I was surprised by the downturn in the economy during 2008. For me, it came as a surprise. I really did not expect it. At first I figured it was just the natural ups-and-downs of the market. But then at the end of 2008 it seemed to explode taking the markets really down and then in Dec. and January came all of the shocking surprises about just how deep and pervasive was the downturn. I suppose I can take some comfort in that I was not the only one surprised. It seems that almost everybody everywhere was equally surprised. What began as an economic downturn in the US with the sub-prime mortgage market now seems to be pretty much a worldwide economic downturn.
Since the 1970s, futurists have been telling us that the world is changing, that the change itself is changing, and that the changing change is also accelerating. And much of this change is how the world is getting smaller. When I first read Alvin Tofler in the 1970s (Future Shock), it seemed like science fiction, but no longer. The predictions that life on this planet would one day be like a village, a global village—that day seems to have arrived. Thomas L. Friedman calls this “the flattening of the world” in The World is Flat (2005). In that book he identifies ten “flatteners” beginning with the fall of the Berlin Wall to the introduction of Windows to open-sourcing, outsourcing, offshoring, insourcing, and so on.
The world is not only smaller, it is faster. News today occurs on thousands of cable and internet channels—24/7 / 360 days of the year. News today travels around the world not merely in hours or even minutes, but in seconds. In moments, information about political crisis, armed invasions, tsunamias, earthquakes, Britany Spears, the price of oil, a suicide bomb explosion, etc. can be in our email inboxes and on hundreds of news programs. So today we have the “soft” science of economics is governed by other “soft” sciences (psychology, linguistics, wealth, etc.) that is now influenced and affected by more and more variables. And that means the world is becoming more and more systemic.
As a soft science, economics is influenced as much by beliefs, frames-of-mind, representations, interpretations, emotions, values, states and meta-states as it is by anything tangible like houses or mortgages. What is the value of a house? Above and beyond the materials that go into the construction and its cost, the supply of houses, the demand for them, the value depends on what people think, how much they want them, how much sellers think they can ask for, etc. It depends on fallible human states and meta-states. That’s why they can be so over-valued that they can mess up the economy.
Similarly with the human decision to lend money to a buyer for a mortgage. It depends on the criteria they set for determining who they can trust to be dependable in repaying the loan. And once a mortgage company creates a subprime loan for people with no or little down payment, who don’t have the financial resources, but who believe that the value of the house will increase at such a rate that it will have, say $100,000 equity in 12 months, and then someone sells these high return loans to Wall Street who then offers them on a world market … then people can believe and feel confident about returns, and borrow more money on the assumed value of the increased and increasing equity and somewhere along the line we all move to La-La land assuming that if we believe it or think it, it will happen.
Then reality hits. The balloon payment on the loan comes due and people begin to default on their loans. This lowers the confident feelings of others about the loans, which is communicated by the sensational bad-news “News” organizations thereby creating more fear and worry about the home mortgage market, then a negative spiral begins and suddenly market value drops around the world. And the nature of the world— smaller, faster, and more systemic is amplifying all of this.
There’s now one more quality. It is more psychological. Did you notice the number of states and meta-states in these descriptions? How many did you notice? We call all of this economics, yet it is actually psycho-economics. The psycho- part is the role of people’s assumptions and interpretations of value or dis-value, their emotional states of confidence or fear, of optimism or apprehensiveness and how these states play such a critical role in economics.
Apparently the banking industry has lost a trillion dollars worth of value and the US Congress has voted to spend more than a trillion dollars to deal with it. A trillion dollars! How much is that? On one program someone said that if you had a trillion dollars in one dollar bills, it would be 67.8 miles tall (over 100 kilometers). Or if you went out on a spending spree — and you could spend a million dollars a day (a million!!) — and you started today, it would take you more than 2,000 years to spend it.
Okay, so if the economy or the banks lost a trillion dollars, where did all of that money go? Who got it? The weird thing is that much of it didn’t go anywhere. Much of it existed on paper as a record of the way people were thinking, expecting, valuing, feeling confident or worried, etc. One day people made certain evaluations about their trust and confidence in certain homes, businesses, markets, and futures and presto— there was a trillion dollars of value. At a later time, they lost confidence—and a trillion dollars of value disappeared.
What is this downturn about? Perhaps it is just a market correction, perhaps it is another aspect of the flattening of the world, perhaps it is a call to recognize the role of our meta-states in creating our social realities. Whatever it is, it is a call to your resilience, state management, and ability to know that your highest asset is your ability to add value.
I think it is also a call for a belief in responsible abundance. That is, if our psycho-economics play such a crucial role in all of this, we now have to resist the temptation to play into the hands of the negative press. It is the psychology of the press to sensationalize whatever they can and turn facts into negative catastrophes. After all, if in the small, fast, systemic, and psychological world—our beliefs, fears, worries, hopes, optimism, resilience (and many other states and meta-states) are now key factors determining whether we set in motion a negative downward spiraling or an upward positive spiraling —then we have to be more responsible to fear-mongering, fear-spreading, negative-forecasting and more committed to intelligent optimism that fosters resilience, persistence, and hope.
What’s needed is an army of people committed to actualizing their own potentials and those of others. What’s needed is a community of people who believe in an abundance of possibilities and potentials—if people are given a chance. What’s needed are a global village of people who will resist the negatively-oriented media and do their part to unleash more and more possibilities.
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