Even Americans with regular income are reassessing their spending habits
Business Times 11 Mar 09;
(ATLANTA) It is a sign of the times when Sacha Taylor, a fixture on the charity circuit in this gala-happy city, digs out a 10-year-old dress to wear to a recent society party.
Or when Jennifer Riley, a corporate lawyer, starts patronising restaurants that take coupons.
Or when Ethel Knox, the wife of a paediatrician, cleans out her home and her storage unit, gives away an old car to a needy friend and cancels the family Christmas. 'I just feel so decadent with all the stuff I've got,' she explained.
In just the seven months since the stock market began to plummet, the recession has aimed its death ray not just at the credit market, the Dow and Detroit, but at the very ethos of conspicuous consumption. Even those with a regular income are reassessing their spending habits, perhaps for the long term. They are shopping their closets, downscaling their vacations and holding off on trading in their cars.
If the race to have the latest fashions and gadgets was like an endless, ever-faster video game, then someone has pushed the reset button.
'I think this economy was a good way to cure my compulsive shopping habit,' Maxine Frankel, 59, a high school teacher from Skokie, Illinois, said as she longingly stroked a diaphanous black shawl at a shop in the nearby Chicago suburb of Glenview.
'It's kind of funny, but I feel much more satisfied with the things money can't buy, like the well-being of my family. I'm just not seeking happiness from material things anymore.'
Economists point out that the Great Depression created a generation of cautious savers. The longer the downturn this time, the more likely it is to change financial habits permanently. Yet, as many economists have noted, cutting spending is the worst thing people with means can do for the economy right now.
But the argument seems to have little traction, especially because even those with steady paychecks and no fear of losing their job have seen their net worth decline and their retirement savings evaporate.
'I don't think there's been any other period in modern history where appeals to people to spend the economy back into health have worked,' said Ethan S Harris, a co-chief of US economics research at Barclays Capital. 'The only time I've ever seen where that kind of urging people to spend worked was after 9/11, and I did think at the time that there was some patriotic buying going on.'
After the attacks of Sept 11, though, former president George W Bush urged Americans to go shopping. President Barack Obama has taken a different tack, issuing a Budget whose very title, 'A New Era of Responsibility,' strives for an austere tone.
On inauguration day, the first daughters, Sasha and Malia, dressed not in designer labels but clothing from J Crew. On television, the insurance giant Allstate is running a 'back to basics' advertising campaign, and in Target's 'new day' commercials, the 'new pedicure' is administered by a spouse and the 'new vacation glow' comes from a spray bottle.
'Though the recession was always talked about in economic terms, we felt really strongly that, in fact, it was a crisis of culture,' said Tracy Johnson, research director for the Context-Based Research Group, a market research firm in Baltimore that views the recession as a rite-of-passage that will reorder consumer priorities.
Ms Johnson has advised clients to focus on quality rather than quantity. Malls redecorated in screaming red 'sale' signs are not the way to go, she said, because 'if you just give people the opportunity to buy more, you're not matching up to where their minds are.' - NYT
