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Puzzling Our Way Out Of The Economic Crisis


To buy or not to buy? Can consumer confidence ward off a depression?

To buy or not to buy? Can consumer confidence ward off a depression?

It's official -- the United States is in a recession. And it has been now for a year.

Of course, we knew that even before we saw the figures. With the autumn, the cold wind of crisis blew all the hot topics of the summer off the pages of the newspapers. Iraq and Iran. Gas prices and Russia. Climate change and health care. All was pushed aside by news from the markets.

We don't really understand much of it, but we can read, and even if we can't do the math, the numbers make a powerful impression.

In the hope of calming hysterical markets, experts issue advice on how to save the country, advice that amounts to not allowing the financial crisis to become a full-blown depression like the one kicked off by the market crash of 1929.

"Do you know the difference between a recession and a depression?" my elderly neighbor asked me. And before I could recite the lessons I'd learned by rote from the newspapers, he answered with the wisdom of a lifetime's experience.

"A recession is when your neighbor loses his job," he said. "And a depression is when you lose yours."

The Great Depression is etched on the national memory of the United States, and left a scar on its soul. Americans recall those hard times in the same way that Russians remembers Stalin's Terror: an incomprehensible and unmerited cataclysm that cannot be explained at all to outsiders and only to a small degree even to yourself.

Whole libraries have been written about how and why the economy of a giant country contracted by one-third virtually overnight. Frighteningly, the books in this library all contradict one another. The only things they seem able to agree on are the psychological factors behind the crisis.

With past experience showing that during difficult times, the markets are most unsettled by inaction, the authorities are taking decisive steps. And the two de facto presidents, George W. Bush and Barack Obama, are working hand-in-glove on this, something that is remarkable for two men from antagonistic parties.

But the crisis is like a forest fire that sends everyone out into the woods with axes and buckets. Even the CEOs of America's three largest automakers have agreed to throw their annual salaries into the fight against the conflagration.

Every day, it seems, politicians are warning about the dangers of the crisis, while reassuring us that it is not fatal if only we make the right choices.

In the end, it seems, everything depends on us, the average consumers.

We are the economy, and, knowing that, Americans are ready to do what they have to -- but not everything at once. A lot of the demands being made are contradictory: spend and save, live within your means but don't deny yourself anything. Having rejected the extravagance that led to this misfortune, America's abundance is now threatened by the possibility that Americans will cease to take advantage of it.

"My wife and I are more of a threat to America than Osama bin Laden," a friend of mine said recently. "We bought our refrigerator in 1952. We still have a rotary telephone. And we don't even own a computer."

Macroeconomics is like quantum physics. It isn't regulated by everyday logic, but by the logic of paradoxes. It doesn't demand that we save for the future, but that we spend for it. Credit expands the economy and the expanding economy leads to more credit.

In order to keep this wheel spinning, only one thing is demanded of America: regain your self-confidence and start acting as if nothing happened. After all, Christmas is around the corner.

Aleksandr Genis is a long-time contributor to RFE/RL's Russian Service. The views expressed in this commentary are the author's own and do not necessarily reflect those of RFE/RL
World Economic Crisis

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