas, Mr. Salam has failed most spectacularly.
One of the relatively few things I can actually claim to understand about markets and psychology is that people hate uncertainty. Of course, as Rowan Atkinson might say, my life certainly has a certain amount of uncertainty, and I’m certain yours does, too. But the present state of uncertainty, or, to describe it more accurately, unease stems from a general sense of aimlessness, drift and misdirection that come together in that nebulous idea that the country is on “the wrong track,” which is reflected in poll after poll this year.
I suspect this is only marginally connected with the state of the economy and has much more to do with anxieties about various crises (or things the government is calling crises) blowing up in our faces and imposing rather more difficult conditions on all of us. Iraq, immigration, Iran, energy prices and the constant impression that the people in charge haven’t a clue what they’re doing and seem dedicated to doing whatever it is the public doesn’t want all conspire to sap confidence for the future. High energy prices seem to be the most important, concrete cause of a loss of confidence.
But what the modern haruspices in the media and on blogs reading the signs of the Conference Board are generally not telling you right now is that April’s consumer confidence rating was a four-year high before the drop in May. Confidence was lower in the wake of Katrina and the general government incompetence associated with it, and has recovered somewhat, and if April was a four-year high that means that for most of Mr. Bush’s presidency people have had less confidence to spend, do not expect their income to rise and have felt more insecure in one way or another than they did two months ago. April 2006 was apparently full of the salad days.
I’m not typically one of the “look on the brighter side” sorts of people (just think what it would do for my reputation!), but what we should bear in mind is that consumer confidence is actually surprisingly high given how many people are convinced that the country is on the “wrong track” and that things seem to be deteriorating across the board. Whether they are deteriorating or not is another question, but one that only matters a little in shaping the public’s perceptions of reality.
I suspect that some measure of, not merely the decline in consumer confidence – which can be attributed to nearly as many factors as there are consumers, I suppose – but also the generalized sense of anxiety or disquietude that increasingly pervades the populace, is due to a sense, reflected in many conversations that I have had recently, that recent trends in the development of the economy are creating a world in which the average American is confronted with the prospect of increasingly personal instability. If I might parse those conversations somewhat, the economy has been developing in such a way as to privilege a sort of cognitive-entrepreneurial elite, and is a reflection of their psychology of restlessness, rootlessness, the adventurous and risky – of the pursuit of fresh frontiers of personal and corporate achievement; and this economy damns the vast majority of ordinary people to chronic uncertainty – what sane man rooted in the ordinary things of this life would ordain for himself and for his world a way of being in which, as President Clinton once fatuously remarked, every American could expect to hold a dozen different jobs over the course of his working years? People, I contend, intuit this, though they may lack the concpetual frameworks with which to articulate it. The whirlwinds of creative destruction are merely destructive hurricanes to the majority of Americans. Americans may well be infected by a sort of rugged individualism that strives to attain to liberation from the constraints of the past; but most of them merely wish to settle down on terms more favourable. They want to settle down, that is, but are left with a discomfiting sense that this will not be permitted. And of course, Reihan and those like him intend that it will be forbidden them.
Just an anecdote, for what it is worth: earlier this week, while dropping a car off at the local Porsche/Audi/Volkewagen dealership for a repair, a chat with a manager disclosed that while the general uncertainty in the market had affected sales of the ordinary cars, the big-ticket luxury models were still moving, which has never before been the case during times of uncertainty or economic belt-tightening. It would seem that the economic changes of the past 15 years have enabled the top-whatever-percentage of the population to insulate themselves relatively well from the uncertainties… to which their globalized/outsourced/insourced/horizontally integrated and hericlitean economy subjects the rest of us. The wealth differentials are of small consequence to the vast majority provided that they perceive that those differentials actually redound to the benefit of all in some fashion; it is that perception that is waning, and, in truth, it ought to have been on the wane for a generation or so, since it has been at least that long since the benefits of economic evolution actually did “trickle down” or achieve broad, inflation-adjusted dispersion.