If you look at the response to the Eurozone debt problems, or any other prior financial crisis, each time the politicians follow the same script: 1. Pretend there's no problem 2. When it becomes impossible to keep up the denials, start blaming the markets 3. Restrict free trading in the markets in some way (e.g. short sale ban) 4. When that doesn't work, start saying they won't need a bailout 5. Later on - go 'cap in hand' begging for a bailout 6. Get voted out of office in total disgrace and failure, becoming social pariahs and having their political reputation in tatters. My question is, given that anyone who has studied economic crises knows that failure and disgrace is always the outcome of this standard politician's response, why do they follow the same script each time? Why not take a different course - like admitting there actually is a problem, stating what steps are necessary to fix it, and then carrying out those steps? Why not just take a no-nonsense honest & realistic approach, instead of sticking their heads in the sand like an ostrich and praying it will all just spontaneously disappear somehow? Just look at ones from the past - 1997-98 Asia Crisis, 1992 ERM crisis, 2000-2002 Argentina & Brazil crisis, 1929-32 in the USA, 1973-74 in the UK etc. They all do the same thing and it works disastrously every time.
Yet another 5-star post from Cutten! I think the answer lies in the type of characters that get elected to political office in the first place: Bullshitter used-car salesman types with a constant 'Yes we can!' charade of over-optimism ingrained into their personalities. Cynics like Ron Paul who address our problems with honesty and pragmatism generally don't fare well in elections. The proles prefer to be told that everything's going to be just fine.
I'd suppose the politician has to consider the impact of "economic policy" effecting his politics, whether or not he chooses a correct solution. An economic problem with only one solution would not mean the politician would use it.
They lie sometimes because telling the truth creates self-fulfilling prophecies. Furthermore maybe its not a lie given that it exists maybe small chance they are correct(if it was 100%, markets would have priced that in), telling the truth would wipe that out
I'm not as cynical as you about who gets elected - Ron Paul has been elected, after all. The "boosters" are only a % of the political class, the majority are not boosters. But I agree that the type of politician who does the overconfident rictus grin BS approach always seems to follow this script. A great recent example was Bertie Ahern from Ireland. And maybe most leading politicians have a bit of boosterism in them. Interestingly, during early 2009 Obama did not follow the used car BS script. He didn't make any ridiculous forecasts that were hostage to fortune, he didn't come out with any silly denial, the only time he stuck his neck out was to say stocks looked like decent value if you had a long-term perspective, which turned out to be exactly right. That kind of lower key pragmatic approach is a lot better than the fixed-grin "all is well" approach that views informed criticism as something to be attacked rather than listened to and learned from. Cameron and Sarkozy also haven't panicked (yet), so I think that shows you don't have to be a ridiculous bullshitter just because you are a head of state. It's just a sign of political immaturity and cluelessness to do that IMO. There's a certain type of "salesman" who sometimes gets to the top, and perform as all salesmen do in leadership roles - talk a good game, do well in boom conditions, and do horribly whenever problems arise. Maybe it's just a trait of good salesmen in general, to deny reality, overlook the downside, maybe that's needed to have the persistence required to keep selling and never give up trying to close the sale. In fact I know a budding businessman who is an excellent salesman but his company is failing because he did the same "deny bad news" approach. Basically, some optimists are just shit and handling bad situations. Just like Giuliani is only good when facing down a serious crisis, so the Bertie Aherns of this world are only good when things are doing really well.
But there are easy ways around that. Just refuse to comment if telling the truth would cause problems, and switch focus by saying you're taking steps to shore up the system. It's like losing in the early stages of a war. You don't restore confidence by pretending the enemy troops aren't overrunning the positions, you restore confidence by having a plan of action for what to do next, by expressing your resolve in putting in maximum effort to confront the problem head on rather than ignore it, and you discuss your plans on how to stabilise the problem and prevent it getting worse. That shows you are leading and taking concrete action with some direction. Whereas denial and lies just show you are clueless and scared, flapping around like a headless chicken, and in 6-12 months your reputation is in shreds and no one will listen to you ever again. It's just always a losing move to deny serious problems in a crisis. The denial doesn't bring any positive effects that keeping quiet or saying "no comment" wouldn't also bring, and it brings many unique negatives that not lying wouldn't incur.