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Marian Salzman Headshot

2013 Living: Austerity With Double-Dip Frugality

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In a world of seven billion people, it's hard to get a coherent picture of where things really stand on the economy. While millions of average consumers struggle to afford the rising cost of basic foods, millions more happily swallow the prices of the hot new offerings from Apple and Samsung. But there's no denying that for many people in mature consumer economies, life is a lot more troubled than it once was.

Growing poverty has become a trend that shows every sign of continuing. More than 22 million American households comprising 47 million people are currently making use of food stamps. Tens of millions are out of work or fear losing their jobs. Many millions more are working for less than they used to; around 60 percent of new jobs in the United States are low-skill and low-wage. The number of Americans living in poverty equals 16 percent of the population.

In the most troubled parts of Europe, austerity is biting deep; unemployment in Greece and Spain is 25 percent, way above the far-from-stellar 11.4 percent average of the euro currency area. In the UK, average incomes have fallen by near-record amounts.

Even people who aren't struggling right now aren't necessarily sleeping easily. A 2012 survey found that 40 percent of Americans are living paycheck to paycheck, putting them one car repair or one medical bill away from financial catastrophe.

As the economic crisis drags on, the shop-till-you-drop exuberance that drove the long boom has given way to caution. Even as consumer confidence is up in the weeks before the holidays, consumers in general are playing it safe, paying down what they owe; Americans are deleveraging to reduce their debts to manageable levels. What will they do once they get debt to relatively manageable levels, predicted for around mid-2013? The odds are against a return to consuming as we knew it before 2007-08. For one thing, it was fueled by debt; all that credit just won't be as cheap or readily available again. For another, people are finding different ways to get the things they need in life. The bad economy is spurring people to get creative.

Frugal Consumption

For many people, big-ticket spending is out of style and not only because they don't have the money. In a break with previous demographic groups, the rising generation of millennials just isn't buying cars or big homes in sprawling suburbs where cars are essential; they want smaller places near transportation hubs and places where they can shop and eat out. Millennials aren't rejecting the comfort, convenience and other benefits of modern life. Along with many older people, they are just finding that they don't need to own something outright (apart from tech gadgets) to enjoy the benefits of it.

It started with digital content: Why bother buying physical books, magazines, newspapers, CDs and DVDs that take up space if you can get them in virtual formats when you need them? Less clutter, less space needed, more mobility -- what's not to like? In fact, there's increasingly less of a need to own much of anything outright when there are so many new ways to use things only when you need them. It might look like old-style renting or leasing, but in its 21st-century form it's the sharing economy.

People who want occasional use of a car without mainstream rental rates have the option of car-share services such as Zipcar. Membership grew 25 percent in 2011; at current rates, 4.4 million North Americans will belong to car-sharing services by 2016. Bikes have long been an ideal candidate for shared ownership; cities all over Europe have been doing it for years. Now the trend is catching on in the United States, with 29 systems going and a new scheme slated for 2013 in New York. GPS, wireless connections, airless tires and solar power are putting an efficient 21st-century spin on a 19th-century invention.

If lavish consumption was about spending and buying things to feel good, frugal consumption is about feeling good by being smarter and spending less; it's about finding alternatives to the expense and wastefulness of old-style consumption. Why spend a lot to own something that's not going to get used much? It's a question being asked about everything from kids' clothes and fashion accessories to parking spots and industrial equipment. With each passing day, plenty of new answers are just a click away, as technology proves to be a powerful way of spreading ideas quickly and spawning new ones through sites such as Shareable.

This new consumption is not always about being too cash-strapped or cheap to buy outright. It's part of a new mentality and movement called Collaborative Consumption that harnesses interactive technology to match supply and demand for pretty much anything -- and create personal connections in the process. Collaborative Consumption evangelist Rachel Botsman says it's the dawning of a new type of economy where people's reputation for trustworthiness becomes more important than their creditworthiness. Another big plus is that it's sociable. Old consumption was about keeping up with the Joneses, says Botsman; collaborative consumption is about getting to know them.

Even expensive college-level education is getting a frugal makeover, with top educational institutions offering high-quality courses online for free. It's not the same as strolling through the dappled shade of Harvard Yard or rubbing shoulders with Nobel laureates at Stanford, but it's unbeatable educational value for the price.

This is the third in a series of 14 posts expanding on Salzman's forecasts for 2013 in her annual trends report, a program of global communications group Havas Worldwide. This year's book, What's Next? What to Expect in 2013, will be published on 12/12/12 and available at Salzman is CEO of Havas PR North America and an internationally respected trendspotter.