Making the worst of it

Kevin Libin, National Post
Published: Saturday, February 07, 2009


By the time President Franklin Delano Roosevelt addressed his nation in his first radio fireside chat one March evening in 1933, America's banking system was on the brink of collapse. A fifth of the country's financial institutions were out of business. Citizens, nervous about losing their savings, had started a run on the remaining banks' cash, preferring the safety of mattresses. Roosevelt, having ordered the banks closed, spoke to a rattled and frightened nation. There was, to be blunt, not much stirring in his words.

He explained the basics of how banks worked, why they needed cash deposits, why most remained sturdy and the plan to gradually reopen them. He concluded: "You people must have faith; you must not be stampeded by rumours or guesses. Let us unite in banishing fear. We have provided the machinery to restore our financial system, and it is up to you to support and make it work," he said. "Together, we cannot fail." When the first banks began to reopen the following day, thousands of clients were lined up outside, ready to redeposit their money. America was soothed.

We are told now, repeatedly, that we are in the teeth of the "worst" financial crisis since that time of Great Depression. And while the public understands vastly more about the financial system and its cycles, today's leaders -- egged on by around-the-clock media eager for high drama, buoyed by a society with a self-absorbed nature that seems to erase any context of longer-term troubles --have traded Roosevelt's cool reassurances and we'll-weather-this-too approach for dark forecasts of worst-case scenarios and panicky appeals. U. S. President Barack Obama warned this week that the U. S. economy could become a "catastrophe for families and businesses across the country."

He recently described this as "a crisis unlike any we have seen in our lifetime." Last week, our own Conservative government's Throne Speech insisted we are in "a time of unprecedented economic uncertainty." British Prime Minister Gordon Brown this week said the world was in a "depression" and days earlier, his treasury financial secretary warned that the U. K. could suffer worse than it did during even the war years, "facing some of the harshest economic conditions for decades, perhaps for a century."

If you're not hysterical yet, you must not be paying attention: Political leaders have clearly made it their task to convince you this is the absolute worst of economic times. So much so, that they have all taken to revising history and exaggerating today's troubles. The mystery is: why?
Because, these times are not "unprecedented." This is not unlike anything we've seen. Serious economists do not call this a "depression," or predict a return to bread lines, work camps and street urchins peddling apples on the streets. There will be no rationing, as there was in wartime London.

"That's bulls--t," says Chris Thornberg, a principal at Beacon Economics in California, one of the first economists to foresee America's housing meltdown in early 2007. "All the numbers we see right now are in line with what you would call a normal, bad recession. The increase in unemployment, the drop in payroll employment: this all looks like 1975. It looks like 1982. Not the Great Depression."

This is a hard time for many families, certainly. But outside, things look familiar: We wait in line at Starbucks; this past Christmas the average American shopper spent US$120 just on themselves. Wall Street managed to dole out US$18.4-billion in bonuses, despite 2008's annus horribilis. American economist Paul Krugman was left telling NBC's Hardball recently that "you've got luxury cars landing at the dock in Los Angeles and then just sitting there because no one could buy [them] ... this is functionally a lot like the Great Depression." Because Lexus sales are down.

Today's younger generations had been led to believe, in the face of an impending labour shortage and employers' clamouring for Web-savvy Facebook virtuosos, that the economy was their oyster offering so many rewarding, comfortable jobs up like pearls, suggests Lianne George, co-author of the recently released Ego- Boom: Why the World Really Does Revolve Around You.
"Well-intentioned attempts to make this generation feel good about itself have, in fact, left them poorly prepared to weather a tough economic storm," Ms. George recently wrote in Maclean's.
When even Google -- epitome of the last decade's blissful, dry-cleaning serviced workplace revolution -- began laying off, as it did in November, many younger workers' worlds surely quaked.

The tendency to frame this in historic terms must be a tempting one for anyone feeling betrayed by the sudden reappearance of long forgotten hardships. With seniors, their retirement funds ravaged, promising to hang on to their desk jobs many years longer than planned, and many starter homes purchased in the last few years worth less than their purchase price, this can only seem like a dustbowl to those accustomed to nothing but bumper crops.

We feel poorer, particularly in the U. S., because our largest asset -- our home -- has lost value. But unemployment rates today are lower than they were in recessions in the '70s and '80s. Projected to peak in the United States somewhere shy of 9%, jobless rates won't match the nearly 11% reached in 1981-82, let alone the peak of 25% during the Depression. Even after yesterday's ugly job loss numbers --129,000 layoffs in January -- Canada's 7.25% unemployment rate still hovers below the average rate over most of the past 30 years. And Dale Orr, managing director in Toronto at Global Insight, says that 2009 in Canada will still be mostly better than 1991. The International Monetary Fund expects U. S. GDP to shrink 0.7% this year; during the Depression, the U. S. economy was cut by a third.

