Psychology of a Recession

Yesterday's quick hits had a piece from USA Today about young people opting for a simpler lifestyle in today's troubling economy. The title actually diminishes the core of some interesting facts about how these tough times are changing an entire generation mentally as well as economically.

"But what [Millennials] all have in common is the knowledge that the recession has in some way shattered the world they thought they knew. And, depending upon how long the downturn lasts, historians, economists and psychologists say it could shape Millennials’ values and attitudes in much the same way the Depression shaped the attitudes of those growing up in the 1930s.

"I call it the end of Disney World," says Michael Bradley, an adolescent psychologist in suburban Philadelphia. But now, young people are reordering their values.

With an unemployment rate twice the national average, debt piling up from student loans and predatory lending, and shrinking access to affordable health care, economic stability can seem like a pipe-dream to many. The emotional toil this takes manifests itself into shrinking birth-rates, reduction in advanced degrees, marital instability, and all sorts of general unhappiness.

"It is their version of the American Dream," says Dr. Bradley. "They talk more about having autonomy and freedom, and in so doing, not being as enslaved to material goals that they perceived their parents being caught up in. They do talk about life happiness not based on economic success or achievement as much."

Emotional struggles due to personal financial instability are just the tip of the ice berg. David Callahan senior fellow at Demos and the author, most recently, of The Moral Center has an op-ed in Democracy about the market of morality. We're also facing an emotional mistrust from our financial institutions, but Callahan believes that Americans are easy to forget instead of a reverberation through a generation of Americans.

"In 2002, as Enron, WorldCom, and other scandals engulfed the business world and the Dow completed a 38 percent dive from its 2000 high, 38 percent of Americans thought that big business posed "the biggest threat to the country"–the highest point since Gallup started polling nearly 40 years ago. But by 2004, with the Dow back above 10,000, that number had fallen to 27 percent, and the corporate scandals barely registered that year as a campaign issue.

"The current crisis is far bigger, and public anger at Wall Street and corporations is as hot as any time in memory."

While Callahan believes today's crisis might be forgotten once the problem itself is gone, I question whether the emotional scars from this kind of fear is possible to completly heal. Enron, WorldCom, and the other scandals were indeed so catastrophic that industries across the country faltered in the wake, but the stigma that business has suffered as a result will forever be implanted in the minds of Americans not to mention the hundreds of employees that were affected in the process.

Today, because more are directly impacted by the crisis, I think the psychological trauma will be much more long lasting and only build on the hardly healed scars of the corporation scandals of 2002 and 2003. Of course our banks and mortgage institutions hurt so many people... of course Madoff was able to steal so much... Enron did it with one arm around the neck of a President.

While Dr. Bradley says that material possessions will fall by the wayside for Millennials, I think too trust in financial institutions will follow much in the way it did for our grandparents after the Great Depression.