Published by The Royal Bank of Canada

A Question of ConfidenceConfidence, it is said, is a plant of slow growththat withers easily in a climate of slow growthin the economy. It comes in several different

varieties, the hardiest of which is a cross betweenfaith and hope. Here we examine it, and consider thequestion that has been on everybody’s mind lately:Just what have we got to be confident about?

[] It has become almost habitual in these grimdays for political and economic commentators tospeak of a "crisis of confidence." The expressionhas a suitably heavy ring to it, like the bells ofdoom. It has also proved to be a convenient devicefor explaining away problems for which there is noother obvious reason. As a catch-phrase, it has themerit of being at once both resounding and vague.

Its wording might be confusing to anyone whohas not heard it before. It actually means thereverse of what it says. It refers not to confidence,but to the lack of it. This lack of confidence in theeconomic future stands in the way of efforts to pullthe Canadian economy out of its present slump.

Similarly, there is some confusion over the word"crisis" in this context. Viewers of television newsprograms, hearing the word two or three times anight, may be forgiven for mistakenly believingthat a crisis is a problem that won’t go away. Butit is not what many journalists seem to think it is.A crisis is a turning-point at which a conditioneither gets worse or better. Doctors use the wordadvisedly. A patient in a crisis can be expected torecover or die.

Chinese people have a clear idea of the nature ofcrisis because of their lexigraphy. Sociologist SaulAlinsky observed: "The Chinese write the word’crisis’ with two characters. One means danger and

the other means opportunity." If we think of a crisisthat way, a crack of daylight appears in the picture.If people are able to clutch the opportunity, theymight be better off than ever once the danger haspassed or been overcome.

The question is, does this encouraging thoughtapply to the peculiar state called a crisis of con-fidence? The answer depends on what kind of con-fidence we are talking about. The Oxford EnglishDictionary lists no fewer than seven definitions ofthe word, three of which have a direct bearing onthe question. All refer to an individual condition asopposed to the mass psychology that steers publicattitudes, but all can be easily converted into massterms.

The first definition in the Oxford is "the mentalattitude of trusting in a person or thing." To adaptthis to mass psychology, let us put that "person" inthe plural, and say that those persons are ourpolitical and economic leaders. Then let us say thatthe "things" referred to are our political, social andbusiness institutions. In earlier times, it was intheir leaders and institutions that people placedtheir trust.

This is not, however, a trusting age. It sometimeslooks as if the guiding principle of modern journ-alism, literature and higher education is thateveryone is guilty until proven innocent. The

relentless scepticism with which the mass mediaviews the world has come to be reflected in publicattitudes.

Scepticism is a healthy enough trait up to a point,but when it becomes a dominant state of mind, itcan develop into outright cynicism. The originalGreek word for cynic was derived from the imageof a surly dog snarling at everything it sees. "Acynic is one who never sees a good quality in a man,and never fails to see a bad one," wrote HenryWard Beecher. "The cynic puts all human actionsin two classes- openly bad and secretly bad."

Cynicism may not yet have gained control of thepublic mind, but it has at least made enoughinroads to affect confidence in the sense of trustingin someone or something. At a time when its everymove comes under suspicion, the leadership ofsociety finds it difficult to retain public trust. Thetrouble is that the less trust leaders enjoy, the lessthey are able to lead.., and the less they are ableto lead, the less they are trusted. It becomes avicious circle: a lack of trust destroys the groundsfor trust, and so on.

If one does not feel confident in something, it ishard to be confident of something. Specifically, itis hard to be confident of a secure economic futurewhen one does not feel confidence in the leader-ship of the nation or the world. Here is where thesecond definition of confidence comes in: "Thefeeling sure of a fact or issue; assurance; certitude;assured expectation." This variety of confidencenow appears to be in short supply.

He may not see the horizon,but he knows it’s still there

In these shifting times, it is virtually impossibleto be certain of any eventuality. The only peoplewho are sure of what they think are the inveteratepessimists who declare that the situation can onlygrow worse. To some extent, this is self-fulfillingprophecy, because negativism is contagious. ’~Tobelieve a business impossible," said Jeremy Collier,"is to make it so."

Between Calls, a publication of Industrial SalesDevelopment Inc., recently recounted a littleparable to this effect entitled "The Man Who SoldHot Dogs." It evidently dates back to the 1930s,but it bears repeating today:

There was a man who lived by the side of theroad and sold hot dogs. He was hard ofhearing so he had no radio. He had troublewith his eyes so he read no newspapers. Buthe sold good hot dogs.

He stood at the side of the road and cried:"Buy a hot dog, Mister?" And people bought.He increased his meat and bun orders. Hebought a bigger stove to take care of his trade.He finally got his son home from college tohelp him out. Then something happened.

His son said, "Father, haven’t you beenlistening to the radio? Haven’t you beenreading the newspapers? The European situa-tion is terrible. The domestic situation isworse." Whereupon the father thought, "Well,my son’s been to college, he reads the papersand he listens to the radio, and he ought toknow." So the father cut down his meat andbun orders, took down his signs, and no longerbothered to stand out on the highway and sellhis hot dogs. And his hot dog sales fell almostovernight.

"You’re right, son," said the father to the boy."We certainly are in the middle of a greatdepression."

With so much gloom hanging in the air, peopleare unable to see what is ahead of them. Theynaturally hesitate to move into the unknown. Theywant reassurance that they will not stumble -- orfall and break their necks- before they committhemselves.

