Is The Country in a Depression?

By Philip Elmer-DeWitt

As unemployment climbs, inflation rises and the economy lurches toward an expected slump, economists issue dire warnings about "recessionary psychology" -- a pattern of cuts in consumer spending and investment that tends to feed the downward spiral and make any economic falloff even deeper. But there is another, more profound kind of recessionary psychology. It is measured by psychic indicators rather than economic ones. As people change their behavior in the face of layoffs, cutbacks or a sudden drop in net worth, more and more Americans find themselves clinically depressed.

This year the symptoms are most apparent in those parts of the country -- New England, the mid-Atlantic states, parts of the Midwest -- that have suffered the greatest economic decline. In the suburbs of Detroit, where sagging auto sales have fanned recession fears, psychiatric referrals from a local counseling service are up nearly 20% over the past six months. Business is also booming at the Massachusetts Psychological Association referral service, where out-of-work lawyers and former bond salesmen seek help in coping with stress, anxiety disorders and panic attacks. Drugstores in the region report brisk sales in Tagamet (for ulcers), Prozac (depression) and Halcion (insomnia).

During the Great Depression of the 1930s, people jumped out of windows, joined left-wing movements or sought escape through watching Fred Astaire movies. In the 1970s, they squabbled in gas lines and drifted into the low- level despondency that Jimmy Carter called "our national malaise." The current economic slump -- not yet officially recognized as a recession + -- threatens to be particularly divisive because of the increasing disparity between haves and have-nots. "In the 1930s, everyone was in the same boat and knew other people were suffering too," observes Val Farmer, a clinical psychologist and syndicated columnist from South Dakota. "The current problems affect people so unevenly that they don't pull together."

As always, some people drown their troubles in alcohol. Others turn to chocolate bars, ice-cream cones or platters of rich food. In the words of Columbia University psychiatrist Jack Gorman, "When things are lousy anyway, who cares about cholesterol?" Many individuals become violent and abusive, usually to those closest at hand. At the House of Ruth, a Washington shelter for battered women, deputy director Dan Byrne reports that the men who are doing the hitting are talking more and more about the economic pressures they feel.

In the inner cities, the situation can quickly turn ugly, polarizing along racial lines, as when black customers organized an angry boycott of Korean greengrocers in New York City this year. The city's commission on human rights reported a 7% increase in the incidence of so-called bias crimes this year. That trend is reflected in the rise in racial assaults recorded by Klanwatch, which monitors such crimes across the U.S. for the Southern Poverty Law Center in Montgomery. "The national recession has created general unrest," says director Danny Welch, "especially among white males vying for jobs they didn't use to have to compete for."

Psychologists say economic losses are no different from other kinds of losses. Homeowners have more than capital tied up in their homes; when their assets decline in a real estate slump, so does their sense of self-worth. People who have lost their jobs experience anger, denial and a need to grieve, just as they would if they had lost a loved one. This is especially true of the solid, stable employee who has worked in one place for many years. "That person has a mental contract," says Maury Elvekrog, a management psychologist in Birmingham, Mich. "Even though no one told him that he would be taken care of, that's what he expected."

The emotional effects can spill over to all parts of a person's life. In times of crisis, says Columbia's Gorman, someone who tends toward pessimism will not worry about just the economy but will also fret about getting sick or wonder whether war will break out in the Middle East. Barbara McCuen at the University of Nebraska at Omaha warns that there may be psychological fallout for the family. "The tensions come out at home," she says. "A five-year-old may not understand why there won't be a big Christmas."

Attitude more than actual events determines how individuals respond to a financial setback. Joseph Cassius, a clinical psychologist from Memphis, catalogs people's reactions according to their personality type. A person whose early family life was marked by chaotic dislocations such as divorce, he says, will see a recession as a catastrophic event that could destroy him. Individuals with dependent personalities who lose their jobs may feel abandoned and show their frustration by, for instance, voting against the party in power. Those who usually feel in control of every situation may be especially stunned by unexpected economic setbacks. "The perfectionist will think all his achievements have been to no avail," says Cassius. "The masochist, by contrast, will now be happy again."

Some people are calling the current slump the yuppie recession because investment bankers were among the first to lose their jobs. Psychiatrists report that Wall Street patients feel guilty about the easy money they made in the booming 1980s and are convinced they are being punished for earlier good fortune. These people are busy lowering their financial sights, and as the downturn rolls across the U.S., the rest of the country may have to do the same. That is just what the economists fear. The trouble with recessionary psychology, they say, is that deflated expectations become self-fulfilling prophecies, for both the individual and the economy as a whole.

With reporting by Kathleen Brady/New York