WILLIAMS: Economic good news

The case for rational exuberance

By Armstrong Williams | Monday, July 28, 2008

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OP-ED:

During the stock-market boom of the 1990s, former Federal Reserve Chairman Alan Greenspan coined the term "irrational exuberance" to describe investor behavior that resulted in grossly inflated stock prices. In today's economy, it seems we are suffering just the opposite form of misguided emotion: irrational pessimism. Many have begun betting on major industry-sector failures, especially in real estate and banking. While we have to face the fact that for many Americans these are tough times, we should not fall prey to a gloomy outlook for the future. In fact, if our past is any indication of things to come, these times of struggle will ultimately make us a fitter and stronger nation.

A nation's economy can in some respects be viewed as the sum total of the outcomes of our individual aspirations. It is a word that conveys our desires, ambitions, triumphs and frustrations. Although the economy as a whole experiences general trends of expansion and contraction, at any given time, individual trajectories are going in all directions. As one company goes bankrupt, throwing thousands of people out of work, a leveraged-buyout firm finds it can buy the leftover assets at a fire-sale price. It cobbles together the bones of defunct companies and breathes life into them, giving rise to new opportunities for employment and shareholder wealth.

Similarly, large shifts in the economy as a whole have differing effects on our individual fortunes. The falling dollar has, for some, signaled a dimming horizon. But for others, the dollar's decline has given rise to a whole new world of opportunity. As the value of the U.S. dollar falls, imported goods become more expensive, and domestic industries, long thought dead, spring to life again. Look at companies like American Apparel, one of the few U.S. clothing retailers that rely on domestic manufacturing. The U.S. textile industry, a dominant international force 100 years ago, lost out to cheap manufacturing in Asia and other foreign countries. Today, most of our clothing is made abroad. But companies like American Apparel, which manufactures its clothing domestically at a Los Angeles facility, find their businesses flourishing amid a diminished import market.

The bright side of high fuel costs and a weak dollar is that they make it more difficult for foreign imports to displace American products. And American products gain in value - this evaluation is taking place in industries such as education (American business schools are experiencing a 50 percent increase in foreign applicants.) In fact, because of the weak dollar, American assets are particularly attractive abroad. The recent purchase of Anheuser-Busch by Belgian conglomerate InBev represents a marriage of strengths that will likely make the company much stronger. While some see it as selling out an American tradition, others view it more optimistically as gaining a worldwide platform for an American cultural icon. The fact that a foreign company owns the brand merely gives others a stake in ensuring that America remains relevant.

More pointedly though, about those pesky gasoline prices, how could that possibly be a good thing? Well, for one thing, Americans are learning to conserve. Driven by high fuel costs, many of us are moving from the suburbs back to urban centers, sparking a period of urban renewal that billions of dollars in public funding and decades of urban planning failed to accomplish. In essence, many of us are driving less and living more. Telecommuting and shorter work weeks are also evolving trends. Recently, some local municipal governments have started giving employees the option of working a four-day week to help them reduce fuel costs. Suffolk County, New York approved a measure recently to allow workers to take a flextime four-day work week or take furloughs to cut down on commuting.

Finally, finding ways to do more with less not only makes economic sense, but could help ease our dependence on foreign oil and reduce the harmful environmental consequences of hydrocarbon pollution. Because we feel we need their oil, we lack the real leverage to encourage countries like Saudi Arabia from spreading radical Islam, a direct sponsor of terrorism in the Middle East. With oil prices skyhigh, at least some of the windfall profits these nations are making go directly to funding terrorists organizations themselves. Moreover, most of us, whether or not we call ourselves conservationists, agree that global warming is a real thing. Any measures that we can take to reduce our consumption and waste will make our planet a more livable place, and may prevent catastrophic changes in the environment.

During times of struggle, whether individually or collectively, we would do well to look within and prepare ourselves for the road ahead. We should not get so consumed by our hardships that we fail to see the good that can come of them, or rather what we can become by learning from them. This is not the time to curb our enthusiasm, but rather to unfetter it. This is a call for rational exuberance - the optimism that stems from knowing that tough times make us stronger.

Armstrong Williams' column for The Washington Times appears on Mondays. "The Armstrong Williams Show" is broadcast on WPGC-AM 1580 in Washington and XM Satellite Power 169.

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