It makes sense that economic downturns would change the way people look at the world. Who doesn't have an uncle who refused to borrow money after the Great Depression, or a grandmother who still tears her paper napkins in two? Stories like those suggest difficult times have a way of staying with us but do those effects more broadly hold true? To figure out how recessions influence our outlook, and what we might expect from this one, economists Paola Giuliano of the University of California-Los Angeles and Antonio Spilimbergo of the International Monetary Fund dug into data from the National Opinion Research Center's General Social Survey.
Their finding: People who experience deep recessions during young adulthood are more likely to believe that luck as opposed to hard work is the most important driver of individual success, and that government should try to increase poor people's standard of living even if it means taxing the rich more heavily. Yet the recession-raised are also less likely to have confidence in Congress and the executive branch. "When there's a big recession we think it's the fault of the government, so our confidence decreases, but at the same time, we want the government to help," says Giuliano.
The researchers focused on young adults those who experienced recessions between the ages of 18 and 25 because that's the stage at which social psychologists typically think we form our beliefs about how society and the economy work. That certainly held true for Giuliano and Spilimbergo's study: the beliefs of people exposed to recession before they were 18 or after they were 25 didn't change nearly as much in response to economic downturn.
Among people who experienced recessions as young adults, though, the outcome was significant. By looking at slowdowns experienced in some regions of the U.S. but not in others, the economists were able to separate the effect of recession from broader social shifts (like the individualism of the 1980s). The result: about 4% of the difference in people's opinions on the role of government in redistributing wealth, as well as the causes of economic success (good luck vs. hard work), could be traced back to coming of age in a deep recession (that is, the most severe 5% of all recessions). For comparison, about 8% of the difference in people's opinions could be accounted for by being unemployed. Economic booms, by contrast, did not tend to change people's beliefs, and the effect of milder recessions was markedly less pronounced.
Does that mean we can expect to see big policy shifts in response to the current recessionespecially as today's young adults become tomorrow's policymakers and thought leaders?
Giuliano and Spilimbergo plan to study that question in an upcoming study, thought there is already one obvious example: the New Deal followed from the Great Depression and changed the landscape of U.S. politics forever. Short of such a scale-defying event, though, it's tough to draw a straight line between cause and effect. After all, matched with an increased belief in the role of government is an increased distrust of that very same government. How exactly recession-formed attitudes translate into political action is complicatedthough what's for sure is that those attitudes are changed. "The young generation will be affected for a long time," says Spilimbergo. "We are confident that this is leaving some big scars on the future."