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Economic Downturn Signals A New Normal

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Economic Downturn Signals A New Normal

Economy

Economic Downturn Signals A New Normal

Economic Downturn Signals A New Normal

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The country's economic situation is affecting how we live. People are taking fewer vacations, looking for sales and putting off large purchases. But once the country recovers from the recession, will we go back to the way we were?

MELISSA BLOCK, Host:

As the country's economy continues to struggle, more and more families find themselves making short-term adjustments: cancelling vacations, stretching dollars at the grocery store, putting off buying a new pair of shoes. Our co- host, Robert Siegel, wonders how the recession will change our country in the long term.

ROBERT SIEGEL, Host:

Great crises and the government responses to them change the way we live. Urbanist Richard Florida says they change us in ways we can hardly imagine. For example...

RICHARD FLORIDA: We went into a major financial crisis in 1873, and the United States was pretty much a farming and agricultural nation. We came out of that 20 or 25 years later in around the turn of the century with these massive industrial cities like Buffalo, and Pittsburgh and Detroit.

SIEGEL: Places that connoted great industry: iron, not rust. Think about the Great Depression, the New Deal and the Second World War and how they changed American life. Historian David Kennedy has spent years doing that. He says life at the beginning of the Depression was much less safe and secure than afterwards.

DAVID KENNEDY: Things like retirement simply weren't known concepts. People couldn't look forward to the fabled golden years. Even the concept of the weekend is a post-1930s invention. They couldn't count on leisure time even in weekly units that way.

SIEGEL: Life became more predictable, less uncertain. One thing that grew big- time in the '30s was the federal government. It changed from something small and remote to something big and omnipresent.

KENNEDY: Calvin Coolidge, in one of his longer sentences, once said that if the federal government should go out of operation tomorrow morning, the average citizen wouldn't notice it for at least six months. And with the exception of the postal delivery service, that was absolutely true.

SIEGEL: So, what sort of changes are we likely to see at the end of this economic crisis? After the trillions in write-offs, the millions of layoffs, the foreclosures, the bankruptcies, what will recovery look like? What will be the new normal? I've put those questions to a few people who think about change for a living. And we're also asking you: how do you think American life will be different in the bright light that we'll see at the end of this particular tunnel?

WILLIAM GREIDER: We will have smaller cars for larger lives.

SIEGEL: That's William Greider, the author of "Come Home, America." He's talking about cars that are easier on the environment and on the wallet.

GREIDER: The rest of the world understands this better than we do and has made this adjustment. For lots of reasons of wealth and character, the United States has not.

SIEGEL: Smaller cars and many people foresee smaller car companies, too. As for those larger lives, here's how Treasury Secretary Timothy Geithner described the new normal on "Meet the Press" a couple of weeks ago.

TIMOTHY GEITHNER: When we get through this, people are going to care less about what they make, more about what they do. What they achieve is what they make, and that will help make this country stronger.

SIEGEL: And what kind of homes will Americans be driving to and from in our smaller cars? Richard Florida thinks they'll be different.

FLORIDA: Every one of our economic transformations in this country's history have always required us inventing new forms of housing.

SIEGEL: Florida thinks that home ownership, which we've heard cited for years as a measure of American progress, has peaked.

FLORIDA: Our home ownership rates, which nearly made it to 70 percent, are going to inexorably decrease. No, we're not going to be a nation of renters, but maybe it'll go more towards 50 percent. Who knows? But renting will get to be a better experience and rental housing will have to be delivered in a high quality fashion. You can fix it up the way you want, have the kitchen you want.

SIEGEL: And all this stuff that we might want inside that rented home? Harvard economist Kenneth Rogoff figures we'll have less of it.

KENNETH ROGOFF: We're in this incredibly consumer-oriented society where people go to bigger and bigger homes, own more and more cars, eat more and more food. And in some ways, what's happened to our economy is really that we've had a heart attack, and we have to rethink our lifestyles, make adjustments, certainly in dealing with the environment, health care, income and equality.

SIEGEL: And savings. Kenneth Rogoff expects at the end of this recession, we'll be spending less and saving more.

ROGOFF: We used to save 10 percent of our income 25 years ago. And then with houses zooming up in price and the stock market booming, we decided we didn't need to bother with that, and our savings rate went to zero and even negative in some years. So I think it'll be sort of back to the future, return to something more normal, as far as that goes.

SIEGEL: And with necessities being necessary, some of the consumption that we'll forego will be for luxuries. Consultant Pam Danziger studies consumer trends among the affluent.

PAM DANZIGER: The simple fact is when we come out of this recession, the luxury market and all the accesses that we have seen, and known and followed for the last number of years are going to be completely over. The new luxury market will be nothing like the old one. And, in effect, the party is over and we've got a price to pay now.

SIEGEL: Pam Danziger says that affluent Americans tell her that they expect to spend less on new possessions, but no less on new experiences: meals, hotels, travel. The losers, she thinks, will be retailers.

DANZIGER: There's a mall close to me, the Linens 'n Things store is down and the Circuit City store is down. And guess what? Nobody is going to fill those spaces. So there's going to be a real change in the landscape of our society. And we're going to see a lot of empty spaces. And that's going to be kind of depressing, when you think about it.

SIEGEL: And since the world is now both depressing and flat, some see the role of the United States abroad shrunken in the new normal. Author William Greider says the rest of the world is rearranging power relationships around us.

GREIDER: We're the supposedly indispensable Goliath, and these events have demonstrated what a lot of other countries, friendly, as well as hostile, already believed, which is we ain't indispensable. And they are anxious to get out from under America running the world for everybody else.

SIEGEL: The people I asked about the new normal also sounded optimistic about the inventiveness and entrepreneurial spirit of America. But obviously, it's easier to think of things we know that we think may disappear, say, a lot of local newspapers, than it is to imagine an economy full of things that haven't yet been invented.

Well, we'd like to hear what you think the new normal will be like, how our lives might change materially and otherwise. Go to npr.org and click Contact Us if you'd like to join in some participatory futurology. Put new normal in the subject line and we'll report back to you on your images of the far shore of this recession.

I'm Robert Siegel.

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