In response to an article written by Nick Coleman in the current issue (Volume 3, Issue 1, Autumn 2009) of The Economist’s “Intelligent Life” magazine (which, by the way, I find to generally be a very good read).
The article by Nick Coleman, titled ‘The i-Decade‘, talks about what styles and items have defined the past 10 years, with the end of the decade almost upon us.
Responses were collected from various people, and while diverse views were presented, ranging from electronics to fashion, from social media to cars, and handbags to cycling, a common theme mentioned by many commentators focused on an observation of an increase in consumption and consumerism. This was defined by one particular commentator as ‘reckless consumption‘.
Examples of other statements with regard to consumption included:
“It has not been an era of holding back” (David Collins, Designer for Nobu, The Wolsey, Claridge’s Bar)
“[…] overall, the single image that I’d use to sum up the Noughties is a pool of vomit. Excess, followed by self-disgust.” (Vikas Malik, Managing Director of Freewheelin’ brand communications agency)
“And what underpins this is the thing that underpins everything else: the pound or dollar sign. That was the decade when it became completely acceptable that there was a price tag for everything.” (Julia Peyton-Jones, Director of the Serpentine Gallery, London)
“I do think we’re coming to the end of a sort of sinusoidal wave, which began just after the second world war, in which life was all about making more, consuming more and so on.” (Stephen Bayley, Design commentator)
Of course, the apparent theme here could be the result of bias of the author, or editor/magazine, or the selection process used to identify commentators (for example, are professional artists, which form a large proportion of the commentators, more likely to comment on consumption than were the author to have canvassed the views of a number of investment bankers?). The article appeared in the section of the magazine titled ‘Style’, and hence focused on themes of design, fashion and style (even when commenting on broader topics like electronics, with regards to the iconic design focus of Apple Mac computers).
Nevertheless, the commentators might be on to something here – it is difficult to argue against the view that ever increasing consumption has been on the rise during the past decade. The extent of this varies by country – until recently economists berated Germany for not stimulating consumption (Germans tended to save more and didn’t pump their savings back into the economy in the form of consumption/investment) – I’ve recently seen articles in the FT that still consider such savings and expenditure habits to be having an adverse effect on Germany’s economy. The US and the UK are two classic examples of where consumption trends have been much higher, partly driven by increasing personal debt (in particular credit cards). We nevertheless now live in a global economy, and so a globally balanced level of consumption is key to economic growth, not too much, but also not too little – both in total, but also within each market.
It is commonly considered that the recent economic downturn was initiated, among other factors, by the US sub-prime mortgage market (unsustainable lending), however the economic downturn has also slowed the explosion in personal borrowing in the US and UK, which itself was a bubble in the making. Vernon L. Smith, a Nobel price winner for Economics (2002), offered the following hypothesis (in a Wall Street Journal article, ‘From Bubble to Depression?‘, dated April 6, 2009):
“that a financial crisis that originates in consumer debt, especially consumer debt concentrated at the low end of the wealth and income distribution, can be transmitted quickly and forcefully into the financial system. It appears that we’re witnessing the second great consumer debt crash, the end of a massive consumption binge.”
So where does that leave us going into the ‘Teens (2010/11 to 2019)?
People are fickle. Without regulation we are at risk of similar trends in consumption happening again, and it seems that while politicians consider increasing regulation of banks and their inter-bank transactions, there is less focus on achieving stability with regards to consumer spending.
That said, the economic downturn, while painful for many, might have been the dose of medicine that we needed to inject realism into personal borrowing and spending limits. Those who suffered problems in repaying credit cards, or who lost their jobs, might think twice about the necessity of future purchases (although this is not at all to suggest that all of the sufferers of the downturn were negligent in their spending habits in the past – many people are unlucky to have been in the wrong place at the wrong time …). Lessons might have been learned that mean for at least the next few years a more cautious approach is taken to consumption.
Consumption trends are partly also driven by the combination of marketing, personal desire and savings attitudes (ignoring an underlying level of spending on basic needs). Demand still exists for the latest, ‘hot’ new products (iPods, iPhones, football shirts, latest films, best seller books, etc.), however there recently appears to be some change in attitudes, towards greater focus on ‘life’ – health, fitness, family and friends, etc. While this might drive some further spending (running gear, gym memberships, dining, etc.) as we exit the recession, it seems not to be the same as the excessive product focus of the last decade.
At the same time, there is a widespread feeling that conventional marketing methods (for example, billboard or TV advertising) are slowly becoming less effective, while new advertising methods (eg, internet based advertising) are offsetting some of the decrease in conventional marketing. Perhaps people are simply becoming immune to the onslaught of marketing they face each day – more targeted, relevant advertising might mean that we each receive less advertising (and importantly, less of the frustrating, irrelevant ‘noise’ that we are forced to endure – eg, sitting through dog food adverts on TV, when you don’t have a dog …). I recently blogged on Google’s Interest Based Ads (here) which is an example of how targeted advertising is beginning to happen.
Could these trends be an indication of the initial stages of new, stable and conscientious ‘savings and spending’ habits? If so, we may well be in line for less extreme ‘boom-bust’ cycles in future years, and hopefully greater stability at sensible levels of consumption that are still sufficient to allow the economic wheel to continue to turn. Hopefully a more frugal future won’t mean a less exciting one, but perhaps result in greater focus on things that a freely available to us – things that used to have greater focus in the past: family, friends, nature, etc. This is perhaps what many people refer to when they talk about “the good old days”.
Filed under: Global economic environment | Tagged: From Bubble to Depression?, Global economic environment, Intelligent Life, Interest based ads, internet advertising, Nick Coleman, reckless consumption, The Economist, The i-Decade, Vernon L. Smith |