Those are the expectations of Harvard University history professor
Lizabeth Cohen, who explored the rise of the consumer-driven
economy in her 2003 book "A Consumers' Republic: The Politics of
Mass Consumption in Postwar America." "Consumers' Republic" is the
name she gives to the economy, culture and politics that put the
consumer at the center of the economy.
"I think we got to the crisis as an apex of the Consumers'
Republic," Ms. Cohen said in an interview. "That private
consumption had risen to 70% of GDP, that we had home ownership
that had expanded so extensively, that all these people were maxed
out on credit cards -- all of that was the nightmare fulfillment of
the promises of the Consumer Republic. Now that it's crashed, it
will be interesting to see how it's reconstructed."
"Consumers' Republic" traces the origins of the
consumption-driven economy back to the Great Depression, when
policymakers identified the consumer as the agent for expanding the
economy and broadening prosperity. After World War II, government
policies (the G.I. Bill being the most famous) and private-sector
initiatives made that happen. Consumers were seen as the engine of
growth; in the book Ms. Cohen quotes President Dwight Eisenhower
touting consumer spending as critical to getting the country out of
a recession.
In flux
The Consumers' Republic was a constantly evolving thing,
influencing and shaping everything from the civil-rights and
feminist movements to the rise of suburbanization to the
development of market segmentation.
The current recession, financial crisis and tightening of credit
likely will force a new evolution. "It may be less than it was, and
it may be more realistic than it was," Ms. Cohen said. "We were in
a situation where we would put up a new mall, and one that was open
for 15 years would close. There are certainly going to be
adjustments."
What adjustments might we see? While saying she's a historian
and not a predictor, Ms. Cohen sees potential for:
- A move away from the exurbs,
partly due to rising energy costs.
- Increased regulation of the
financial sector, something we've already seen with credit cards.
"In some ways you could argue it was inevitable as people became
increasingly dependent on credit, more people became homeowners,
more people became stockholders."
- More difficulty getting a
mortgage.
- Differences in the way
purchases are financed.
The first challenge is getting off the blocks. The old answer --
get consumers spending -- is problematic in light of the bursting
of the housing bubble, defaults and wallets already being
stretched. Moreover, people are saving more after watching their
retirement plans get whacked. And even people who have jobs are
nervous. Indeed, Ms. Cohen said she sees a role for government ??
in health-care reform -- to make people feel more confident.
"The economy will start growing again if people feel more
secure," Cohen said.
In any event, Ms. Cohen said she is confident that savvy
marketers will continue to find ways to sell in this
environment.