A way of controlling things that’s as old as it is subtle is the self-fulfilling prophecy. A classical example: the media reports on an ailing bank that they say will soon go bankrupt. Result: depositors withdraw their savings in record time before things get worse. Next result: the bank quickly goes bankrupt. The same can also happen with positive results, as when a famous investment guru predicts a certain stock is about to take off. That has the effect of raising the demand for that stock, hence increasing its value. Result: a profitable investment.
Barack Obama seemed to be following this same strategy when he gave his (although it wasn’t so named) State of the Union Speech last Tuesday. The calculated optimism radiated by the president was meant to assure the majority of his fellow citizens that the crisis they faced wasn’t completely hopeless, and that everything was under control. This reassurance was in turn meant to preclude any outbreaks of panic among the public as much as it was to prevent them from hoarding their remaining capital. Obama’s speech also made clear that he intends to find a way out of the crisis through consumer spending. That can happen only if Americans replace their fear with euphoria. Had Obama accentuated the dreary outlook, the United States would perhaps be irretrievably lost.
Obama is doing what he does best: inspiring the public with his encouraging speeches. In so doing, he even allowed for the worsening times that will surely follow. Everything that’s wrong in the United States can be blamed on his predecessor, he said in effect. But – no need for panic – he knows what has to be done: hard work and belt-tightening will get everyone quickly to the promised light at the end of the tunnel.
For now, it seems that Americans are willing to trust his rallying calls, and Obama appears to be on the right path with his optimism. Whether that endures will depend, in the final analysis, on the results of his economic policies. Even the self-fulfilling prophecy of a rising stock can last only as long as its owner can see that it’s still worth keeping. If it loses value it will be dumped, and the market sinks along with it.