"We don't have enough rhetoric of faith, the rhetoric of confidence," says Amos Kiewe, a professor specializing in presidential rhetoric at Syracuse University. "I wish they would induce more confidence."

There may be a number of reasons for the hyperbole. The most evident is the recent and current environment of heightened political partisanship. The full weight of the recession crashed over North America at a time of concurrent election campaigns in Canada and the United States, ensuring the economy would be the top issue. Politicians who seemed too serene-- recall John McCain's maligned "the fundamentals of our economy are strong" -- were torched by rival spin-doctors. As the Democrats noticed worsening economic news correlating to larger gains in support, the Obama team had motive to paint a worrisome picture.

"The fact that it was an election year forced Obama to be more negative," says John Huizinga, an economics professor at the University of Chicago.

The Democratic candidate even resorted to citing statistics that don't exist: Last summer, he said the "percentage of homes in foreclosure and late mortgage payments is the highest since the Great Depression."

Actually, there exist no foreclosure data that far back. No wonder that by December, a CNN poll showed six in 10 Americans convinced a depression was nigh.

Of course, we have never before had the influence of that 24-hour all-news network, and a parade of other channels and Web sites, to help us worry as we have this time, since the last major U. S. recession happened before the First Gulf War, and the birth of the "CNN Effect."

These are outlets hungry for high drama to fill their hours, notes Greg Elmer, a media studies professor at Ryerson University in Toronto, and are often moved to continually ask, 'how bad will it get?' as a way of keeping the story moving. It doesn't help that any journalist younger than 40 has never seen anything like this before, and may be willing to believe, therefore, that it resembles the Great Depression.

"I think it's a trope, it's a way to talk about any downturn in the economy," says Mr. Elmer. While the cynical say it's a way to sell more papers, more likely, he says, it's comparable to the habit of sticking the suffix "gate" on any government transgression, as though a rumoured sex-scandal like Troopergate was anything as serious as the felonious Watergate. Still, Alison Milward, a marketing manager at Business News Network says audience numbers have shown a "significant increase" as the economic news has soured.

That Mr. Obama hasn't let up is probably partly due to the fact that he has been battling Congress over the stimulus bill. The more urgent the situation seems, suggests Mr. Kiewe, the more pressure he can put on rivals to play ball. "If we don't pass this thing, it's Armageddon," hyperventilated one Democrat this week. Yet, careful observers note that the bulk of initiatives within the latest bundle of emergency measures won't create jobs --at least not anytime soon -- and that hundreds of billions are earmarked for expanding the federal government. That might suggest that the Obama administration sees advantage in exaggerating its urgency in order to smuggle through a number of otherwise unpopular policies. "You never want a crisis to go to waste," Mr. Obama's chief of staff, Rahm Emanuel said in November. "It's an opportunity to do things you couldn't do before."

The starkest transformation has come from our own Prime Minister who in October of last year was lambasted by opposition leaders, in the thick of a campaign, for offering optimism about the economy, telling the CBC's Peter Mansbridge that there was "probably some great buying opportunities emerging in the stock market as a consequence of all this panic." In fact, in that same month, U. S. investing sage Warren Buffett had said the very same thing. But Mr. Mansbridge was incredulous: "Do you really want to say that?" he checked.

Within two months, with the opposition threatening to topple his government, claiming the Prime Minister was insufficiently alarmed over the economy, and forced to justify the first impending federal deficit in over a decade, Mr. Harper was using the word "depression," adding "I've never seen such uncertainty.... I'm very worried about the Canadian economy."

Ever since Bill Clinton reached out to unemployed Americans in the 1992 election campaign, riding his "I feel your pain" empathy to the White House, politicians have been less focused on unflappable leadership and more anxious about seeming out-of-touch not only with the concerns of voters, but their feelings. "Instead of telling them what you think they need to hear, you tell them what they want to hear," says Mr. Kiewe.

Determined to out-empathize their political opponents, political leaders may have trapped themselves in a rhetorical cycle of Depressiongrade doom. That worries Mr. Kiewe: too much panic in the ranks could aggravate things, as businesses hesitate to invest and consumers get too scared to spend. Today's political leaders may find that, unlike Roosevelt's comforting words, the more they prophesize the economic end-of-days, the more likely they are to come true.