Quickening the Pace:
What a slow-growth West demands of brands
The Futures Company, 2012
The eight days of near-doom in September 2008 struck like a lightning bolt, cleaving the market in two along an already-weakening fissure largely hidden from view until laid bare by a direct hit from the financial crisis.
Across the developed world, most particularly the US, the UK and the Eurozone, decades of stagnant real wages, accumulating debt and flagging innovation had left the middle class acutely vulnerable to the financial storm that swept the globe. In the wake of the Great Recession, a sizable stratum of spent consumers has materialized where an aspirational middle used to be.
Overlooked—or just ignored— during the boom preceding the global recession was clear evidence that the position of the middle class in developed markets was increasingly fragile. The New York Times reported in early 2008 that “[t]he European dream is under assault, as the wave of inflation sweeping the globe mixes with this continent’s long-stagnant wages.” A recent report from the UK-based Resolution Foundation Commission on Living Standards documents the failure of wages in developed markets since the mid-1970s to keep pace with economic growth.
In the US, inflation-adjusted wages for men dropped by double digits from 1969 to 2009, even for those with a college degree.
It’s not just an issue of wages, though. More fundamentally, it’s an issue of jobs. An analysis by MIT economist David Autor shows that middle-income jobs in the US and the EU were in decline long before the financial crisis broke.
To sustain their financial position through these decades of stagnant wages and declining job opportunities, middle-class consumers in developed markets found a Midas touch in easy credit, asset bubbles in equities and housing, tax breaks, government transfers and pensions, two-income households and the so- called Wal-Mart effect. But in the aftermath of the Great Recession it has become painfully clear that all of that was little more than financial alchemy.
Hard on the heels of decades of decline, the financial crisis widened income divides in developed markets, splitting the global economy along another fissure by increasing the divide between beleaguered developed economies and booming emerging economies.
Looking to the future, the challenge for companies and brands is as simple as it is profound: What are the sources of growth in a global economy weighed down by a squeezed middle class in the developed West?
This Future Perspective will tackle this question with a baker’s dozen of observations and foresights: six important things to know about the fallout from this downturn followed by seven key imperatives for follow- through by smart marketers and business strategists looking for growth opportunities.
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