Talking the financial crisis up and down

There can be no denying that Prime Minister Kevin Rudd and Treasurer Wayne Swan, in particular, have brought a concerted air of solemnity to their communications regarding the global financial crisis. It has become almost cliched for our leaders and media commentators to assert that these are “tough times that we are living in”, or to compare the recent machinations in our financial markets to Black Monday, the oil shocks of the 1970’s, or even the mother of them all, the Great Depression. The national mood is a heady brew of overstated pessimism and introspection, and few have the confidence to predict exactly how events will unfold in the future.

The importance of confidence for consumers and the world’s remarkably flaky financial markets can’t really be overestimated at this stage. This creates a bit of a conundrum for government; on the one hand, the situation should probably be talked up, in order to send positive signals out there to those willing to listen. On the other hand, the government needs to keep its mood in touch with that of the Australian people. The last thing the Rudd Government wants to do is engage in rank triumphalism over Australia’s position in relation to the financial crisis when a lot of people out there are hurting as a result of it.

It would seem that the Liberal Party is happy to send positive signals with respect to the financial crisis, and to wear on its sleeve any criticisms arising from it being out of touch (some would suggest this is its natural disposition). Shadow Treasurer Julie Bishop appeared on Channel Nine this morning suggesting that Rudd needs to be more positive in relation to the crisis, offering this hyperbolic vignette to support her case:

Ms Bishop said shopkeepers in an Adelaide shopping centre had sent her a clear message.

“A number of shopkeepers … said to me that every time the Prime Minister goes on the nightly news and says ‘it’s going to be tough and ugly and hard’, they know that sales will be flat the next day.”

Former Prime Minister John Howard sent the Rudd Government a similar message on Fox News yesterday, urging the government to steer clear of comparisons of today’s crisis with the Great Depression. He is not without a point, but clearly the line upon which the government needs to walk here is fraught. Federal Labor is getting hit by the Opposition and some punters for talking the crisis up. If it talks the crisis down while the problems related with the crisis remain, it will also get hit by Opposition and the punters.

Rudd and Swan, knowing that this truly is a global financial crisis and that for the most part it is beyond Australia’s control, are erring to the negative side at the moment. Although we could perhaps do without some of the “Great Depression” hyperbole, I am not sure this is necessarily a bad thing given the reality of the situation that Australia faces. When the United States sneezes, we need to do what we can and hope for the best, because we simply don’t have the economic equivalent of an influenza vaccine on hand.

6 thoughts on “Talking the financial crisis up and down

  1. Its just a vague feeling I get of late, that Australian corporate enterprise is continuing to pursue its goal of maximising profit no matter what the cost, with even greater vigour. While a few of the truly filthy rich worry needlessly that they’ve lost a few mill here and there and maybe aren’t quite as well off as they were before. Those like me, with nothing, still have nothing and are none the worse off, indeed relatively speaking the gap may have actually shrunk a tincy, wincy, bit. What we can afford is dispassionate, philosophical speculation. Nobody quite knows what to do or how it will all unfold because mankind hasn’t quite yet dispensed with his proclivity for greed–a conundrum. The market is giving us a sign that nobody is quite ready to accept.

    The message we are getting from the Govt’, is certainly confused. We are to save. No. Forget that. We are to spend.

    I don’t think encouraging people to clock up even more personal credit card debt is necessarily ever a good idea. Although come to think of it, its only the bank’s money anyway. Heh.

  2. There are certainly a few mixed messages out there, aren’t there? Just six months ago all the observers worth listening to were concerned about inflation, and the RBA was being encouraged by the conditions to hike interest rates. Now effectively the opposite message is being sent.

    Fundamentally it is of course the greed of certain investment banks and financial institutions that has to a great extent caused the crisis of confidence we are seeing now. Australia’s stockmarket has apparently halved its value this year, but this only means that the bargain hunters sooner or later are going to be out in force, reinflating things once more.

    BIg greed seems to have gotten us into this mess. It seems that everyone is relying on little greed getting us out of it?

  3. I heard what’s his name? . . . World’s richest fellow . . . Anyway, he said “when people are fearful, be greedy and when people are greedy, be fearful”. Certainly seems to have worked for him. He alone. We can’t ALL be the world’s richest.

    Big greed? Little greed? A rose is a rose is a rose.

  4. Big greed? Little greed? A rose is a rose is a rose.

    Well yes, but it is looking at the moment as though greed (or shall we say “investment”) is going to be the driving factor that gets the world out of this crisis – ironically enough.

  5. Is it greed or is it the system that facilitates greed that is the problem and once you fixed the system would it solve anything or would it cause more unforseen consequences?

  6. That’s a fairly big question Matthew – that’s basically a question of whether one considers capitalism generally to be effective as a system of global financial interrelations or not. What some call “greed”, others would probably call entrepreneurialism, and I am sure that a lot of (in fact the vast majority) businesses out there who provide jobs for people and goods and services to the public would not be around if there was markedly less financial incentive to do so.

    So in short, it’s certainly true that a certain amount of “greed” is required in order for capitalism to function. The challenge for legislators is to regulate and moderate that greed in ways that ensure that the underlying system upon which the world depends is stable, and furthermore that the benefits produced by the overall system are distributed in a fair and equitable fashion. It is a challenge that most governments have quite frankly not been up to.

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