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It’s been so long since we’ve had an economic downturn that people have forgotten recessions are about being fired, losing your home, and companies going under.
The mainstream press is instead treating the recession more like a seasonal change in fashion.
In a strange echo of the frivolous attitude that stoked up the debt bubble in the first place, much of the media seems to see the recession as a new ‘story’, just as they’d salute skirts going back above the knee or the return of cashmere.
Over the past few months I’ve noticed:
- Articles in glossy magazines explaining how to throw a thrifty Christmas party, with top tips such as forgoing a party bag for each guest, and plumping for free-range turkey instead of a goose for that special retro touch
- Fashion writers talking of a new austere mood on the catwalks, which supposedly means that a £5,000 jacket with a few less shiny buttons is in touch with the times
- Photos of well-groomed kids tumbling out of Range Rovers in remote corners of the country in articles extolling the joys of a stay-at-home holiday
- Countless jokey references to the credit crunch and resultant penury throughout the lifestyle sections of newspapers and magazines
I don’t want to sound too mean-spirited about this; lifestyle journalists have mortgages to pay, too, and I’ve nothing against a bit of fun to brighten up dark times.
But what worries me is that for the average person in the street, these silly articles constitute their main information diet for dealing with the recession!
Wake-up call to the world: The recession is not a lifestyle choice.
The economic downturn isn’t about wearing coats that hark back to the Great Depression, or donning a 1950s apron and making an ironic return to the kitchen to bake grandma’s cookies.
It’s about seeing your friends and family lose their jobs and homes, and their lives changing forever. And it’s about trying as hard as you can to make sure that doesn’t happen to you.
The mainstream media is lost for words
Personal finance bloggers have written sleeves-up articles on coping with the downturn, as have a few of the financial and money-focused sections of the mainstream media.
I made a modest contribution to this archive of practical advice with two fairly well-received early articles on quick financial checks to make in the face of the credit crunch, as well as some follow-up tips.
Now nearly a year has passed since I wrote those pieces, and events and the outlook has turned gloomier.
What started as a financial correction has now spread out to infect the entire economy. Governments turn from nationalising banks to bailing out homeowners to increasing taxes as they struggle to deal with a situation outside the current generation’s experience.
Again, the mainstream media seems to have two responses:
- Either scaremongering: “It’s worse than the 1930s, the banks are all bust, the politicians have lost control, cue doom-and-gloom music”
- Or, frivolity: “Don’t worry, the recession will provide a great inspiration for some 1960s-style protest songs, and also enliven mealtimes“
This all-or-nothing approach is a particular disservice to young people, who’ve never lived through a recession before.
I grew up in the 1980s – a time characterised in the UK by boom-bust economic turmoil, long cues of the unemployed outside what were then called ‘dole offices’ (they have a more euphemistic name today), daily counts of job losses on the Six-O’Clock News and running battles between miners who were seeing their livelihoods shipped overseas (rightly, in my view, but still painful) and a politically-tilted police force.
The politics and impact of recession were a fact of every day life back before the long boom began.
Even in the early 1990s, when I went to university in London, the signs of economic difficulty were still all around.
When I was a student, ‘thrifty chic’ really was fashionable; students hadn’t yet been taught to accept huge debts as the price of an education, mobile phones were barely invented, and the average 19-year old would no sooner expect to ‘Get the Look’ of a Hollywood celebrity than they’d imagine their coursework would get the recognition of a paper from Einstein.
This was the era of the scruffy grunge bands, as well as house music in the UK. Both had a come-as-you-are ethos that made living cheaply no problem for young people caught up in them.
The ‘slacker’ attitude captured by books like Douglas Coupland’s Generation X wasn’t some manufactured media response to recession: it was a very real reflection of the times. Students then were being told that for the first time in living memory they’d retire poorer than their parents, while in that pre-Internet era, technological revolution in the West seemed to have halted. The world belonged to the Japanese, and Western kids were marking time.
