Political Perspectives is produced by the students and faculty of Carleton University's School of Journalism and Communication, Canada's oldest journalism school.

21st
SEP

Fear, greed and other economic fundamentals

Posted by cwaddell under Election 2008, Election 2008 Campaign strategy

Karim H. Karim

“The market is never wrong,” a student insisted in one of my classes several years ago. His statement came to mind frequently during the course of the last week’s roller coaster ride in the stock exchanges.

It exemplified the almost unquestioned faith that some have in the workings of the markets.

Industrial societies have made them integral to our economies. Traders’ daily choices determine the monetary value of the materials that are vital to our well-being.

Whether it is speculation about the price of petroleum or about financial stocks, we seem to leave it to a relatively small percentage of the population to decide what turns and twists our collective fortunes will take. The best we can hope is that the traders’ decisions are guided by rationality.

But CBC TV’s morning show business reporter, Marivel Taruc, appeared to think otherwise. She commented that bear markets are driven by fear and bull markets by greed.

Are the stock exchanges, and by extension the economy, primarily driven by raw emotions? It would seem that we are leaving too much to how a few unelected individuals may feel on a particular day.

So far in the election campaign, none of the political parties has presented much of an economic strategy responding to the current financial upheaval. They appear to act as if we are going to be sheltered from the havoc taking place south of the border.

The parallel drops and rises in the New York and Toronto exchanges last week were clear indications that we are not immune to the financial blowouts in our largest trading partner.

It may be too much to ask if anyone is thinking about how to protect the economy from the whims of stock traders, but does anyone at least have a made-in-Canada plan to minimize the ill-effects of the widely-expected downturn?

Perhaps the idea is to react with rescue packages worth billions of dollars after the damage has already occurred, just like Washington is doing now.

Add sloth to the list of economic fundamentals.

Karim H. Karim is the director of the School of Journalism and Communication at Carleton University. He formerly was a Canadian correspondent for Compass News Features (Luxembourg) and Inter Press Service (Rome).