Jerry J. Maginnis

is managing partner of KPMG's Philadelphia office

We're in the midst of what's supposed to be the most joyous season of the year, but gloom pervades the economic news. Name the indicator, and it's down: construction spending, manufacturing, hiring, consumer confidence.

As I meet with business leaders in our community, it's clear that the conventional wisdom everywhere favors retrenchment: curtail investment, cut costs, stop hiring, and wait it out. Most believe they'll be waiting a while. According to a recent poll by my firm's Audit Committee Institute, 72 percent of Philadelphia-area board members and executives feel the economy won't begin to recover for at least 18 months.

In times like this, pulling back is a natural reaction. But while caution is certainly prudent, total retrenchment may not be.

I'm concerned that some businesses are swinging the pendulum past caution and into paralysis - potentially prolonging the downturn and missing opportunities to invest wisely. The result could be an unfortunate, self-fulfilling prophecy.

Let me explain why I think we all should maintain our confidence during these challenging times, no matter what the headlines tell us.

The current landscape may not be so daunting compared with previous recessions.

Look at the 1970s, a pessimistic decade when unemployment nearly hit 8 percent (compared with 6.7 percent today), inflation was unchecked, and the nation's oil supplies were interrupted. It may be small comfort, but inflation is not an issue today, and gas prices continue to plunge.

During the holidays, you might visit with parents or grandparents who lived through the Great Depression. You'll learn we've been through far more difficult times as a nation and not only survived, but prospered.

The U.S. government has taken steps toward a massive economic stimulus.

And many other countries have done the same. The G-20 meeting last month showed that the world's powers are willing to act together to strengthen the global economy.

Perhaps most encouraging, the business cycle is inevitable.

Nothing lasts forever, whether good times or bad. Wall Street observers have noted that, in good times, overconfidence can lead to excesses and poor business decisions. But it's also true that an economic crisis can create opportunity, which can lead to investment, growth and progress.

Business leaders should heed the latter point. Recall our recent history: The recession of the early 1980s was followed by a period of investment and economic expansion. These opportunities may not be apparent this month or next, but they will surface for management teams that have vision in these challenging times.

In many ways, a follow-the-herd mentality created the financial crisis we're in today. It will take true business leaders and innovators, who see opportunity when others don't, to lead us out of it. History shows that American entrepreneurship and ingenuity thrive when business looks bleakest.

A crisis also gives established companies a chance to revisit old assumptions and explore new models. These transitions can be painful, but the result is often stronger, nimbler and more efficient.

No one can predict what might happen next week or next month. Headlines about layoffs, bankruptcies and foreclosures certainly will follow us into 2009.

But blind pessimism shouldn't be our guide. Better days are ahead.

E-mail Jerry J. Maginnis

at gmaginni@kpmg.com.