Depression, bank runs were thought to be cured. The Northern Rock bank run in
2007, the first UK bank run since 1866, brought back the old narratives of
panicked depositors and angry crowds outside closed banks. The story led to an
international skittishness, to the Washington Mutual (WaMu) bank run a year
later in the United States, and to the Reserve Prime Fund run a few days after
that in 2008. These events then led to the very unconventional US government
guarantee of US money market funds for a year. Apparently, governments were
aware that they could not allow the old stories of bank runs to feed public
anxiety.
In the heart of the 2007–9 recession, the Great Depression narrative may have
intertwined with bank run narratives to create this popular perception: “We have
passed through a euphoric, speculative, immoral period like the Roaring
Twenties. The stock market and banks are collapsing now as they did in 1929,
and the entire economy might collapse again, as it did in the 1930s. We might all
lose our jobs and crowd around failed banks in a desperate attempt to get our
money.”
In short, the Great Depression and its causes (after a period of euphoria, loss
of confidence) remain a powerful narrative. The Great Depression was a
traumatic period in the nation’s history that is constantly on people’s minds as
they listen to other narratives regarding what may happen next. Far less
remembered than the confidence and fear constellation of stories is a different
constellation that was also prominent in the minds of people who lived during
the Great Depression: narratives about modesty, compassion, and simple living.
These narratives are mostly in remission and as of this writing have been
replaced by success narratives that justify conspicuous consumption, as we
discuss in the next chapter.

Chapter 11
Frugality versus Conspicuous
Consumption
Frugality and an impulse to maintain a modest lifestyle have roots going back to
ancient times. Sumptuary laws in ancient Greece and Rome, as well as China,
Japan, and other countries, forbade excess ostentation. Stories about the
disgusting flaunting of wealth are one of the longest-running perennial
narratives, in many countries and religions. Opposing these frugality narratives
are conspicuous consumption narratives: to succeed in life, one must display
one’s success as an indication of achievement and power. The two narratives are
at constant war, with modesty relatively strong during some periods and
conspicuous consumption dominant at other times. Both are important economic
narratives because they affect how people spend or save, and hence they
influence the overall state of the economy. In fact, these narratives can have
profound economic consequences that economists and policymakers would not
necessarily anticipate.

Frugality and Compassion in the Great Depression
During the Great Depression in the 1930s, frugality narratives were particularly
strong amidst the perception of widespread involuntary unemployment. They
were also a reaction to the perceived excess of the 1920s, which we can see by
the rapid growth then of the phrase keep up with the Joneses, generally used to
disparage people who think that, to keep up appearances, they have to buy
everything that their successful neighbors buy. Indeed, the use of that phrase
grew most rapidly during the 1930s. It is difficult to find accounts of depression-
induced modesty in the era before the Great Depression.1 The “new modesty”
stayed high during World War II and into the 1950s, and then started to decline.
The new modesty that coincided with the Great Depression and World War II
evolved out of the strong narrative that people were suffering through no fault of
their own. They lost their jobs because of the Depression, and some lost their
lives later because of the war. Maybe your Jones neighbors were doing very
well, but your Smith neighbors were having a terribly difficult time, like so
many other families during the Depression. A huge constellation of human
tragedy narratives prevailed through word of mouth among friends and
neighbors, stories of families out on the street after the father lost his job and
defaulted on his mortgage and lost the home, through no fault of his own. Under
such conditions, the reasonable response even for people who still had a job was
to postpone buying a new car, throwing lavish parties, and keeping up with
expensive fashions. Such self-imposed austerity helps to explain the severe
contraction at the beginning of the Depression as well as the contraction of
consumer purchases during World War II.