‘People are realizing they can’t accumulate everything they want.’


By SETH MYDANS
THIMPHU, Bhutan


IF THE REST of the world cannot get it right in these unhappy times, this tiny Buddhist kingdom high in the Himalayan mountains says it is working on an answer.

“Greed, insatiable human greed,”said Prime Minister Jigme Thinley of Bhutan, describing what he sees as the cause of today’s economic catastrophe in the world beyond the snow-topped mountains.“What we need is change,”he said in the whitewashed fortress where he works.“We need to think gross national happiness.”

The notion of gross national happiness was the inspiration of the former king, Jigme Singye Wangchuck, in the 1970s as an alternative to the gross national product.

Now, the Bhutanese are refining the country’s guiding philosophy into what they see as a new political science, and it has ripened into government policy just when the world may need it, said Kinley Dorji, secretary of information and communications.

“You see what a complete dedication to economic development ends up in,”he said, referring to the global economic crisis.“Industrialized societies have decided now that G.N.P. is a broken promise.”

Under a new Constitution adopted last year, government programs - from agriculture to transportation to foreign trade - must be judged not by the economic benefits they may offer but by the happiness they produce.

The goal is not happiness itself, the prime minister explained, a concept that each person must define for himself. Rather, the government aims to create the conditions for what he called, in an updated version of the American Declaration of Independence,“the pursuit of gross national happiness.”

The Bhutanese have started with an the 1970s to negative 2.7 percent in 2005, meaning Americans were spending more than they made.

This time is expected to be different, because the forces that enabled and even encouraged consumers to save less and spend more - easy credit and skyrocketing asset values - could be permanently altered by the financial crisis that spun the economy into recession.

“I expect that the savings rate will end up at the end of this recession higher than it was going into it,”said Jonathan A. Parker, a finance professor at the Kellogg School of Management at Northwestern University in Illinois.“It’s hard to see how it wouldn’t.”

Sustained increases in household saving would cause a difficult period of restructuring for the American economy, which has become increasingly driven by consumer spending. Such spending makes up about 70 percent of the nation’s gross domestic product.

“If Americans cut back, as they almost have to do, what will replace that source of demand?”asked William G. Gale, director of the economic studies program at the Brookings Institution, an independent research group in Washington, D.C.

“The easy answer is the Chinese consumer,”he said, but unlike their more prodigal American counterparts, the Chinese save about a quarter of what they earn.“We may cut back faster than they expand into that space, so there might be a lull.”

Why might the higher savings rate outlast the recession?

Social critics like David Blankenhorn, president of the Institute for American Values, hope that introspection about America’s“culture of consumption”will awaken Americans to the virtues of thrift.

But many economists believe consumers will change their habits for more pragmatic reasons.

Consumers have lost a huge chunk of their net worth, in the housing bust and the stock market, and to resuscitate their retirement accounts or children’s college funds they will have to channel more of their paychecks toward saving - unless those asset markets soar again.

Forms of easy credit that were once prevalent, like mortgages with no down payments, also may not return, either because the government regulates them out of existence or because banks dare not venture back into such risky lending. That means if Americans want to buy a house, they will have to save more and borrow less.

Consumers are thinking a bit differently about their long-term budgets. A recent Pew Research Center survey found that many more Americans had begun regarding products like microwave ovens as luxuries rather than necessities.

Such attitudes suggest that retailers will have to change their marketing strategies, said J. Walker Smith, executive vice chairman of the Futures Company, a marketing and research consultancy.

“People are realizing they can’t accumulate everything they want anymore, and they’ll have to prioritize more,”he said.“That may be hard for a lot of brands - figuring out not only how to get considered by consumers, but put at the top of their list.”

Despite the immediate jolt to the economy, more personal saving would be a positive step in the long run, analysts say. More saving leads to more investment, which promotes economic growth, which leads to better living standards.

At the family level, social critics, economists and even many consumers seem to agree that a forced financial conservatism may be for the better.

Kenny Tran of Santa Ana, California, for example, said he had been nervous about saving enough to buy his first house - he and his fiance have been setting aside about $800 a month for the last year and a half - but he has no regrets about not buying a home when credit was looser and saving was less of a priority.

“A couple years ago it would have been easier for us to get a loan,”despite the fact that the couple’s combined income was lower, Mr. Tran said.“But if we would have gotten a loan, and a house, a couple years ago, we’d probably have ended up in foreclosure now.”