People who grew up during the Great Depression often turned into compulsive penny-pinchers, unable to spend money without anxiety. Will recent recessions leave similar psychological scars on people growing up today? A new study by economists suggests they will.
The Boston Globe's Christopher Shea has a terrific discussion of the study on the Brainiac blog:
Giuliano and Spilimbergo made use of the General Social Survey, which has recorded political attitudes among the American public since 1972. The specific questions Giuliano and Spilimbergo explored were whether living through a recession in one's "impressionable years"—defined as 18 to 25—influenced Americans' views on the merits of economic redistribution; on whether financial success resulted largely from hard work or from luck; and on faith in public institutions. Attitudes were analyzed by region, to account for geographical discrepancies in American economic performance. And, because so many people have lived through at least one year of a recession, the study focused on the worst recessions: those in which GDP growth was -3.8 percent for at least one year.
In each case, a recession during one's impressionable years had a significant effect on political and economic attitudes. People with such an experience were more committed to redistribution, more inclined to attribute success to luck, and less likely to trust public institutions. In each case, having been through a severe recession accounted for 4 percent of the variation in attitudes. For the sake of comparison, in the case of income redistribution, that's about one-third of the effect of possessing a high school education—as opposed to a B.A. or B.S, the authors said. (People with college degrees are less amenable to income redistribution.)
Shea points out that if this study turns out to be correct, we can expect the generation coming of age in the next 10 years may have a more "European" attitude toward inequality.
What's heartening about this study is that it shows people who have suffered through hard times often come out wanting to help other people. Hence their commitment to "redistribution," whether through social spending, universal health care, or other programs aimed at redistributing wealth. Unfortunately, a side-effect of recession experiences is that people stop believing in the very public institutions that might - if reformed - be able to help with this redistribution.