Tis the time of year for predicting what lies ahead. I’ve been scanning the internet and peering into my crystal ball. I’m not claiming any special powers, but the following predictions seem to make sense to me.
1. Economic growth, as measured by GDP, will be negative for all of 2009 largely due to the contraction in consumer spending and investment. The only segment that has the potential to offset these declines is reduction in the foreign trade deficit. We will import less, but we do not have the manufacturing capacity to increase exports by any significant amount. Net effect: economic contraction with significant loss of jobs and consumer spending in freefall.
2. Adaptations by consumers as they struggle to cope. Emphasis on frugality and thrift. Aversion to messages that trumpet luxury and excess.
3. Growth of the “other economy” that produces goods and services that do not get counted in GDP. An upswing in cooking at home, vegetable gardening, crafts, DIY projects and repairs, at-home entertainment over going out, “staycations”. Consumers will take pride in self-sufficiency and taking part of their economic life back into their own hands.
4. Related to this, growth in consignment stores and resale businesses, as people sell what they are not using in order to raise money and simplify their lives. Or, when they do buy, look for second-hand bargains. An increase in bartering - for childcare, professional services, etc.
5. Growth in home-based and small businesses as people struggle to find ways to make a living when there are very few employers willing to hire.
6. Greater importance of digital media sites like YouTube, Twitter and Craigslist, using them as tools to connect, do business and gain access to free information and entertainment.
7. Suspicion of any investment that is not real and tangible. More government spending in infrastructure - rail, roads, bridges, schools - and an emphasis on projects that bring benefits to the local economy. But the effects on this new “new deal” will not be felt until 2010.
I believe we are experiencing a major shift in consumption patterns that will last for many years. Already, I am hearing people talk about the silver lining in this economy - the reemphasis on simple pleasures and a home based life, the demise of greed and selfishness, and the hope that eventually everything will be fine. Let’s hope the optimists are right.
Happy New Year!
{ 2 comments… read them below or add one }
Frankie, you’ve been describing this retrenching and simpler life for quite some time. I would have been quite content with the accuracy of your prediction without the economic meltdown to accompany it. Nevetheless, I am always impressed with your observations and predictions, and happy that more people will get to “hear” your point of view (through this blog) and benefit from your insights and provocative wisdom. Now, back to my home-cooked meal and rented (red box for $1) video. Joan
Hey Joan. Thanks for the kind words and encouragement. And see, I’m already right. You, my glamorous Manhattan friend, are going simple on New Years Eve…. surely a sign! And, here too, the kiosk in my Safeway has the latest movies for $1 versus $4.25 at Blockbuster… life is good.
Happy New Year!