Cheer Up, America! The Economy (and the Country) Is Much Better Off Than You Think

The first installment of "The Edgy Optimist," a new column about what is going right in the U.S. economy, and why

Reuters

Barely had the counting ceased in last week's presidential election when the news took a somber turn. Two of the next day's headlines read "Back to Work, Looming Fiscal Crisis Greets Obama" and my favorite, "America has Sown the Seeds of Its Own Demise." Politicians either celebrated or decried the results, but regardless of party affiliation most warned of formidable challenges and a perilous future.

How did it come to pass that even the resolution of a contested election brings almost zero relief from the relentless focus on problems and threats? How did a country that for much of its history exhibited a (sometimes naive) willingness to ignore obstacles and plunge forward become a society that struggles to turn its gaze away from the dangers that loom just ahead? In short, how did the United States become so pessimistic?

Some of it surely has to do with how the past decade has unfolded.  Without question, this has been a challenging time for America and much of the Western world. We can all recite the crises, disasters and failures: Y2K, the bursting of the Nasdaq stock market bubble in 2001, 9/11, Iraq, Afghanistan, Enron, WorldCom, the bursting of the housing bubble, the Wall Street implosion of 2008, the euro zone's troubles, chronically high unemployment, anemic growth, the continued emergence of China as a global economic force. I could go on.

The bleak attitudes of the past decade are in stark contrast to the giddy optimism of the 1990s, a consequence of the Internet revolution,a soaring stock market and the end of the Cold War. Yet even then, the growth model that so many Americans took for granted was showing signs of strain. Manufacturing jobs were quietly evaporating, and incomes for the middle class were stagnating. And so we have come to a point where even the conclusion of a peaceful, contested democratic election offers no pause in the drumbeat of negativity.

Few today are unaware of the problems that beset us. There is ample informed commentary, analysis and prognostication describing  what is going wrong and could get worse: increasing deficits, waning economic growth, high unemployment, unstable financial systems, stock markets crashes, inflation spikes, geopolitical conflict, renewed recession, destructive gridlock, rising inequality, etc. No one could argue reasonably or rationally against the possibility that these issues will undo us or lead to worse times ahead. The problem, is that few argue consistently or cogently that our fears may, in the end, just be fears and that we will do more than muddle through.

That is the goal of "The Edgy Optimist," my new column. It will examine what might go right and how, and what is going right and why. To deny the challenges and perils of our world, particularly the changing nature of our material and economic lives in the West and how we can ensure sustainable prosperity and growth in the years to come ‑ well, that would be foolish. But it is equally wrongheaded to dismiss arguments to the contrary as foolish, unlikely or ill-informed. Behavioral psychologists have shown that when people feel fearful, anxious or pessimistic, warnings about the dangers that lie ahead sound smarter and wiser than alternate views that suggest more constructive outcomes. Alliance Bernstein recently sent a note to clients charting how the Dow could quietly reach 20,000 within five years. The reaction? Anger and outrage. Bernstein was flooded with complaints that they were naifs. Had they released a paper with the title "Dow 5000" they likely would have generated just as much reaction, but from clients wanting to know how to prepare for what seemed like a credible scenario.

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Zachary Karabell is Head of Global Strategy at Envestnet, a financial services firm, and author of The Leading Indicators: A Short History of the Numbers that Rule Our World. More

At River Twice Research, Karabell analyzes economic and political trends. He is also a senior advisor for Business for Social Responsibility. Previously, he was executive vice president, head of marketing and chief economist at Fred Alger Management, a New York-based investment firm, and president of Fred Alger and Company, as well as portfolio manager of the China-U.S. Growth Fund, which won a five-star designation from Morningstar. He was also executive vice president of Alger's Spectra Funds, which launched the $30 million Spectra Green Fund based on the idea that profit and sustainability are linked. Educated at Columbia, Oxford, and Harvard, where he received his Ph.D., he is the author of several books, including Superfusion: How China and America Became One Economy and Why the World's Prosperity Depends on It (2009), The Last Campaign: How Harry Truman Won the 1948 Election, which won the Chicago Tribune Heartland Award, and Peace Be Upon You: The Story of Muslim, Christian, and Jewish Coexistence (2007), which examined the forgotten legacy of peace among the three faiths. In 2003, the World Economic Forum designated Karabell a "Global Leader for Tomorrow." He sits on the board of the World Policy Institute and the New America Foundation and is a member of the Council on Foreign Relations. He is a regular commentator on national news programs, such as CNBC and CNN, and has written for The Wall Street Journal, Newsweek, Time, The Washington Post, The New Republic, The Los Angeles Times, The New York Times, and Foreign Affairs.

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