The recession will end, even this one. But it won't be back to the usual, it won't be back to the "happy days" of inflated real estate and easy profits on Wall Street. We're in the middle of a huge social shift, not unlike what happened in the 1960's. My guide to understand what's happening is Albert O. Hirschman.
When the IT- and telecom bubbles burst, there was a blip when people sat down and asked themselves what the meaning was with it all, but Osama bin Laden shook us out of all that, and George W. Bush took the opportunity to launch a couple of wars while lowering taxes on the rich, which got the economy started again, even though it was heading down the wrong way leading to the Great Recession of 2008.
But there was an underlying shift going on, a shift of the type Albert O. Hirschman discussed in his brilliant little book Shifting Involvements - Private Interest and Public Action (Princeton University Press, 1982, 2002)
The "me first" era had run its course and no Hummer or three-car garage could ease our existential pain, or address the large public issues that loomed ever larger at the horizon (war, poverty, health care for all, global warming, infrastructure...). The failure of private solutions lowered the alternative cost of public action, which we saw in the tremendous outburst of support and volunteering for the Obama campaign.
The shift from private to public emphasis helped prepare us for the challenges we are now facing, and it will be strengthened by the impact of the recession. This was illustrated well in Peter S. Goodman's story in the New York Times on August 28: Reluctance to Spend May Be Legacy of Recession
The Great Depression imbued American life with an enduring spirit of thrift. The current recession has perhaps proven wrenching enough to alter consumer tastes, putting value in vogue.
“It’s simply less fun pulling up to the stoplight in a Hummer than it used to be,” said Robert Barbera, chief economist at the research and trading firm ITG. “It’s a change in norms.”Not only will they save more, they will take part in public life much more as their private options are limited when dealing with huge collective problems.
“Not only have people lost money, but they don’t expect as much appreciation in the money they have, and that should affect consumption,” said Andrew Tilton, an economist at Goldman Sachs. “This is a cultural shift going on. People will save more.”
That's bad news for conservatives who live off fear and government-bashing.