Confidence can come in many forms. Whether it’s a Kanye West soliloquy, a Christopher Hitchens interview, or 19-year-old Erling Haaland swaggering into Borussia Dortmund’s Champion’s League team; we are constantly surrounded by outbursts of confidence.
But confidence is not just a topic for sports columns or the therapist’s sofa. Confidence is the lifeblood of finance capitalism, and its symbiotic relationship with political electoral cycles can make or break political parties. It is for this reason that light needs to be shed on its murky and ambiguous definition, so that we can fully understand the fraudulent role of ‘confidence’ in politics and economics.
It is a wonderful time to be in government when the general mood around the economy is one of confidence. If firms believe demand is going to spike in the near future then they can afford to invest in capital or increase the size of their labour force, as they can expect increased revenue in the near future to cover their investment. Confidence will therefore inspire firms to spend heavily, and often increase overall employment.
Confidence can therefore be seen to create a snowballing effect. If businesses believe the economy to be on the up, then they will increase investment and employment – the very things that cause GDP to grow.
An alternative interpretation of this mechanism would be that of a self-fulfilling prophecy, rather than a snowballing effect. It could be that our economic models (or the people utilising them) were miles wide of the mark, and the economy was actually due to stagnate. But, due to findings released by prestigious organisations and media outlets, the economic zeitgeist is bullish. This is sufficient to reverse the trend and bring the economy back on track.
The positive results of the investment have a further role to play in this narrative. Not only do they fulfil the prophecy of confidence, but they also reinforce the validity of the causal factors of said confidence. If event X caused people to believe the economy will grow, and this confidence then produced investment, which in turn caused growth, it is entirely conceivable that people will then come to associate event X with growth. While it may be the case that it was in fact our response to event X, rather than the event itself, this is largely insignificant – X will be validated as a precursor to growth and will thus inspire even greater confidence in the future.
It must also be recognised that ‘confidence’ in the economy is, by definition, amorphous and subjective. When firms speak about having confidence in the future, it is often referring to conditions which are considered to be broadly ‘pro-business’. Progressing in trade negotiations, cutting corporation taxes, or weakening regulation are but a few examples of policies which come under this category.
“Growth is caused by our response to event X, rather than the event itself”
But there is no objective criterion for what is good for business. Slashing regulation may seem appealing, but it can lay the groundwork for devastating financial collapses. Progressing in trade negotiations may appear valuable, but it could be the calm before the storm.
It must therefore be accepted that the causal factors for ‘confidence’ are, essentially, abstract. And if they are abstract, then suddenly there is a huge role to play for the institutions which set the Overton Window and dictate the national mood – the media.
Once the true nature of confidence is revealed, it can suddenly be seen that the media wield the power to make or break a political party’s economic credibility. If the media argues that a political party ought not to inspire confidence, then the mere prospect of their election can cause wild economic contractions, thus ‘validating’ the party’s status as being economically incompetent. It is no longer just the media asserting things – the proof is in the pudding. The self-fulfilling prophecy of confidence results in the media’s claims being backed by official economic forecasting and figures.
This effect has been in full force in the UK since the December general election. The CBI found that the manufacturing industry has been experiencing a confidence boost post-election, despite the fact that Johnson was potentially hurtling towards a no-deal Brexit. Even now, any specific terms of a deal are riven with uncertainty and exports are on a knife-edge. Yet, because of the Murdoch narrative of the Tories being ‘good for business’, and Johnson’s pledge to ‘Get Brexit Done’, confidence is booming.
Johnson therefore does not need any sound economic policies to experience an economic boom. All he needs is the media to create a mood of ‘confidence’, and the rest will click into place for him. Economic indicators will duly suggest his premiership has been a roaring success in the economic sphere.
Behind impressive, ‘impartial’ numbers such as GDP or net investment are fragile and impressionable individuals. ‘The market’ is not immune to the media’s claims – investors and CEOs are people like you and I, and the role of misplaced confidence cannot be ignored.
Big pigeon energy 