Plus Ça Change

great depression-irony

The reappearance of Napoleon III after the revolution of 1848 in France prompted a journalist to utter the memorable epigram, "Plus ça change, plus c'est la même chose." Dripping with irony, its English equivalent is, "The more it changes, the more it’s the same thing." The phrase seems to fit the behavior of consumption patterns in the US as the debris from the financial crash is slowly being cleared away. The initial severe drop in consumption spending was thought by the sustainability optimists to signal a structural change. The financial straits was forcing many to look closely at their life style and, realizing the unneed (seems like a good neologism here) for many things, begin to shift toward a lower level of consumption, making do with less. The winner in all this was to be the Planet, now able to escape from the huge burden hyper-consumption creates.

The hope of those optimists seems to be fading, as data on more recent consumption indicators show a return to the earlier, well established patterns. Daniel Gross, writing in the NYTimes, sees a return to the same old, same old.

Meanwhile, as the economy slowly recovers, there are signs that Americans are rediscovering their free-spending ways. Total consumer credit, which includes non-revolving debt like car loans, has stabilized, and it rose in both June and July. It’s back to where it was in the second quarter of 2009. Collectively, we don’t seem to have run our credit cards through shredders. Mailboxes are again stuffed with credit card solicitations. Newspapers are filled with come-ons from car dealers offering zero-percent financing. The Federal Housing Authority offers mortgages on houses for as little as 3 percent down. You’d be forgiven for thinking that we’ve flown back in time to September 2006.

Should this come as a surprise? No. The conventional wisdom's solution to everything bad caused by the crash is growth, growth, growth, as quickly as possible. Not just growth, per se, but growth fueled by more debt--that very thing that brought down the economic house of cards. Gross writes, "The renewed willingness and confidence to spend money we don’t have is vital to the continuing recovery." Perhaps true in the isolated world of economics. But in the real world, the ability to consume tomorrow's real wealth today is a moral hazard. It creates an economic system that is unsustainable, and it makes it too easy to ignore the consequences of all that stuff on the Planet. Another epigram works to end this post. There's no free lunch.