In the Foreign Service I develolped a reputation for spotting rapidly growing markets before most did.  On my first assignment in Spain in the 1970s I said it was the best growth market in Europe at that time and by 1985 I was proven to be correct.  When I went to Turkey in 1978 I said it would be a great market and at that time it was so depleated of foreign exchange they could not import coffee, imagine Turkey without coffee!  I even convinced the US government in the guise of the Overseas Private Investment Corporation, OPIC, not OPEC, to bring an investment mission to the country.  I recall the head of the delegation who was OPIC’s President telling me on arrival that his entire board of directors had voted against coming to Turkey.  When I asked why they came, he replied, “Because I decided to come based on your reports.”  Again in 1988 while in Mexico I predicted the flourishing trade that the NAFTA agreement would bring between the USA and Mexico and even wrote material used in the agreement.

So why was I so good at predicting growing markets?   Easy, I spotted millions of hungry consumers waiting to break free and buy everything in sight.  As an economist I base all of my analysis and forecasts on consumer demand. So how is this relevant now? 

The slow growth in consumer demand in our economy now is only partly the result of the “Great Recession.”  Face it, we have a sated population.  We managed to stir the consumer to action in the middle part of the first decade of the 21st Century by creating a frenzy of home buying.  The stimulus, middle class illusions of becoming rich thorough property investments and the demand for “McMansions.”  When the bubble burst in this market our real problem was laid bare, we are not hungry consumers.  This is not the post WWII years of creatiing families on a massive scale eager to buy homes and autos.  This is not the frantic pace of the 1960s with so many entries into the “upper middle class.”  This is not even the extravagant spending of the 1970s which led to a massive rejection of consumerism in pursuit of the ideal, “Small Is Beautiful.”  No, we are a sated, even bloated crowd that is hard to stimulate to strong growth in consumption.

Look at the so-called growth industries, health care or entertainment.  Health care growth has one main ingredient, we are aging as a population.  Consumption here comes not from desire but from reality.  And entertainment enjoys probably the most elastic demand there is.  No, we are not moving into better housing or buying a first car or basic home appliances.  Thus our consumer growth is at the margins and does not provide the stimulus found in 40 million Spaniards buying their first home or car (Spain has the highest rate of home ownership in Europe, a phenomenom that started in the 1970s).  Nor the 70 million Turks dong the same thing a decade or so later. 

So what do I see for the US economy?  It is not the “Great Recession” per se that has casued the “New Normal” of higher unemployment and slower economic growth, rather it has simply exposed the underlying fact that our consumers are sated, if not bloated.  And this means that the “New Normal” will continue no matter what direction our political leaders take.