In Strict Confidence

If you’re a business leader feeling confident, get used to being lonely.

Only 20 percent of your colleagues think the domestic economy is likely to improve over the next six months, according to the Business Optimism Index from Grant Thornton LLP. What’s more, about half of them think it’ll get worse.

Peter Drucker lived through numerous recessions, including the Great Depression, and he considered confidence to be a legitimate concern. Where he parted ways with many experts, though, was in his skepticism toward policies aimed at boosting it.

Most economic theory, particularly of the Keynesian variety, was something Drucker found lacking in explanatory power (as we’ve noted before). Drucker particularly deplored what he viewed as a belief that the “supply of money automatically and infallibly regulates confidence,” as he described it in The Ecological Vision.

In real life, money supply wasn’t much of a booster of confidence, said Drucker. “Confidence has been proved not to be producible by a check-writing machine,” he wrote.

Drucker generally took a softer view when it came to public-works programs, noting that an economic downturn is “the right time to build highways and hospitals, irrigation dams and schools, air fields and post offices.”

[EXPAND More]But even here, Drucker saw a downside in terms of bolstering confidence. “The most important factor in the deep depression is not economic but psychological, that is, confidence,” he asserted in The New Society. “A public works program, being of an emergency nature, tends to create as much distrust in the future of the economy as it creates immediate jobs.”

So what to do about creating confidence? On this topic, Drucker was fatalistic. Neither euphoria nor despair could really be curbed. “A government that rests on popular support cannot counteract a boom,” he wrote. “It is equally difficult for a government of a well-developed country to counteract a depression and restore prosperity.”

What would it take to make you feel more confident about the business climate? [/EXPAND]