The latest suite of incentives announced in the UAE were justifiably met with breathless excitement and exuberance by analysts and journalists alike, with prophecies of a new dawn being ushered in. From liquidity enhancing to economic stimulus and visa overhaul, the measures announced have been comprehensive and far ranging.
However, it is pertinent to note that since the Asian Financial Crisis of 1997, when governments throughout the world set out explicitly to prevent this sort of thing from happening again, the cycles of euphoria and panic have become more dramatic. Economists have largely stated that this has been due to the faster pace of technological change and that in every conceivable sense, things are “accelerating”.
So too has been the case with booms and busts. Ever since 1987 and the Black Monday episode, we’ve had crashes that suggested disastrous economic and social consequences, but in the end had no serious long lasting economic effects. The bursting of the internet bubble, the Asian Financial Crisis, the Russian government bond default, the collapse of LTCM, the housing market crunch, all of these extreme events have been compressed into a fantastically short space of financial history.
You can even add the latest trade war to this. It all seemed in the heat of the moment to have the power to change the world as we know it. But none of them really did as it turned out.
What we observe is that financial panics have become almost commonplace; events that are meant to occur once in a millennium now seem to occur every few years. If perhaps this is the nature of global capitalism — faster booms and busts — then perhaps what needs to change are not the markets themselves, but our reaction to them.
How many times does the end of the world as we know it need to arrive before we realise that it’s not the end of the world as we know it?
It’s never really obvious what is going on inside a boom or a bust. Even as writers after the fact put on an academic sense of detachment from the mania of it all, the events in real-time reveal the real sense of euphoria, and panic, depending on the stage of the cycle that you are in.
The most recent sluggishness felt in the UAE raised similar alarm bells in the gave of rising costs and falling sales, in a number of sectors, as chatter started to grow about the health of the economy. The response has been strong and level-headed from the government after listening to feedback from the private sector. It has been laser-like in it focus.
Reforms and initiatives that allow for greater private sector participation and flexibility — reflecting a logical extension of government decisiveness — has been embedded into the fabric of the economy for decades. Despite the increasingly complex endogenous and exogenous challenges the UAE has confronted over the years, it has continued to grow.
Expatriates have continued to flock into the country, and have made this country their own, by investing their life and resources into its soil in a culture that is a model of tolerance, diversity and openness. It is here that journalists play a curious role, adding to the state of frenzy or drama, when in point of fact, they should be acting as fact-checkers, instilling a counter-cyclical view into the ecosystem.
Step back from it all, and all you see is an exaggerated commentary on either side of the debate, extolling either the breathless virtues of rising markets and/or the calamities that were set to befall the economy, without the least sense of irony as to their endless reversal of commentary.
If analysts are supposed to minimise the drama in the financial markets, they’ve been doing a remarkably poor job at it. In fact, one can’t hep but wonder if they are even really trying.
In an age of big data, where everyone is spinning their side of the story, perhaps the most critical role to be played is the one that looks at data for what it truly shows. Before the op-eds start adding their fancy vernacular atop the proverbial Christmas tree fest.
And what it shows, despite the commentary are two very obvious trend lines: one, economic and social reforms have been a steady hallmark of the UAE, introduced at continuous stages in a proactive rather than a reactive manner. And two, the most recent down turn (just like the earlier ones that have preceded it) has not been as bad as the press would have you believe.
The critical takeaway from this latest drama is this: there was no drama to begin with at all.
Sameer Lakhani is Managing Director at Global Capital Partners.
