A year of fear draws to a close

Fear was a theme that linked many of the key news stories of 2006. Although there was no single event that dominated the year, many diverse stories had anxiety as part of the text.

Many stories could be discussed in this context but a few stand out. At present Britain is gripped by the news of a serial killer murdering women in Suffolk. Before that there was the tale of Alexander Litvinenko, a former Russian spy, who was poisoned to death in London. The climate change discussion conjured up images of imminent catastrophe. And Islamic terrorism is widely seen as a threat to the Western way of life.

None of this is to suggest that these stories are unreal. The point is there seems to be a free-floating anxiety that attaches itself to many discussions. Climate change is quickly interpreted as necessarily meaning catastrophe. A few Islamic fantasists (to put it politely) are seen as a potentially mortal threat to Western civilisation.

It would also be a mistake to assume that such anxiety has always been pervasive. Of course reasons for fear, including war and natural disasters, have always existed. But the defining feature of today is the way society responds to these events. In the past individuals often demonstrated a robust response even in the most difficult of circumstances. Today relatively distant or amorphous threats can provoke widespread anxiety.

From an economic and financial perspective it is fortunate that this climate of fear has come to the fore when the world economy is performing well. The global economy has performed better than at any time since the early 1970s in recent years. Corporate profits have been strong while markets, with a few ups and downs, are generally strong.

But even the economy and markets cannot be immune from the culture of fear. Even the talk of a possible “slowdown” sometimes seems to embody anxiety about what the future may hold. It also increases the possibility of a panic in the event of the markets encountering difficulties.

More generally, the climate of fear shapes everything we do. If we are fearful of all sorts of threats then we are less likely to see the potential opportunities around us. Our goal – whether as individuals or businesses – becomes redefined as mere survival rather than promoting innovation and prosperity.

Hopefully in 2007 the mood will begin to shift. We will become less prone to anxiety and more amenable to ambitious goals for the future. In the meantime the Fund Strategy team would like to wish all our readers a Merry Christmas and a Happy New Year.