On the first anniversary of the “official” start of the financial crisis (even though it was creeping up on us well before then), several articles have argued that the crisis resulted in a “new frugality” that has permanently altered the spending behavior and attitudes of an entire generation, similar to what happened after the Great Depression. I call BS.
This Recession and a Great Depression Are Not the Same
So far the recession has lasted a year to a year and a half. That’s longer than most, but nowhere near as long as the dual recessions that made up the Great Depression. It’s also true that the impact on people’s wallets will be felt for longer, but I doubt we’ll see the same wreckage we saw in the Depression.
No Food Shortages
Remember, the Depression was also accompanied by a drought (the famous Dust Bowl) that saw many, many crops fail. Although we still have droughts, our farmers have learned the lesson and don’t farm that way anymore, so we’re not looking at the food shortages that caused people to stretch groceries and stand in bread lines.
During the 1930s, some products were imported, but most were built right here. They also cost a LOT more to replace. Even with the recession, a family in need of new socks can find cheap options rather than learn to darn a sock. I don’t think people will take to knitting (which would be expensive) to repair cheap items. In addition, our stuff is no longer designed to last a long time, like it was 80-100 years ago. This weekend our DVD player broke. It would cost as much to fix it (if we could even find a repairman) as it would to replace it. Regardless of how the economy fares, we will still be faced with products that aren’t designed to be fixed.
Smaller Job Losses
Yes, we have high unemployment, but it’s still half the level of the Great Depression and it appears to be slowing. We will likely continue to see lags for the next few years, but unless we have a serious double-dip, I don’t think we’ll get to 25%.
We’re Not Heading into Rationing
This is something I considered this weekend, which I think most commentators ignore. World War II is credited with ending the Great Depression. However, the scope of the war was so great that the US government was quickly forced to start a rationing program for many household goods, including food.
There was essentially a 15-year period where a generation had to learn to do without or make do with less. That indeed does have a lasting impression and will form the behavior of a generation. I don’t think the current recession will last long enough to make a real change in American consumer behavior.
It’s Not All Bad News
I do hope that some of the changes will be lasting, partially because they were already the trend and partially because it will only take a few years to make something into a habit.
Increases in the Savings Rate
I hope that people will continue to see the value in saving money after the recession is over. Because it looks likely that it will take a few years for the jobs market to completely recover and credit will be tighter for a while, people will have a few years to turn saving money into a habit. Hopefully it will stick.
Interest in Sustainability/Anti-Consumerism
Sustainability, simplicity, and reduced consumerism were buzzwords before the recession, so I think they’ll continue to be popular after the economy recovers. Hopefully that will encourage people to make better choices, but at the same time we’ll still have products that are designed to be disposable. We’d have to make major global production changes to return to the era of repairing rather than fixing.
Parents are learning to say “no.” Again, this was happening before the recession. Parents were realizing that molly-coddling kids and giving them everything they want is bad for them in the long-run. The recession intensified that trend and I hope it sticks. Our instant gratification society is part of what got us into this mess and fixing it will help us avoid getting there again.
Has the recession permanently changed your attitudes and behavior? Do you think the changes in attitude will last or do you already see people itching to spend? What one societal change will stick?