For 200 years (roughly 1780-1980) every single adult knew of some consumer product that he couldn't afford but yearned for because the next higher class was flaunting it. So, whatever his discretionary income, be it ever so small (200 years ago), the next desirable product was identifiable and was saved hard for. Those products of the first 100 years or so we would now regard as trivial. Those of the last 100 years were not so trivial -- radio, telephone, car, fridge, central heating. All iconic products start out by being very expensive. But, increasingly mass-produced, they work their way down through successive classes. They motivate everyone to buy something at some income level or other.
Where are the new iconic products? There aren't any. They petered out at around 1980 and it was then that the financial sector then started throwing credit at consumers to keep them buying new embellishments of old products, not uniquely new ones. But now, since the credit-crunch, we are now into a no-growth economy and it may be a very long time before a new situation emerges. Keith Keith, as usual you attribute America's and the world's economic woes to the absence of new iconic products, your argument being that the lower classes of society look up at the consumer capital goods that the classes above them have bought and, in a fit of envy and emulation, save like hell so that they can buy them too. You say that new iconic products petered out at around 1980 and that, funded by consumer credit, people have been doing little beyond buying embellishments of old products, etc. So, there isn't really that much to spend on and, hence, the downturn, etc. An item in today's Washington Post suggests another reason for limited consumer spending: "A majority of Americans now say they are worried about making their mortgage or rent payments, underscoring the extent of economic anxiety in the country heading into midterm elections. ... A new Washington Post poll shows that concerns about housing payments have spiked since 2008 despite some improvements in the overall economy. In all, 53 percent said they are "very concerned" or "somewhat concerned" about having the money to make their monthly payment. Worries are the most intense among those with lower incomes and among African Americans." So, people may not be spending because they are trying very hard to pay their mortgages or their rent. Nevertheless, your argument about spending being driven by consumer envy may still make sense. Soledad O'Brian's CNN program on Black America the other night was on the problems black middle class Americans are having in staying in their homes. Both working parents in the family she featured made their money on commission. Their income had fallen quite drastically during the past year or so and they were having a lot of trouble in meeting their mortgage payments. Little wonder, considering the house they were living in. It was huge with a two or three car garage and a multiplicity of rooms. It had obviously been bought out of a feeling of entitlement when things were going well but was far too elaborate and costly now that good times were over. What this suggests is that iconic new products can take a variety of forms, bigger and more elaborate housing for a rising middle class emulating the rich for example. What it also suggests is that there is little that is certain in the economy; you may be seeing yourself rising upward one year only to be sinking the next. It's an uncertain world, and as Chris keeps telling us, the predators wanting to sell you something you can't afford are never far away. Ed
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