There's nothing much wrong with a boom. Or even a bubble. People tend to understand that economic booms and bubbles come from excessive optimism. The problem isn't the excessive optimism itself.
Optimism is what motivates people to create. Optimism is what motivates people to build. Optimism is what inspires you to do useful work for other people. Optimism makes the economic and social world grow. You feel confident. You are open to the world. You believe in the future.
The real problem is what happens after a boom. When the bubble bursts, optimism is replaced by pessimism. Optimistic voices are replaced by pessimistic voices. All the people who are afraid of everything get very loud. They write books about how they always said that the banks would collapse. They appear on chat shows boasting about how cleverly they predicted the economic slowdown. But they have no answers. They can offer no better future.
These prophets of pessimism are dangerous. It is easy to predict banking problems. Banks will always have problems. It is easy to predict recessions. The creation of value (our economy) is cyclical. If we have a boom, we will have a bust.
The trouble is that when we most need optimism, these prophets of pessimism offer only fear, uncertainty and doubt. When we most need confidence in the future, we have happiness leeches sucking us dry of hope. We get taken over by the fear.
The more we believe that it is worthwhile exchanging our hard work for the hard work of others, the more the economy (our creation of value) grows. We happen to use money as a convenient way of swapping. But that doesn't mean that money is real. It is the effort that is real. It is the effort that needs to be encouraged. And that effort requires trust in each other. Making an effort requires confidence in the future. It thrives on certainty. It needs belief.
Naturally fearful people are looking for signs that the world is ending. Every new bit of negative news confirms the worst. Every bit of positive news is discarded. It's a kind of phobia. It is irrational and damaging. They are like the hare (in the Buddhist story) disturbed by a falling fruit who believes the earth is coming to an end. Or like Chicken-Licken who believes the sky is falling when an acorn lands on her head.
In those stories, the panic spreads. The fear is contagious. Rational thinking is abandoned. And there are different endings. In one, a calm lion restores calm by investigating the cause of the panic. In another, the animals are so afraid that they trust a fox who offers them safety and are eaten. The risk at the moment is that fear will cause panic, riots, and senseless actions that will cause real damage.
The world works best when everyone is doing something useful and satisfying. Unfortunately, believing that the big, bad debt is real will reduce the number of people doing something useful and satisfying. Believing that the world is coming to an end will lead the world to a slowdown. A recession may be an unavoidable correction to over exuberance but a depression, or a 'choppy recovery' is avoidable.
That's because a depression is the result of giving pessimists too much power. If you want growth, you need to lead people out of excessive uncertainty. If you don't know how, then find an optimist who does.
These pessimists may believe they are doing the right thing. But they may lead us down to an economic hell with their good intentions. The debt is not real. The threat of the is not real. But the fear of debt is a problem. And the impact of that fear is potentially frightening.
Fear makes bad decisions. It stops people working. It stops people sharing resources. It stops people getting an education. Or building a school. Or working together. Fear encourages short-termism, protectionism, fundamentalism, hostility towards anyone else who might steal your job or spend your money. People hide.
Fear, uncertainty, and doubt have a history in sales, marketing, advertising and politics. They have even been given their own acronym – FUD. It was a phrase coined in the 1970s to describe a tactic of rhetoric that influences public opinion by undermining confidence. In business, if the market leader can create uncertainty around a new competitor then the customer is more likely to stay with what they know than take a risk. In other words, FUD encourages inaction.
Some of the FUD seems useful to those in power because appears to make the population easier to control. Some of it is created by people who really do believe that the world is coming to an end.
This culture of fear is packaged up and powerfully presented. The BBC's business correspondent produced a whole brand around the UK downturn. There are discussion boards dedicated to various aspects of the housing crash and the possibilities for global economic meltdown. They sell the fear. And if too many people buy the fear we will have a more serious real world problem. People not working. People not creating.
If you want growth, you need to fight the fear. If you want a better society, you need to challenge the FUD. If you want a happier world, you need to rise up against the culture of fear. You will not be afraid if you understand more about the nature of the perceived threat. You will become more optimistic if you realise that nothing bad has really happened.
We have pretty much the same people, living in the same countries, communities and homes. We have the same skills, the same knowledge, and the same resources. The planet hasn't changed. The potential hasn't changed. The future is as good as we believe it is.