Resource Center > Trust Publications > Outlook
July 2003 - continued
In the early 1930's a writer named Rauschning interviewed Hitler [see box on right], gathering material for a book. Observing that fascist governments believed in strong central control over their entire countries, Rauschning asked why the German government did not nationalize all private industries. "Why should I nationalize the industries?" Hitler asked. "I will nationalize the people." And so he did. He gave the German people of the Thirties an arrogant belief in their own superiority and destiny. That belief would eventually help to destroy them, but during the Depression it helped businessmen to cast aside their doubts, hire workers and invest for the future; and it led German workers to work harder than anyone else in Europe. Hitler not only glorified Germany and the Nazi party -- he also glorified work itself, and Germany responded.
It is tempting to give free-market capitalism the credit for all economic miracles, but the story of Germany in the Thirties is an eye-opener. Hitler was hardly a capitalist; he seems to have spent little time worrying about the health of the economy; and his planned economic programs made little sense. But Germany thrived anyway. Why? Perhaps because Hitler knew that public confidence is a vital ingredient for economic growth. And Hitler, in historian John Lukacs' words, "was the most terrifying creator of national confidence in the history of the world."
Since public confidence might be so important, let's look at the key economic news so far in 2003 and ask what it suggests about our own state of mind, and the possibility of that nightmare deflation scenario.
The U.S. economy entered 2003 in a state of anxiety about war. That didn't improve until the war ended, and even then the improvement was a halting, uncertain tiptoe towards the future. The biggest chunk of the American economy is consumer spending, and it kept surprising people by refusing to collapse under the weight of all the anxiety about unemployment, debt, terrorism and war. There were two ways to interpret this: either the U.S. consumer was an addict so hooked on debt and spending that only an outright Depression would "cure" him; or the gloomy picture of the U.S. economy painted by the pessimists was overlooking some major patches of blue sky and sunlight.
When you look at the "hard" economic facts about 2003, it's tough to see anything that looks like bright sky and sun. Auto sales have limped along above stalling speed, but seemingly only because automakers cut prices (through zero-interest deals and rebates) so much that profits nearly vanished. The housing market has been amazingly strong, but nobody feels like betting that the fantastically low interest rates (which clearly drove that market) will stick around very long. Business spending behavior has been stuck hard in "go slow, wait-and-see" mode for a very long time now, and despite several months of growth in technology spending there isn't yet any clear sign that the general spending pedal is being pushed again. (Technology spending had sunk so low that a few months of growth aren't impressing people, yet.)
The "soft" economic facts are the many surveys which are done each month about practically everything from business buying plans to consumers' psychological feelings about the future. Since the war's end, these surveys have mostly shown improved confidence, but it's been a pale, anemic sort of movement, like school kids drifting toward the cafeteria at lunchtime, not because they're looking forward to the menu but because it's better than heading back to class.