Here is a follow-up to my New York City post a few weeks ago, just focusing on a different city, Boston, MA. These are not my words, they are from a well known site Itulip, which is run by Eric Janszen. Eric begins by discussing the consumer psychology in a depression and continues into some examples that he is seeing.
"What impresses us most is how unimpressed many appear to be about the seriousness of this depression. They ask why many restaurants are still busy and why many malls are still busy, even if apparently the shoppers in them are buying less. Where are soup lines? Where is the high crime rate?
We remind them that we are only one year in to a multi-year process.
The average man or woman does not change his or her behavior until years after an economy has changed around them. No one likes change, even positive change but especially negative change. The tendency is to ignore change as long as possible, and hope it goes away and "normalcy" returns. Meanwhile, change goes on.
This depression is transforming the world around us. If you don't think so, I encourage you to take a closer look. On the surface much appears to be the same as two years ago, but under the surface much has changed and is changing, shifting relationships among friends, families, and colleagues. Changes in circumstances effect the range of choices people can make. They make different decisions than before. Different decisions produce different results. Those results impact someone else's decisions. Collections of decisions combine in unexpected ways. One of the most obvious is that consumers buy less. As they do, after a lag, they will find that they have less to buy.
The Great Depression is taught in American schools as a market crash on a Monday in October 1929 with soup lines forming shortly thereafter. Blurred over are years of failed trial and error policies by politicians who desperately wanted to undo the damage caused by the preceding decade of credit excess. But as time went on, the damage that started off as abstract data on output and debt and incomes began to show up unmistakably in the physiognomy of economic depression. That itself will later to have consequences, feeding back into changes in behavior.
To get a street level view of this process, I brought my camera with me on my latest bike ride into Boston from the western suburbs where I live. On the usually pristine Minuteman Bike Trail that I ride on as far as Arlington, not seen on previous trips over the past ten years are now graffiti, piles of burned trash, groups of teenagers hanging out, and police cars parked on the side of the trail. Nothing says “things are not going well at home with Mom and Dad” like graffiti on the side of a boutique grocery store.
Riding down Newbury Street, Boston’s posh shopping district, I took 15 pictures of retailers that had gone out of business, eight of them side by side. So desirable is the location that even during the 1980s recessions a single vacant Newbury Street shop was a rare sight."
I will again come back to the idea that the U.S cities that decided to base their underlying economic strength on financial and retail sectors will have a hard time regaining their dominance. Again I ask, what will be the next great financial center of the United States?