Will it be a ‘Happy New Year?’
How can the present situation of the world economy be defined? “Gloomy present, grim future.” From time to time, there has been some good news for the U.S. economy, but the world’s richest country does not have enough strength yet to help effect a European recovery. Instead, some economists have begun to discuss how vulnerable the U.S. economy would be if the eurozone collapsed.
In addition, there is much distressing news coming from every corner of the world: The Asian Development Bank has cut the East Asian growth forecast; Brazil’s rapid growth has been halted; domestic demand continues to contract; next year’s growth forecast has been slashed from 2.5 percent to 0.7 percent in the United Kingdom; China’s leaders are seeking ways to avoid a crash landing; inflation has jumped again in Turkey and so on.
Is it wise to tell the people all the bitter economic realities? Some governments still prefer to keep the bad news secret in order not to demoralize the people further. However, everybody is already aware of the gloomy atmosphere as most of them are jobless and living in poverty.
In some Western democracies, authorities have preferred to tell the people the true dimensions of the economic problems. But as this approach is risky for the political future of those in power, the general idea is that if people do not comprehend how serious those problems are, it will be next to impossible to convince them about the necessity of implementing the bitter measures. In Europe and in the United States, people are already against the austerity measures. However, those governments believe that even people if people continue to oppose the bitter measures in the coming months, at least they will stop their revolts.
Naturally, this approach carries another important risk. Hearing about the seriousness of the economic problems day after day might create new pessimism that could result in widespread panic, leading people to cut their spending further and precipitating another drastic fall in total demand and a rapid increase in unemployment. Most of the worldwide crises became worse after the creation of that kind panic. This was why the 1929 crisis continued on for so long despite all governmental efforts.
It might be wishful thinking that people would be more tolerant of government measures in affected countries if they were informed about the economic problems. Still, there are two approaches available to governments: Don’t tell the people the whole truth to prevent widespread panic, thereby adding new problems to present ones, or openly explain the real dimensions of the problems in order to prevent the circulation of rumors that might be more harmful than the truth.
Naturally, there is a middle way between these two approaches, namely, revealing the bitter realities but not announcing all of them in a single day. Although it seems rational, it is, unfortunately, not practical.
The reason is obvious: Even if a small portion of all the serious problems are announced, the result will be the same. The size of the panic and anger among people never changes. It must also be remembered that keeping problems secret is not politically ethical.