Let’s start with this…I hate the word paradigm. It is the most overused of many overused management terms over the last several years. Having said that, there are a growing number of voices arguing that consumer spending in the United States is undergoing a permanent downward shift. Though the rational varies slightly, the overall argument goes something like this: the severity of the current recession, arguably the worst since the great depression, has caused a fundamental shift in the attitude of consumers. Consequently, consumers are saving more, spending less, and becoming both more value conscious and quality conscious. In the long-run, U.S. consumers would become more like Europeans, buying fewer products, but of higher quality and becoming less materialistic. Short term savings and spending data are used to support this thesis. If accurate, the implications for an economy that is driven by consumer spending to the tune of 60 percent of GDP are significant. A long-term down turn and complete re-making of our culture would follow, not to mention a realignment of the commercial real estate market.
I don’t see it. It’s difficult to read the tea leaves in an economic downturn. People tend to want to make more out of the data than is there. Recessions always lead to a downturn in spending and increased savings. And, while it is painful for many right now and there are pockets of severe economic problems, the country will recover, the economy will recover and consumers will return in force. We’ve spent 200 years building a consumer oriented economy and one recession, even if it is a big one, isn’t going to change that. It may take a while given market uncertainties and the lack of readily available credit, but consumers will be back. There will be changes in consumer tastes and habits, there always are. Retailers spend a fortune measuring them and responding to them. But, fundamental changes to our society and death to consumerism as we know it, no.
On a grander scale, our country has reached a point that it only makes significant changes one of two ways. Incrementally – little by little we make changes whether on social issues, government programs or business. This is our primary mechanism of change. Going green is a great example. We as a country are a lot greener than we were 10 years ago and we’ll be a lot greener 10 years from now. But, it’s happened incrementally and will continue to do so. Cataclysmically – some event triggers immediate change. 9-11 resulted in a massive build-up in the military, a massive shift of resources to security and a fundamental change in how we live as Americans in the world. I would go a step further and say that something very bad has to happen to motivate us and politicians to make these kinds of changes. Which is why social security and Medicare won’t really be reformed until they’re bankrupt. So, let’s come back around to consumer spending. Have we seen a cataclysmic event that is causing a fundamental shift in consumerism, no. Might we be moving toward a more European consumer model in the long run on an incremental basis, perhaps. For now though, consumerism is alive and well, just taking a break.