The world is starting to look up and ahead

The world is starting to look up and ahead
The Economic Times, March 30, 2009, Page 13

SUDESHNA SEN

RIGHT. Please don’t hang me if I’m wrong. But I sense a very, very faint green shoot under all the recessionary snow. It has nothing to do with my indices screens turning green, for a change, and there will probably be absolutely no change for at least six months. But yes, everyone I talk to also senses that something is happening. What, we don’t quite have a grip on yet. People seem to be emerging from their catatonic state through the winter, and actually beginning to go back to economic activity, with the accent on activity. Even if it isn’t resulting in anything, most people report a sudden jump in being busy during March. “We aren’t getting any orders, but we’re getting a lot more enquiries. It’s not as dead as it was in the last quarter.”

I have this theory, which is that as soon as people put their heads down and start doing things, anything, even if it is running a Red Queen’s Race, things are ‘going to begin to start to improve’.

Half the global recession is economic — the other half is psychological. The psychological bottom of the recession, if there is such a thing, seems to be where we are floundering now. Despair has given way to resigned, but positive activity. People have just given up on being depressed with bad news, stopped waiting for happy headlines, and are slowly, painfully, shaking themselves out of shock and getting on with the grim business of making a living in the bad new world. As one banker told me, “we’ve started cautiously venturing out and around — the past three months we were just going around feeling the walls to make sure they didn’t fall in on us.”

And, umm, since the entire concept of banking has always been some kind of mass induced hallucination, resting on a universal suspension of disbelief, and the kind of blind faith any messiah should enviously covet, psychology does matter. (Ask any bank which has had a run on it. The economists call it confidence, and trust, and so on. Everyone else calls it blind faith based on a self-perpetuating myth, ever since we came off the gold standard.)

If the global markets’ reaction to Tim Geithner’s latest bank rescue plan is any indication, when every theoretically approved action by any government over the past six months has failed, markets, financial services, the real economy, investors — everyone is now clutching at straws to start the upward climb again. It doesn’t matter if Mr Geithner’s hugely complex plan works or not. People want to believe it will, so it just may.

Again, indicators are beginning to fluctuate as much as the currency markets. Since October 2008, there was only one way every indicator went — straight down. Now, there’s a lot more confusion — one week a confidence survey in Germany looks good, the next it looks bad. One month we see retail sales arresting the slide, the next it’s down again. A purchasing manager’s survey in the Eurozone looks good, an employment number in US looks bad. Foreclosures are up, but so are mortgages. The signals are getting very mixed, but that’s a positive. At least, there’s something happening out there.

Make no mistake, to quote the unlamented Mr George Bush, there’s a lot of pain still to come. And knowing India, while the rest of the pundits are predicting we’ll come out of the downturn faster, I predict we won’t. What commentators like the RBI governor are missing is that sentiment in India has gone all technicolor tragedy, a good year after it went belly up in the west, and the recovery time lag will be the same. That herd mentality is alive and kicking, thanks. India took five years, almost, to recover from a dotcom bust which really should have affected us about as little as a dot. As an India watcher said ruefully, “If the western countries had even the thin cushion of comfort that India does, they’d be going all out to exploit it. But we’re busy whining and scaling back, and we’ll shoot ourselves in the foot.” Oh well. That’s the trouble with having too many decisions taken by the handful of Indian corporates who attend the same parties — and wakes — as Wall Street bankers and western CEOs do.

Here, at the epicentre of the economic earthquake though, I suspect that everyone’s finally reconciled to the fact that the world is going to be much poorer than before, and staggering up after the knockout.

After all, how long can you sit around twiddling your losses? Life goes on. There’s just that long you can mourn the loss of an old order. It could be the temporary effect of spring, but it is definitely not my imagination. It’s not exactly a buzz in the air, it’s more like crawling out of bed after a bad bout of flu and pottering groggily around the kitchen, but we are getting out of the sickbed. If I was the betting type, which I’m not, I’d say the world is starting to look up. Or at least look ahead. Hallelujah.