Here’s the Divide Between Optimists and Pessimists in the Global Economy

The pass-through of gloom from past to future matters, ING study shows

Past performance is of course no guarantee of future outcomes, but for a lot of people who’ve gone through Europe’s debt crisis, it can certainly seem that way.

A new survey released this week by ING, a Dutch bank, indicates that recent experience overwhelmingly determines whether or not people have an optimistic or pessimistic view on economic outcomes for the near future.

The ING report, in conjunction with research company Motivaction, shows that while more than a third (37 percent) of Europeans are optimistic about their future standard of living, over a fifth (23 percent) are quite pessimistic, leaving just a 14 percent of net optimists on the continent.

The survey asked 13,000 people in 13 countries whether their standard of living had improved over the last five years, and whether they expected it to improve over the next five. 

In general, the two answers correlated strongly, meaning that there’s a big implication for policy makers trying to kick-start the European economy: People in countries like Italy and France, suffering from the region’s low-growth malaise, are likely to stay unexcited about their prospects.

That makes the investment and consumption needed for a return to prosperity harder to come by.

By contrast, the graphic also shows that success breeds success. Germans and Americans are more likely to be upbeat about their prospects than the Italians or French. The Chinese top the chart.

“Sluggish growth in Europe is clearly linked to the growing divide between people’s economic experiences,” said Mark Cliffe, chief economist at ING. “Those who fared worse over the past five years typically expect it to continue.” 

Though there is one encouraging outlier: Spain. Even though the unemployment rate in the euro area’s fourth-largest economy is still around 20 percent, the country’s growth rate may be leading its citizens to leave the bad times behind. Almost 60 percent of Spanish respondents said they expect living standards to improve.

Italians on the other hand, struggling with a stagnant economy and a shaky banking system, aren’t nearly so sunny. That may explain the old Italian adage: “Money makes money, lice make lice.”