NCPA - National Center for Policy Analysis


May 15, 2008

A cultural rut of pessimism is draining our collective energy, blinding us to possibilities and eroding our position in the world, says Zachary Karabell, president of River Twice Research.

There is no denying that the current financial morass is deep and painful.  But, looking back over the past century, it would be a stretch to rank the current problems as especially notable or dramatic:

  • Right now we have an unemployment rate of 5 percent and headline inflation topping 4 percent.
  • We have economic growth of 0.6 percent, extremely low consumer confidence and weakening consumer spending, small business optimism at a 28-year low, and a housing market that is showing declines in excess of 20 percent.

These are hardly statistics to celebrate, but they are a far cry from the crises of the 20th century, says Karabell:

  • The unemployment rate in 1933 was 24.9 percent; seven years later, after the intensive efforts of the New Deal, it stood at 14.6 percent.
  • The unemployment rate went from 4.9 percent in 1973 to 8.5 percent in 1977, and then nearly broke 10 percent in 1982.
  • While the recent collapse of Bear Stearns shocked Wall Street, in 1933 alone 4,000 banks failed, and millions not only lost their homes but were rendered homeless.

The path to a more balanced view of ourselves is impossible to chart, but the first step is surely to have better perspective on where we are and where we have been.  The alternative to grime-encrusted lenses isn't rose-tinted glasses, but more equanimity about our weaknesses and our strengths would surely help us navigate.

Unfortunately, the problem with downward spirals is, well, that they spiral downward.  There is little evidence just now that we are about to break this cycle, and until we do, we will watch in awe, envy and fear as peoples throughout the world do what we used to do so well, says Karabell.

Source: Zachary Karabell, "Who Stole the American Spirit?" Wall Street Journal, May 14, 2008.

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