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.