As we go through this epic economic transition, I’ve been waiting for observers in the press to begin to define what a “new normal” will be. With a radically downsized economy, even as we return to growth, there will be differences in consumption and in how patterns of expansion occur.
The drivers of the old economy — largely consumer consumption expanding faster than population growth due to increased debt — will have to be replaced by new drivers. Those drivers, and changes in behavior attached to them, will be a different kind of normal than we are used to.
Already, people are looking around trying to gauge what the patterns of consumption will be.
Pew Research recently released the results of a study that they do asking people what they consider to be life’s necessities. They also asked questions about how the recession is impacting the way people behave.
The results show an interesting trend. Items associated with entertainment, information and community are holding higher as essentials than items related to the classic American artifacts — the house and the car.
As they tighten their belt, the overwhelming impression of the Pew Research is that people are thinking more carefully about what they spend money on. The effect feels like a recalibration around the premium people will pay when they consume, not necessarily a permanent change in the absolute number of transactions that people will initiate.
When looking at items traditionally associated with home ownership — a clothes dryer, a dishwasher — the percentage of Americans identifying them as a necessity has declined sharply over the past three years. I’d venture that this is a slackening of the frenzied enthusiasm around home ownership that helped to fuel much of the sub-prime mortgage boom.
What do these shifts mean for our culture and the economy in the long term? Are they temporary adjustments driven by a cataclysmic shock or are they structural changes that give a clue to what lies ahead?
In the Atlantic, Richard Florida takes a stab at how we’ll begin to recognize the new normal. Florida is a observer of cultural change and a proponent that we are at the beginning of a new economic ecosystem that will produce a greatly altered country.
First, the era of the suburban way-of-life is over, Florida argues.
New patterns of private consumption are required to undergird the broad and sustained level of consumer demand that is needed to fuel sustained innovation, enable the growth and expansion of new industries, and drive long-run economic development. It was the rise of suburbanization and of the post-war suburban way-of-life, as I’ve noted before, that powered post-war recovery and expansion.
The economy that is to come will be experience-driven, not possession-driven, Florida says.
It will be less oriented around the auto-housing industrial complex: We’ll all be spending relatively less on cars and housing and energy, that is, if we’re going to have money left over to create demand for the emerging, new stuff required to power a new round of growth and prosperity.
If we look closely it’s possible to discern some emergent threads of a new consumption pattern. We’re already experiencing the fall of some of the biggest symbols of post-war consumption – big cars and SUVs, oversized suburban McMansions, and conspicuous consumption of various sorts. There’s a shift toward smaller cars and smaller dwellings, toward walkable neighborhoods; toward more authentic, organic and energy-efficient products; and from material goods to experiences generally.
An economy driven by community, knowledge and entertainment will replace an economy driven by homesteading, nesting and relative isolation. These new dynamics will drive innovation and interaction, Florida believes. It’s an almost utopian vision of a new society.