They- and the economy--are suffering thepangs of uncertainty. Uncertainty is associatedwith a lack of confidence, but the two are not ne-cessarily synonymous. Uncertainty will stop somepeople in their tracks, while others will take it in

stride as a normal part of living. In fact, a personmay well feel uncertain and confident at the sametime.

That is, he may have doubts about his prospectsin the short run, but still be confident of reachingthe goals he has set for himself in the long run.He might not be able to see the horizon in thecurrent murk, but he has not forgotten that it isthere. He does not ask for certainty at any time,because he knows that "sure things" do not existin real life any more than they do at a racetrack.There are no certainties, only probabilities. Hecalculates that those probabilities will work in hisfavour over time.

This is a manifestation of confidence according tothe third definition of the word: "Assurance, bold-ness, fearlessness, arising from reliance (on oneself,on circumstances, on divine support, etc.)." Notethe difference between this and the other two. Withthis kind of confidence, you do not depend onsomething or somebody else; you do not depend ona guarantee of security. You depend on yourself, onyour surroundings, and on the things you believein. You make your own way.

It is natural to wonder whetheryou will ever be the same again

At the crossroads of opportunity and danger,you clearly recognize the danger. You also rec-ognize, however, that there is a fighting chancethat danger can be overcome. For societies as forindividuals, the worst danger of all lies in the lossof this cool assurance. In warfare, it is what turnsan orderly withdrawal into a bloody debacle. ~Self-distrust is the cause of most of our failures," wroteChristian Novell Bovey. "In the assurance ofstrength, there is strength, and they are weakest,however strong, who have no faith in themselvesand in their own powers."

We all occasionally lose faith in our ability tocope with the world, especially when we are notfeeling well. To people who are used to an activelife, the sudden loss of strength due to illness comes

as a distinct shock. They are likely to wonderwhether their strength, or at least a significantpart of it, has permanently deserted them. Theirdoctors may tell them that the loss of strength isonly temporary, but there are dark moments whenthey feel that they will never be the same again.

A strength that lies so deepthat it is almost out of sight

Economic problems are often likened to physicalailments (investment analysts like to refer to falling market as "sick") and they have much thesame psychological effect on people. They expe-rience periods of depression when it seems that allis lost. To hear some Canadians talk about thepresent slump, one would think that the reserves ofstrength in this young and basically robust nationhave been almost exhausted. This is simply not so;our basic strengths are intact, but they need moreexercise.

Still, it is fair enough to ask just what thosestrengths might be, considering all the signs ofweakness around us. Our standard of living relativeto other countries has slipped in recent years, alarge proportion of our labour force is unemployed,and our dollar certainly is not what it used to be.The answer is that the strength is down so deepthat it is not immediately apparent. It lies largelyin things which we take for granted, but which aregreatly envied in other parts of the world.

For example, we are accustomed to living withgenerally high standards of health care andeducation, with political stability and democraticinstitutions. These might be considered mere socialniceties from a hard-headed economic point-of-view.But think of what our economy would be likewithout them -- if our labour force were not adapt-able and trainable, if we were regularly subject tocivil violence, if people did not feel that they hada stake in the system. Things like these make up

the tissue of a fundamentally healthy body politic--one that is able to rally and recover from itsperiodic economic ills.

In strict economic terms, Canada has pronouncedunderlying advantages. It is an advanced countrytechnologically. Its manufacturing plant andequipment, on the whole, is reasonably up-to-date.Its agriculture is highly productive, its financialsystem functions well, and it has excellent trans-portation and communications facilities. In otherwords, its economic infrastructure is sound.-

A nation founded on boldness,hope, and precious little else

Then there are Canada’s abundant naturalresources, which continue to hold great potentialfor the future. Historically, the discovery anddevelopment of the natural riches of this harsh andinhospitable land have been among the stiffestchallenges Canadians have had to surmount. Weshould never forget that the national bounty inwhich we all indirectly share would have remainedin the ground and under the water if our pioneershad not risked their lives, limbs and money torelease it from the hard grip of nature. Canada’sgood fortune in this respect was not given; it wasearned.

To discover the reserves of strength in them-selves, present-day Canadians could do worse thanlook back to those who have come this way beforethem. These were the people who shot the rapids,climbed the mountains, cleared the forests, dug themines, broke the sod and built the dams. They didnot let adversity get them down for long- howcould they in a land of such ruggedness andloneliness, such cruel weather, such endless dis-tances to conquer? They had an abundance of the

combination of faith and hope that makes con-fidence. And when they came together to form anation, critics called it a triumph of confidence overcommon sense.

"In self-confidence, and thatalone, we have gone downhill"

"Let us confess the truth: in self-confidence andself-confidence alone, we have gone downhill since1867," Bruce Hutchison wrote on Canada’scentenary. It is strange that the people of a nationthat was founded on boldness, hope and very littleelse should from time to time show a serious lackof faith in themselves.

True, confidence in Canada has always takenwide swings. A decade-by-decade study of publicmood since Confederation shows an almost manic-depressive pattern. Canadians have been over-confident at some times and under-confident atothers. In our spells of over-confidence, we havetried to take more out of our economy than it wascapable of giving. The under-confidence occurredwhen we had temporarily run it down, then doubtedits ability to bounce back.

But this "is a goodly land, endowed with vastrecuperative powers," as the early Liberal Partyleader Edward Blake once commented. Throughthe best and worst of times, Canada has alwaysmanaged to make real progress- progress being,in the memorable words of Will Durant, "thedomination of chaos by mind and purpose, ofmatter by form and will." In the long run, the landhas more than repaid the hope and faith whichgenerations of Canadians have poured into it. Nodoubt it will continue to do so as long as Canadianshave faith in it -- and faith in themselves.