Economics columnist Robert J. Samuelson says that the reason economic recovery is so slow in coming and the unemployment rate so high is a shift in the national psychology:
We have gone from being an expansive, risk-taking society to a skittish, risk-averse one. Before the 2008-09 financial crisis, the bias was toward more spending. The inclination was to surrender to immediate gratification. Want a new car? Sure, why not? More meals out? Great idea! Businesses behaved similarly. Banks made the next loan; companies hired the next worker and approved the next investment project. An ever-expanding economy justified optimism, and optimism supported an ever-expanding economy. Hello, bubble.
The psychology has now reversed. The bias is against extra spending. Eat out? Try leftovers. Remodel the basement? Oh, leave it alone. In the boom years, the personal saving rate (savings as a share of after-tax income) fell from 10.9 percent in 1982 to 1.5 percent in 2005. Now it’s edging up; from 2010 to 2012, it averaged 4.4 percent. It could go higher, imposing a further drag on the economy.
Businesses have also retreated. They resist approving the next loan, job hire or investment. . . .As I’ve written before, this psychological shift stemmed from the fact that the financial crisis and Great Recession were largely unpredicted. Americans aren’t just deleveraging. They’re also building wealth to protect themselves against unknown dangers. . . .
We are hostage to a stubborn, restraining psychology. There’s no obvious fix for slow job growth, precisely because it requires a change in public mood or some autonomous source of added demand — a burst of exports, investment in new technologies — not easily predicted or controlled. It could happen but is hardly guaranteed.
Is this necessarily a bad thing? Does an aversion to risk threaten the promises of free market economics?