Welcome to doom-watch

I was out chatting to a mate who works in property just after the latest GDP figures dropped into my inbox last week.
In itself, the 0.2 per cent contraction was unremarkable. I’d seen enough data and anecdotal evidence to know that growth had been looking like a pancake since the summer.
What was notable was the reaction to some of the coverage of it. News websites were dominated by portentous stories which spoke of an economy ‘lurching towards recession’. Politicians wagged fingers and spoke of double dip as if it were Lord Voldemort.
When I mentioned it to my mate his reaction was one of near despair: “I am absolutely sick to the ******* back teeth with this. It’s been tough for years and you just get on with it. Some people are still doing OK. But what does the bloody television do? They just revel in it.”
Now, his company happens to be doing OK, though business is a hard slog and deals take time to happen because people are cautious. What concerns him is that he believes their caution stems in part from a relentless focus on negative sentiment in the media.
As a journalist of *cough* years’ experience, I always bridle at any suggestion we should ignore ‘bad’ news. News is the world we live in, which is not necessarily the way we’d like it to be. So it’s up to you to decide whether it’s bad or not. And I have a real beef with politicians who are all for press freedom but wish we were a bit more positive (about them).
But there is a serious point underneath what my mate was saying.
Confidence, sentiment or whatever you want to call it, is NOT an intangible concept which is separate from what happens in the real economy. The Bank of England recognises it as a key factor in investment, spending and purchasing decisions and assesses it when it does its own economic forecasts.
So it’s right to ask questions about what influences economic confidence.
The media clearly is an influence because it tells people what’s happening in the wider world – both the hard facts and people’s interpretation of what those facts mean.
There WAS a 0.2% fall in economic output between the start of October and the end of December last year. There IS a consensus that we may see the same again when the figures come out from January to March. If that happens, we WILL have satisfied the technical requirements to classify the period as having been in recession.
But what does a recession really amount to? And has the media got its head round the impact it actually has on our 21st century economy?
My mate’s belief – and he is far from alone – is that the media’s assessment of what recession actually amounts to is a doom-laden cliché rooted in memories of either 1930s dole queues or 1980s factory closures.
Neither are appropriate to where we are now.
In the 1930s, we had a depression, an altogether deeper and more prolonged period of economic contraction made more serious by the lack of a welfare safety net, out-dated economic levers which didn’t allow a dynamic response, and a political class stuck in the past.
In the 1980s, we finally began to confront the reality of an uncompetitive manufacturing sector whose costs, efficiency and working practices had long been outclassed by Germany and Japan, both of whom reinvented themselves in the wake of wartime defeat.
But that was the past.
In 2012, we are the sixth biggest economy in the world, we have a comprehensive welfare safety net, and we have a much more flexible economy which doesn’t get lost in hang-ups about major change and reacts pretty quickly.
Certainly, the view of many people in business that I talk to is that, yes it’s difficult, but not disastrous. Growth is still possible, and if the economy contracted by 0.2 per cent they’re focusing on the 99.8 per cent that’s still happening.
So while the political approaches of the main parties seem pretty traditional, the economy they pronounce on is not the same as it was even 30 years ago.
Is this where the problem lies – that the media is simply echoing the politics of the economy, which are all about heavily-prejudiced interpretations, rather than the reality for business?
The idea that business just gives up and goes home because the GDP figure ticked down a bit is utter tosh. People who run businesses just don’t inhabit that kind of negative universe.
Our attitudes to recession are similar to those we used to have about unemployment. While no one is happy that more than 2 million are out of work, the fuss being made about it is nothing compared to the uproar when it broke through the 1 million barrier in the early 1970s.
Then, with a generation whose memories of the 1930s were still vivid, joblessness was seen as a social cancer to be avoided at all costs. But the government’s attempts to solve it by throwing money at the economy simply caused rampant inflation.
The truth was that unemployment had been rising naturally since the 1960s as our economy began to switch away from out-dated large-scale manufacturing. Today, it’s broadly accepted that if we want a flexible economy with low inflation, some level of unemployment is the price we pay.
So if businesses don’t go into panicked hibernation when recession sets in, and unemployment is a natural consequence of a modern economy, why do the headlines sometimes suggest we are staring disaster in the face?
I’d point the finger at three causes.
One is that the financial crash was a near-disaster, and has caused damage which has gone deeper and lingered longer than a simple, cyclical recession.
Second, London media is dominated by a politics which can’t see beyond the end of its own self-importance – it genuinely believes that the solution to all of life’s problems begins and ends in Westminster.
Finally, large organisations like the BBC sometimes struggle to get a feel for the grassroots. In Robert Peston and Stephanie Flanders, the Beeb has one of the most powerful double-acts in the coverage of the global economy.
Yet the end result of that is that their coverage of ‘business’ is dominated by national politics and global economics.
The grassroots – which has proved far more resilient than you would expect given the scale of the crunch - doesn’t appear to get a look in. And this is why I ended up getting an earful last week. I wish Robert Peston had been there...