Confidence not crisis
Posted: Tuesday, May 5, 2009
By Derren Joseph
May 05, 2009
Last Tuesday morning, the Business Department of St Mary's College hosted a panel discussion on the "Impact of the Global Financial Crisis on the Trinidad and Tobago Economy: Perspectives and Recommendations." Schools from all along the East-West Corridor to Toco were invited. Kudos to the college for such an initiative. On the panel were Robert Mayers, Indera Sagewan-Alli, Gregory Aboud and Larry Howai.
logoWhat stood out most for me was the overall tone of the discussion. The tone was realistic, but optimistic and positive. There were three positive points that I found of interest. Firstly, there is some consensus that the absence of regulations contributed to the present economic situation—particularly in the United States. In that way, T&T is fortunate to have relatively stricter financial services regulations in place that, to some extent, have helped shield us.
Secondly, we are set to experience stagnation, not recession. The Central Bank has predicted between zero and one per cent growth for 2009, and First Citizens Bank has predicted 0.8. This struck me as good, given that in its latest World Economic Outlook, the IMF has predicted that the world economy will contract by 1.3 per cent. This, in turn, compares favourably with the World Bank's estimate of a 1.7 per cent contraction, published in its updated Global Economic Prospects report. Thirdly, estimates are that a return to world economic growth is expected in 2010.
Howai was most specific in pointing to the first quarter of 2010 as the time when we should expect to see a turnaround in the US economy.
It seems as if the key driver of the expected economic turnaround is to be found in a single word—confidence. All panellists agreed that confidence underpins the global banking system. Howai went further to suggest that the biggest stimulus package to be delivered to the US economy, in particular, would not be financial, but a dose of confidence. For me, the star of the morning was Gregory Aboud. He confirmed something that some of us have been thinking for a while—all this talk of crisis is creating a crisis.
I think this is definitely the case locally, and some commentators have also been saying it in the US. Economist Bill Herrin, from the University of the Pacific in California, notes that being inundated with bad news reinforces negative feelings. He goes on to say, "when people hear that day after day, they expect that things will continue (to be bad) and cut back even more." Then the "herd" mentality kicks in.
Aboud pointed a finger at the media in particular. I definitely agree with him. Sometimes I watch the news, both local and foreign, and I wonder whether the pre-requisite for being interviewed is the ability to shout the loudest about the sky falling. Day after day, we are inundated with commentaries on how terrible everything is, economically and otherwise. My friend Colin only reads the sports section because of the negativity. Elaine Peterson, who has a doctorate in economics and specialises in public finance at California State University, agrees, and concludes that "…a lot of this is self-reinforcing."
I smiled as Aboud said that the media must be in heaven this week. After all, we have an economic "crisis" together with a medical "crisis" to report on. Herrin and Peterson suggest that the economic downturn that the USA is struggling with now was years in the making, and is, to some extent, a result of the "I want it now" mentality of consumers.
Aboud agrees, and explains that in a boom, the money or material culture could become stronger. Consequently, human values of decency and integrity may decline. In that context, it seems almost logical that crime increases. That reminds me of the title of 50 Cent's CD, a few years back, Get Rich or Die Trying. The connection between social values and crime is hard to ignore. In this context, Aboud suggested that we think about this time as one of adjustment, as opposed to a crisis.
Would we return to our previous pattern of seemingly uninterrupted growth? Or, would our world economic model genuinely incorporate the idea of sustainability? I guess time will tell! In the meantime, I look forward to things turning around economically in 2010. As always, I end by saying that despite our challenges, we are so blessed to live in this beautiful country. We need to remember and acknowledge just how much uplifting work is being done all around us. Let us continue to have the audacity of hope in our country, as we move towards Vision 2020.
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