For all the uncertainty about the current state of the economy, everyone is sure of one thing: this recession has permanently remade American consumers, turning them from spendthrifts into tightwads. From cover stories on “The New Frugality” to stories about cheapness as a new status symbol and pundits’ repeated analogies to the lessons inculcated by the Great Depression, the message is the same: there has been a fundamental change in American consumer behavior, one that will endure after the recession ends, returning us, as one economist put it, to “the days of ‘Leave It to Beaver.’ ”

Illustration by Christoph Niemann

The assumption that consumers have fundamentally changed is understandable. Personal spending is down sharply from 2007, while the national savings rate, which dipped below zero a few years ago, went above six per cent earlier this year. But although analysts point to the numbers as proof of a new mind-set, you don’t need psychology to explain what’s happened: simply put, Americans have been spending less because they have less money to spend. After all, in the past two years, nearly seven million jobs have been lost and wage growth for people who have kept their jobs has been anemic. At the same time, the housing crash and the stock-market meltdown erased, conservatively speaking, about thirteen trillion dollars in household wealth. Given the well-known wealth effect—people’s tendency to spend more when they get richer, and vice versa—that alone would translate into an expected drop in personal spending of between five hundred and seven hundred billion dollars.

In fact, you could argue that consumption has actually fallen less than might have been expected. Spending did drop off the proverbial cliff in the fall of 2008, in the direst phase of the financial crisis, but it stabilized at the beginning of this year, and has now risen for four months in a row. And much of the decrease in consumption since early 2008 can be traced to a drop in spending in just two categories: gasoline (thanks to lower prices) and cars. The decline in new-car purchases has been so steep that the average life of a car on the road today is at a historic high. This is just one example of how better product quality makes it possible for consumers to cut back without experiencing much decline in their standard of living. We can delay buying a new car because the one we have can be driven hundreds of thousands of miles without problems—making the auto industry a victim of its own success. Nonetheless, the response to the Cash for Clunkers program indicates a certain amount of pent-up demand out there.

Of course, none of this precludes the possibility that our frugal ways will endure even after the economy starts to recover. But there are reasons to be skeptical. Recessions regularly give rise to assertions that consumers will begin spending more responsibly. Toward the end of the 1990-91 recession, for instance, Fortune reported forecasts of the “death of conspicuous consumption.” Time ran a cover story on the return to the simple life, arguing that “after a 10-year bender of gaudy dreams and godless consumerism, Americans are starting to trade down.” Consumer-behavior experts predicted that people would be more frugal in the nineties, and consumers themselves said they planned to cut back on spending. It didn’t happen. A decade later, the bursting of the Internet bubble and the impact of 9/11 led many to predict that Americans would consume less—and we all know how that panned out.

This is a far more severe and traumatic recession—the worst downturn since the Great Depression. So, just as the Depression, as the Times put it, “imbued American life with an enduring spirit of thrift,” won’t this recession make Americans thrifty again? Maybe. But the current downturn, bad as it has been, is nothing like the Depression, which lasted a decade and saw unemployment hit twenty-five per cent. What’s more, the notion that the Depression turned Americans into tightwads is largely a myth. In fact, it was after the Second World War that America really came into its own as a consumer society. In the five years after the war ended, purchases of household furnishings and appliances climbed two hundred and forty per cent, while between 1940 and 1960 the rate of homeownership rose by almost fifty per cent. If the Depression didn’t make Americans wary of the pleasures of consumption, it’s unlikely that this downturn will.

This doesn’t mean that we’re going back to the days when the average American saved not a penny of his paycheck. As people try to rebuild their nest eggs, the savings rate is bound to remain higher than it was a few years ago. And what we spend our money on will change, too; housing costs, which were the central cause of the rise in Americans’ indebtedness in recent years, should eat up less of our budgets in the future. But the evidence for a radical shift in the way we consume seems more like the product of wishful thinking (there’s a palpable longing among pundits for Americans to become more frugal) than anything else. In many categories, spending has dropped only slightly, if at all. And, while these are very tough times for retailers who believed that spending could only go up, retail sales rose briskly in August. Before we go proclaiming this the age of the American tightwad, a little perspective is in order. Even after the worst recession of the past seventy years, retail sales this year will be about where they were in 2005. Does anyone really think that four years ago Americans were misers? ♦