The 2008 Financial Crisis as a Driver of Cultural Change

Introduction: Economy as a Force of Cultural Change

Whether you are an anthropologist or a dramatist, the word culture brings to mind various aspects of people groups. The kind of music a group enjoys, the type of food it eats, definitions of family, clothing choices, gender roles, stereotypes, values, and interests are all part of culture. But what characteristic can influence these aspects of culture more than the economy? One might answer that religion, personal beliefs, needs, or other variables certainly impact the cultural choices a people group makes more than the economy does, but a careful examination of the issue may reveal that this is not necessarily the case. Instead, personal, group, and global finances have a drastic impact on individuals, families, and therefore on culture. Cultures with greater financial freedom can devote more time to luxuries, while cultures without financial resources must spend much of their time working.

Family values shift with different economic tides, as do sexual and reproductive attitudes. A historical example illustrates this point: in 1905, President Theodore Roosevelt attacked birth control methods partly because large families were then desired for economic reasons (London, 2008). The state of the economy, therefore, has a drastic impact on cultural formation and cultural change. Today's economy is no different. The recent economic recession has drastically affected the behavior of many families, driving a broader cultural shift. By reviewing the brief history of the issue and tracing the resulting cultural changes, we can begin to look at potential solutions from a cultural standpoint.

Brief History of the Crisis and Its Causes

Taught to contribute to their retirement funds, invest in stocks and bonds, and diversify their portfolios, many Americans were astounded and wrought with despair when the economy began to show signs of struggling in mid-September 2008. Although concern over the U.S. economy surfaced as early as 2007, the Guardian cited September 12 as the beginning of the financial crisis. On that day, a buyer was sought for the struggling Lehman Brothers, but just three days later the investment bank filed for bankruptcy and the Dow Jones Industrial Average fell by 504 points. Now described by many as the worst economic situation since the Great Depression, the markets struggled under low rates of investment and a cascade of corporate collapses.

Most observers agree that the current financial situation was historic in its scale and destruction. According to the BBC, Washington Mutual's September bankruptcy was "the largest bank failure yet in the United States." The devastation did not end there. While Washington Mutual's failure would have been historic on its own, the BBC described the late summer and early fall's economic troubles as a tumult of compounding problems: "Each day has brought an extraordinary development that would have seemed astonishing just the day before" (BBC, 2008).

What exactly caused the crisis? The answer is not easily reached; analysts have been grappling with it since the first warning signs emerged. Most agree, however, that the sub-prime mortgage crisis contributed substantially to the problem. Home loans became available even to borrowers with poor credit histories and virtually no income. When home prices stagnated and then fell, thousands of homeowners moved to sell, "flooding the market with supply, and demand dried up" ("The Financial Crisis," 2008).

Did this climate of economic distress affect ordinary people, or only the news anchors, high rollers, and CEOs? From average blue- and white-collar workers to large corporations and employment opportunities across the nation, the financial crisis affected nearly everyone in the United States and many people worldwide. Some found their investments wiped out by falling asset values; others discovered that their retirement funds no longer made an early retirement possible. Still others worried about the safety of their banks. Many were anxious about rising mortgage payments and the prospect of losing their jobs, as tightened lending between banks drove up mortgage rates and unemployment continued to climb (BBC, 2008).

The Financial Crisis and Cultural Change

Because the recession touched so many people's lives, it became a powerful catalyst for cultural change. That change was most immediately visible in the political arena. According to The Economist, the economy played a major role in Barack Obama's victory on November 4, 2008. Although most voters were uncertain why the economy had reached its current state, they wanted change. Barack Obama and the Democratic Party, not then in power, appeared to these voters as the path toward economic recovery and a departure from the culture of job and asset loss ("It's an Ill Wind," 2008).

Election night confirmed that cultural shift. The Republican White House was handed to the opposing party, and Democrats gained control of Congress, giving Americans a unified legislative and executive branch under the Democratic Party for the first time in many years. Obama's victory also encompassed broader cultural change: he carried several traditionally conservative states, including Indiana. This outcome suggested that the American people were ready for a cultural realignment that embraced Democratic Party values. The Economist and many other sources identified the economy as the root cause of that shift.

While the political shift from Republicans to Democrats was the most visible sign of cultural change driven by the struggling economy, it was far from the only one. Family values and behaviors began to shift alongside society's broader values. Before the recession, credit was the norm and the "buy now, pay later" philosophy was the prevailing consumer creed. But just as easy credit had contributed to the Great Depression, it also contributed to the current crisis, and American families began to change their attitudes toward credit cards and personal debt. Leigh (2008) observed that credit card companies would start feeling the pain of customers unable to make minimum payments and who defaulted on their loans. Fearing this situation, many consumers moved to reduce their reliance on credit cards. This shift curbed the long-standing American cultural tendency toward consumption. Where that attitude had once been one of privilege and entitlement — the assumption that one should simply get what one wants — the prevailing attitude shifted toward caution and savings.

The New York Times reported that consumer spending dropped significantly, largely eliminating the hedge that had protected against recession for so long (Barbaro & Uchitelle, 2008). Beyond its financial dimensions, this development carried profound implications for society and culture. Instead of seeing themselves as privileged and entitled, Americans began to value frugality and saving — a trend that was genuinely new and a direct result of financial hardship.

References

Barbaro, M., & Uchitelle, L. (2008, January 14). Americans cut back sharply on spending. The New York Times. Retrieved from http://www.nytimes.com/2008/01/14/business/14spend.html

Banking crisis timeline. (2008, October 30). The Guardian. Retrieved November 17, 2008, from http://www.guardian.co.uk/business/2008/oct/08/creditcrunch.marketturmoil

BBC. (2008, September 26). Q&A: Financial crisis and you. Retrieved November 17, 2008, from http://news.bbc.co.uk/2/hi/business/7625419.stm

It's an ill wind. (2008, October 9). The Economist. Retrieved November 17, 2008, from http://www.economist.com/world/unitedstates/displayStory.cfm?story_id=12380943

Leigh, A. (2008, November 3). Credit card issuers struggling. Retrieved November 17, 2008, from http://www.inc.com/news/articles/2008/11/credit-cards.html

London, K. (2008). The history of birth control. Retrieved November 17, 2008, from http://www.yale.edu/ynhti/curriculum/units/1982/6/82.06.03.x.html

The financial crisis explained — how did we get here? (2008, September 25). Retrieved November 17, 2008, from