Archive for April, 2005
A few weeks ago, we observed that Jamie Oliver’s documentary on school dinners was a seminal moment for Big Food. It blew the lid on the link between junk food, behaviour and academic achievement and showed a way to reverse a long-term trend. The subsequent press coverage and government intervention into school meal provision seems to confirm that a tectonic shift is now occurring. At the risk of our succumbing to the overconfidence bias we point out in others, we’d like to claim a similar tipping point may have been reached yesterday in the discussion of the economy. The critical moment is the public admission by former BBC arts correspondent and Sunday Times property columnist Rosie Millard that she is Â£40,000 in debt and her bank accounts have been frozen.
Characterizing herself as an “impoverished professional,” she claims to be typical of an entire generation of high achievers who are maxed out on their numerous rotating 0% credit cards, still spending hard, but increasingly on the run from bank managers, with apparently no way out but to get rich parents to bail them out. Lacking rich parents, they would liquidate their multiple housing assets, purchased on chit as holiday homes or pension-vehicle buy-to-lets.
The article is important because Millard is a familiar figure in the press, and moreover has been an advocate of leveraged property investment through her columns in the newspapers. It permits other journalists to comment on her circumstances, search out other similar “sad” souls, and invent yuppie-like acronyms.
In effect it creates a new genre of comment following the consumer boom and housing boom focussing on the real difficulties of the over-extended. It also moves the debate about the sustainability of current economic growth away from the academic arguments of the City economists, Gordon Brown and Bank of England. It feeds our appetite for the anecdotal. As such, for many commentators it will “prove” that credit is too loose and the consumer boom is artificial. It will show the link between consumer spending and the housing bubble and the negative effects that the bursting will have on the wider economy–a link that the Bank of England was anxious to claim had been broken when the housing market first showed signs of slowing.
The role of press comment in fuelling booms and busts has been highlighted by behavioural economist Robert Shiller, most notably in his book about the dot.com bubble “Irrational Exuberance.” So identifying trends in press coverage has some value. In the past, The Economist has done this monitoring by monitoring the use of the word “recession.”
The tenor of headlines on the housing market is already mixed, but consumer confidence has probably not been completely eroded. Millard’s piece creates open season for the press to “amuse” us with shocking stories of mad spending and distressed debtors. Talk of a consumer slowdown/collapse will join the emerging cliched discussion of a housing market gradual slowdown/crash, creating a self-reinforcing process of greater caution throughout the economy.
Above all, while for several years it may have seemed necessary, if not sensible, to make a whole range of lifestyle choices, purchases and financial decisions “to keep up with the Millards,” this article, and others to follow removes that competitive consumption imperative and behoves greater prudence. From such behavioural switches are consumer recessions born.Donate and help me buy back my Fender ('About' tells you why)