Every morning, all over the world, countless men and women open their newspapers or fire up their laptops and stare at row after row of numbers mumbling to themselves that things are up or down. Not so long ago, the obsessive study of numbers was the exclusive domain of economists, Wall Street traders, financial analysts, and the occasional sports fan trying to figure out if their team is going to make the playoffs this year. Increasingly though, the general public is spending more and more of their time worrying about the economy.
Of course, worrying about the economy is hardly a new thing. In fact, worrying about people worrying about the economy isn’t even new either – a thought provoking, albeit sloppily put together, episode of South Park was poking fun at consumerism and examining the recession all the way back in 2009. But as the recession is consigned to the annals of history, and begins to fade to nothing more than an unpleasant memory for the middle classes, the transfixion people have with the economy shows no signs of going away. Why is the case?
One suggestion is that people are more invested (excuse the pun) now than they once were – with more people experimenting with unregulated cryptocurrencies like Bitcoin and over a billion people worldwide playing the stock market, it’s safe to say that people are increasingly realising that it’s possible to do more with your money than just putting it in the bank. Is this all due to people hoping they can make an easy buck by keeping a closer eye on 'the economy'?
A more cynical idea is that people are actually keeping an ear to the ground – by watching out for signs of the next recession, they’ll be ahead of the curve and will know when to take action. That action generally comes in the form of stopping spending, which has potentially catastrophic implications. This is not unlike fuel shortages that often plague island nations – as word spreads about, potentially very minor, fuel shortages, thousands of people race to fill up their cars and jerry cans with gasoline. This compounds the shortage, and starts a vicious circle. In the cases of both fuel and money, the mass media is often complicit in making the situation much worse by fear mongering.
A recent NPR blog post pointed out why getting too worked up about the economy is pointless – the way GDP is calculated from country to country varies. When Italy began to include black market transactions in its figures, its economy (supposedly) overtook that of the UK. Because the way these figures are calculated isn’t written in stone, they can be massaged and manipulated. Take, for example, a change last year that increased the size of the USA’s economy by $500 billion.
If you ever had a parent tell you ‘money is everything’, they were absolutely correct. It’s all too easy to equate money with happiness, but statistics show that you can’t reasonably make this assumption. Denmark, which was found to be the world’s happiest country, only has the 14th highest GDP in Europe. While they place second and third in the World Happiness Report, Norway and Switzerland barely make the top 10 of European GDP figures. Meanwhile the United Kingdom, which has the third highest GDP in Europe, is way down in 22nd place on the World Happiness Report.
As people pay more and more attention to fluctuations in the economy, there’s a real risk that we may see an extreme version of ‘Keeping up with the Joneses’, with people struggling to match what the media tells them they should be spending without taking things like their earnings or outgoings into account. Although most of the world avoided a double dip recession after a recent financial crisis, repeated patterns of spending that are adjusted based on what the media dictates will lead to a boom and bust economy plagued by double, triple and maybe even quadruple dip recessions.
Perhaps that comparison between sports fans and 'economy checkers' in the first paragraph is quite appropriate after all - just as sports give people something to hold on to, especially when they're feeling blue about their own lives, so does positive news about the economy. However, as we've seen above, the fact that the state of economy can be so easily manipulated means that it's surrounded by much more of a sense of gravitas - even the most die hard sports fans can take off the jersey and talk about something else for a while, but consumers can't simply 'opt out' of the economy whenever things don't seem to be going their way.
Certainly, a little knowledge of the financial space is a good thing - it helps to know what a constitutes a good interest rate and how not to get screwed when you're pension planning - but the bottom line is that, unless you belong to one of those groups I mentioned in the very first paragraph, obsessing too much over the economy is futile. Overspending or underspending (if you have kids you may find yourself having trouble imagining such a thing...) based on what the media says is a recipe for disaster. If we all just focus on how much we have in our bank accounts and make sure to pay the minimum amount off our credit cards every month, we should all be relatively fine.