What Will We Save?

Recently, a friend spoke to me of his grandmother using the “Child of the Depression” label – the untiring saver who never felt comfortable with her nest egg. And I wonder: At least to some extent, will we of the Great Recession be cautious and conscientious in a similar way?

Six months ago, America’s household savings rate rose to 6.9 percent. This was a marked shift from the pre-recession rate, which dipped to zero in April 2008. Though such saving is not what the broader economy needs now in recovery, such a dramatic behavioral change could linger on well into the future, especially for new job seekers introduced skeptically to employment security.

Two recent articles have further addressed this point. Writing for Slate, Daniel Gross blamed the relative “overreaction” to Dubai’s debt woes on financial post-traumatic stress stemming from the shocks of Lehman, et al.

Using the Great Depression as evidence, Gross wrote, “The damage was so traumatic that the crash sapped the national tolerance for risk for decades…In 1952, 82 percent of families had life insurance, but only 4.2 percent of the population held stocks.”

Additionally, in his latest column, the New York Times’ Ross Douthat referenced a joint paper, “Growing Up In a Recession,” which reports that “Americans who experienced ‘macroeconomic shocks’ between the ages of 18 and 25 were more worried about poverty and inequality across their voting lives, and more skeptical about the wisdom of the market.”

And while Douthat speaks mainly to the political implications of such generational findings, will such collective trauma and skepticism alter saving and spending patterns?

For me a quite tangential memory lingers from “Apollo 13,” which was my favorite movie through much of my youth. I recall that one of the many bespectacled NASA men was arguing that the damaged spaceship needed to cut back drastically on power in order to survive atmosphere reentry, and that struck a chord. There was then the need for planning ahead and conserving and an underlying fear of not making it.

It is within this context that I also weigh the upcoming discussions on climate change in Copenhagen. Certainly behavioral principles pertaining to saving and spending could be related to conservation and consumption. And I can say confidently that our generation is more attuned to environmental conservation; simply, no other group has grown up with the specter of climate change in the popular narrative.

So, with our upbringing in the climate change era and the recession perhaps reinforcing saving, will our behaviors be altered and counter the ease of consumption in this modern, “throwaway culture”? Looking for a silver lining, then, perhaps our ongoing financial trauma could serve as a sort of unwanted and forced behavioral panacea, crafting “children of the Recession” when we need it.

~Ben