Little orphan Annie is a tale for troubled times
I gained some insight into the economics of our time when I went to see Annie the Musical this week. Bear with me. While the tale of a singing 11-year-old red head might not at first seem like a breeding ground for economic theory, it was frighteningly topical.
Set in 1933 America, in the grip of the Great Depression, Annie tells of a world knocked off its feet, populated by the jobless, homeless and down at heel.
One scene finds US President Franklin D Roosevelt and his cabinet bewildered – at a loss at what to do to tackle the depression and get a grip on with the crisis – until the eponymous Annie, with her unstoppable optimism and bright lyrics, inspires them to come up with the New Deal that kick started America on the road towards recovery. Sounds familiar yet? Well, maybe not all of it. While its unlikely that today's President, Barack Obama, was inspired to throw almost $2 trillion at the current crisis by a freckled orphan with big lungs, his rescue package and "five pillars" to fix the economy are not a million miles away from Roosevelt's thinking on the New Deal.
While both Annie and America's story ended happily back then – the sun did come out tomorrow as she promised – the twist in the tale is it took until 1941 for tomorrow to arrive, especially concerning unemployment. And there were several new New Deals in the interim.
This week, President Obama voiced "cautious optimism" that the US economy could be stabilising.
Hardly the stuff to inspire Broadway and the same day the release of economic data showed otherwise, including a surprise drop in US retail sales in March.
If we use the Annie timeline today, the US economy should recover sometime around 2016. No matter what plans are implemented this crisis is going to run its course. That is the lesson after riding a boom for almost two decades. The near misses of the Asian financial crisis, the collapse of Long Term Capital Management, Enron and the dot-com bubble were treated in the same way as we are dealing with today's problems. It seems like world leaders are hoping that a mix of stimulus – rate cuts and money – and optimism will shorten the suffering.
Like the 1930s, this time there is no escape. We are going to have to suffer the consequences for as long as need be. Sure, optimism might make it all a bit more pleasant. It might even convince consumers to spend a bit more. But it doesn't seem to have convinced the banks to start lending in any meaningful way or stop companies laying off workers. The problem is that the pre-credit crunch world was perception, celebrity and deals with huge numbers attached to them.
In that world, talking things up worked because everyone seemed to be getting richer and no one cared if it was reality or not. We believed we had the power to create our own realities. Now that we are back down to earth, rubbing our heads in disbelief and shock, it's a new world.
Les Miserables, anyone?
- The author is consulting editor of Emirates Business' weekend editions
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