Spending and Saving

Thrift Today, Gone Tomorrow

The global recession that began in 2007 revived Americans’ interest in an old-fashioned virtue: thrift. And some say it will last — but history says otherwise.

Thanks to shriveling job and stock markets and plummeting real estate values, saving money have become all the rage, and Americans en masse are re-using their tin foil, cutting coupons and boasting about their thrift-store bargains. (Read 13 Thrift Store Shopping Tips.) Conspicuous consumption is out, conspicuous frugality is in. Economists and pundits have pronounced the arrival of a new era – the era of like-it-or-not thrift.

Over the last few months, we’ve seen signs that the economy is perking up. The housing market is leveling out, growth in parts of Asia and Europe has been surprisingly robust, and many forecasters expect the U.S. economy to grow in the second half of the year. (Though Some Smart People Say We’re Still Kinda Screwed.)

Even during periods when thrift was framed as a virtue, it turned out to be a virtue Americans couldn’t wait to relinquish.

But one important piece of the puzzle – consumer spending – has remained stubbornly low, and economists and policy makers worry that consumption won’t ever climb back to pre-recession peaks.

We’re witnessing “a huge seismic shift – a return to savings by American consumers and a shift away from spending,” Allen Sinai, president of consulting firm Decision Economics, told the New York Times in August. Like many others, he suggested that the change in Americans’ shopping habits might signal a long-term adjustment, if not a permanent one.

But take a glance backwards. In hard times, Americans have hunkered down, made do with less and proclaimed their commitment to frugal living. Yet when the danger passes, they have cheerfully reset their appetites—even a notch or two higher than before. In fact, even during periods when thrift was framed as a virtue, like in the run-up to the Revolutionary War or during the Depression, it turned out to be a virtue Americans couldn’t wait to relinquish.

Colonists protested British tariffs by boycotting imported fabrics and tea in the years before the American Revolution. They donned coarse, domestically-produced textiles called “homespun” and drank infusions of local herbs to demonstrate their patriotic fervor. But as soon as the war ended, Americans enthusiastically bought imports such as elaborate rococo furniture from France and porcelain tea sets from England, often on credit.

Observing the public’s appetite for luxuries and modern conveniences, some patriots despaired that the Revolution had failed. “I consider the extravagance which has seized them as a more baneful evil than toryism was during the war,” Thomas Jefferson wrote to a friend in 1786. “Would a missionary appear, who would make frugality the basis of his religious system, and go through the land, preaching it up as the only road to salvation, I would join his school.”

Thrift was also practiced as both a necessity and a virtue during the Depression, a time when Americans grew their own food and made clothes out of old flour sacks. There was talk then that citizens were so scarred by the years-long trauma that they’d never be willing to take out a mortgage or splurge on an automobile again.

But when the economy ramped back up – thanks largely to the government stimulus program known as World War II – Americans could hardly be restrained from releasing their pent-up demand. Only forced rationing helped them keep their money in their pockets while the government steered resources toward the war effort. After the conflict ended, Americans spent heavily on washing machines, cars, suites of bedroom furniture, vacations to Miami and suburban houses. Total household debt jumped from $5.7 billion at the close of 1943 to $23.9 billion in 1950 – an increase of 419 percent (or an inflation-adjusted 303 percent).

So are we witnessing today a permanent – or even a long-term – shift away from conspicuous consumption and toward austerity? I doubt it. Like most things in history, virtues operate in cycles. In the 1980s, greed was good, said Gordon Gecko; by the recession of the early 1990s, Americans were chastened and the “voluntary simplicity” movement enjoyed brief prominence. During the bubble of the 2000s, Americans fetishized hedge-funders’ 12,000-square-foot homes; now we crow about our pious cancellation of cable television and gym memberships.

I would like to be proven wrong. As a lifelong cheapskate – and the daughter of a man who once tried to save money by rationing our family’s toilet paper – I believe that thrift is a key ingredient for restoring some kind of fiscal balance in our own lives and in the broader economy.

But economists and politicians who are anxious about consumer spending have little to worry about. It will come back, even if it takes a few more green shoots (and, most likely, a drop in the unemployment rate). It’s those of us who are cheered by the frugal revival who will be disappointed once again.

Lauren Weber, author of the new book In Cheap We Trust, grew up with a father who rationed toilet paper and rarely used his car’s turn signals (to prevent them from burning out). She attended Wesleyan University and was a Knight-Bagehot journalism fellow at Columbia University. Lauren was formerly a staff reporter at Newsday and Reuters, and has also written for the New York Times, Los Angeles Times, and other publications. Visit http://laurenweber.com/ for more information.