Consumers need confidence

Consumers need confidence

Bad news appears everyday on the financial pages of newspapers. Economic indicators including unemployment, gross domestic product (GDP) and various economic ratings have been moving in the wrong direction for at least the last two years.
The average Czech consumer does not have to understand the grim details. He knows that the news is "bad".
The first thing that he does when he hears about the declining financial situation is stop spending. It is a natural reaction to fears about his job security. He puts off purchases he might make today, waiting to see how things will develop, contributing to the overall economic downward spiral. Investors started leaving the Czech Republic years ago as rumors of lawlessness penetrated western Europe. Tunneling was the main reason, but it became generally known that doing business in the Czech Republic was at best risky business. Companies that might have invested chose not to based on what they had heard. Political instability also played its part.
Recessions are nothing new in the world. There are times of prosperity and times of economic slowdown. It is how consumers and investors react to an economic slowdown that determines how long it will last.
A politician's job is, in this case, to instill confidence, in both foreign investors and domestic consumers. Measures must be taken to heighten confidence so that foreign companies will risk investment here. At the consumer level, someone must assure the Czech consumer that everything possible will be done to protect his interests.
Consumers lacking confidence contribute to the downward spiral. Investors waiting for new legislation don't invest until the new laws are in place. An economy lacking consumer and investor confidence is doomed to stay in recession.
A mature economy like that of the United States has been through the tough times of restructuralization. There were spending slowdowns when workers were unsure of the future. But American politicians and the Federal Reserve were able to convince spenders that better times would come again.

George Griffis