• by July 14, 2009

The primary cause of the current recession is psychological, not economic. And regardless of what happens economically, we're going to stay in this recession until we reverse our recession mentality.

To say that we're suffering because of a recession mentality is not to dismiss the fact that millions of people find themselves in real financial distress for reasons beyond their control. They were laid off. Or their hours reduced. Or the value of their houses plummeted, putting them upside down in debt. Or sales at their small businesses dried up overnight. There are millions of people like this.

But these millions of people don't include us (or not most of those reading this column). A late January/early February USA Today/Gallup poll found that 68 percent of Americans have not been laid off in the past six months and are not worried about being laid off in the near future. While this is a lower percentage than comparably worded (though not exactly the same) questions have found in past surveys, it's still two-thirds who are not worried.

The January Dollars & Consumer Sense research conducted by the Yankelovich MONITOR found similar results, with 38 percent reporting high or severe levels of economic anxiety. That's a noteworthy percentage, but equally noteworthy is that 62 percent report much lower - even no - economic anxiety or concerns about personal finances.

The overwhelming majority of consumers are not in financial trouble. As commentator Ben Stein admonished viewers to remember on the March 8 edition of CBS Sunday Morning, more than 90 percent are still employed and still pay their mortgages on time. Certainly, all of us would prefer less uncertainty about the direction of the economy, but so far, the impact of the financial crisis on our ability to pay our bills has been nil.

Yes, nearly everyone has suffered paper losses on real estate or stocks. Yet only for a minority of people have these paper losses led to monthly financial struggles. Clearly, for these people, this is not good. Everyone struggling needs help. But it does put things in perspective. The problem is that even though only a few are under serious financial pressure, everyone is acting like they are - and this makes things much worse for those in need of help.

The figures are familiar to everyone by now. Retail sales dropped off a cliff in the fourth quarter of last year, and have worsened since. The decline in car sales is the worst since the Great Depression. Exports and imports are down substantially. And instead of spending, people are saving. As tracked by government statistics, the personal savings rate has soared since last April.

In Dollars & Consumer Sense, the reported cutbacks, caution and concerns are significant across all levels of economic anxiety and financial distress. Consumers with no actual reasons to worry report nearly as much reluctance to buy as consumers with serious financial problems. As a recent front-page story in The New York Times noted, much of this is recession chic. People just find it unseemly to shop or engage in too much conspicuous consumption as others struggle and so, as this article puts it, they have "pushed the reset button" on their shopping behaviors.

Psychology - and nothing else - is the biggest reason for the pullback in spending. Fixing this must be the No. 1 priority of marketers. Admittedly, it can seem improper to encourage spending during a downturn. It seems to cut against the grain of the new responsibility ethos. But factories are idle because no one is buying. When demand shrinks, layoffs follow, which shrinks demand more, which in turn leads to more layoffs. It quickly becomes a vicious cycle of recessionary decline.

People feel bad for those who have lost their jobs and want to show some solidarity with them. But not shopping is the wrong way to do so. The best thing people can do for those who have lost their jobs is to buy something so that companies will hire people back to meet the demand.

Unfortunately, the marketplace is getting no help from the media or government in dealing with the psychological recession. Even President Obama has decided not to be a voice of optimism, only a voice of responsibility. So marketers must do this for themselves. In fact, more than anyone else, marketers have the ear of consumers, so it is time for marketers to do what they do best - motivate people to buy.