It was another week during which new ingredients were added to the cocktail of economic misery, to make it taste even worse. A week when investors of all shapes and sizes saw that bubbles really can burst, and that money is no longer free. That energy prices are threatening to rise even further, and policymakers are admitting that not all pain can be eased. That there might be a recession on its way. That politics are divided between those who have something to lose and those who are losing. Whether it is carbon reduction, flying or petrol prices, the only thing to share is a loss. An economy in a state of blind panic.

And so we are digging in our heels. Rational arguments are being shoved aside and facts are only presented during arguments that serve self-interest. And of course, the buck is passed back and forth, because there must be someone who is to blame for all this. A psychological state of intense and irrational fear, with people who have the most to lose shouting the loudest. Vested interests function as an amplifier of resistance towards a sustainable transformation of the economy.

What remedy is there? There is no obvious economic policy that can be applied here. This situation cannot be resolved by providing a spending boost (that has already been done), by implementing a job plan (unemployment is in most countries historically low), or accommodative monetary policy (it needs to be tightened). No, this is about distributing loss.

Fortunately, psychologists have valuable advice about what to do in case of a panic attack. First: acknowledge and accept that there is a panic attack going on. Do not walk away from emotions but face the beast full on. The more you resist, the worse it will become. So accept that a loss has been suffered on the stock market and that the world will not look the same anymore. Maybe, after 40 years, interest rates really will start to rise. Accept real climate policy and not unfounded hopes for non-existent technology.

And second: wait and observe. Let the panic rage itself out. And in the meantime: analyse. How do you distribute the loss fairly? To do so, you must ensure that the vested interests bear their share. This will hurt, but most of us should be more than able to cope with this. Keep an eye on those who are less fortunate. On people who are struggling. Try to offer them as much targeted help as possible. And also: what is the most efficient way to transform? Not by waiting, in this case: current generations should take immediate steps and take their losses so that future generations have a future.

And the final tip: a panic attack will always pass. Breathe in, breathe out and take a sip of water. Just think: the world will never be the same again. That does not matter at all, because maybe it will only get better. With cleaner air, less health damage due to particles being breathed in, fewer weird financial bubbles. Panic reactions have never produced sensible economic policies. Good analyses and preparations, on the other hand, have.

This is a translation of Hans Stegeman's column in Het Financieele Dagblad, published June 21st, 2022.