We don’t know how not to grow
It’s hard to cast your mind back and remember these differences, without coming across like a working-class parody from Monty Python.
Besides, as mentioned recessions weren’t unusual 15-20 years ago. But the dotcom crash aside, modern times in the West have been characterised by expansion, and an apparent (but illusory) mastery of the financial system.
This meant we were primed for a ‘Minsky moment‘ – an idea that arose from U.S. economist Hyman Minsky’s famous proclamation that ‘stability is unstable’.
We saw the consequences of that complacency over the past decade, as banks lent too much money, people borrowed too much, and financial speculators and investors kept fuelling the expansion, confident that Alan Greenspan and the Fed would cut interest rates to keep the party going.
Financial institutions took on far too much risk – or worse didn’t understand the risks – while the systematically dismantling of checks-and-balances and the general deification of investment bankers and fund managers allowed for personal greed on a breathtaking scale.
Now that world has unwound, we shouldn’t be surprised that the financial shock has been followed by a philosophical shock to the system.
The mainstream media doesn’t know how to report bad economic news, let alone offer any practical advice, because for the past decade it’s played the role of choir to the debt binge, rather than questioner and court jester.
Instead of querying the basis for the ridiculous house price bubble, for instance, the media mainly pumped out TV shows asking why buy one house when you could own two by taking on more debt.
Anyone with a contrary view was laughed at.
I know from personal experience, having pitched an idea to a contact at a national newspaper, only to be told that, effectively, that house prices didn’t ever go down.
Blogs are more in touch than the mainstream press
I’m not naive enough to think the press can or should present a 100% dissenting line as a matter of course, nor do I think that journalists were any better qualified than policymakers to understand our shifting attitude towards debt.
And there were, of course, a few sane voices
The trouble is these so-called ‘doom-mongers’ got drowned out and discredited by being proven wrong as house prices somehow defied gravity and kept rising, leaving the skeptical poorer as well as looking foolish.
That’s all changed now, but the editors and journalists writing today about the recession are the same ones who helped inflate the bubble.
And we can hardly expect a media that grew up in such a benign climate to be best equipped to deal with the recession now unfolding.
Publishers and broadcasters are stuffed with fluffy lifestyle writers who can’t do much more than throw a Kath Kidson-patterned cloth over the bad news and suggest we eat more porridge with a knowing nod.
And financial journalists who overwhelmingly said there was no house price bubble aren’t the men and women to understand the aftermath of it blowing up.
Do I have all the answers? Of course not. (For that matter, more humility would be a good medicine for the mainstream media, too). But I’d suggest the personal finance ‘blogosphere’ can offer a very helpful contrary viewpoint right now.
I think personal finance bloggers are more in touch with what’s happening on the ground, and more attuned to their reader’s real concerns (hint to big media: that’s not whether red is an appropriate colour for a recession).
Personally, I think it’s not impossible that the worst is over for investors, but that’s definitely not true of the general economy, where things are certain to get much worse before they get any better.
As a self-employed consultant, for instance, I’m finding several of my usual revenue sources drying up, and tomorrow I’ll post an article offering some thoughts on securing your income in recessionary times.
For now though, here’s some really useful blog articles on coping with the recession:
- Forty ways to reduce your monthly spending at The Simple Dollar
- Nickle and dime tips for young people at Studenomics
- How to rent out a spare room at Get Rich Slowly
- Top ten reasons you’re not finding a job at Free Money Finance
- Five clear signs your job is in danger at Saving to Invest
You might also Portraits of an Economy for personal tales from the front line of the recession.
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It comes down to maths. The return on capital (5% real p.a. for global equities on average since 1900) tends to exceed the return to labour (a reasonable proxy for which might be GDP per capita, which has grown by no more 2-3% real terms p.a. over sustained periods in the developed economies, at least in normal times).
The best hope for most now is to start investing as much as they can into a S&S ISA for their children from birth up to 18 and to then encourage them to continue to invest throughout their own working lives so that by the time they retire in their 70s they’ll at least finally become financially secure.