TIME: Almanac 1993/TIME Almanac 1993.iso/time/020491/0204201.000

Text File | 1992-08-28 | 7.5 KB | 165 lines

                                                                                BUSINESS, Page 58

All Wired and Wary


American consumers react to war and hard times by hunkering
down, embracing reality and trying to find a few bright spots

By JANICE CASTRO -- Reported by Mary Cronin/New York and William
McWhirter/Chicago, with other bureaus


    Colin Powell is a military man, not a marketing analyst, but
he keenly recognized the mood of American consumers last week,
when he talked about the "oscillations between euphoria and
distress." The shock of war's beginning has passed, but
Americans are left swinging between the moods of hope and
resignation about the war and the economy. In one sense,
consumers are hunkering down, digging in and embracing reality.
They are postponing big decisions and avoiding the kind of
purchases that fuel the economy: autos, houses, appliances.
(Suddenly  the old car doesn't look so bad.) Yet simultaneously
they realize that the unthinkable event of war has happened
without the economy collapsing in a heap. The recognition that
the U.S. just may muddle through all this has prompted some
fits of optimism, impulse buying and a search for diversion.

    Most remarkably, a limited Desert Storm economy is springing
up. Companies have boosted production of war-related books,
maps, computer games, T-shirts, yellow ribbons, American flags
in all forms and just about anything red, white and blue. At
Bloomingdale's in Manhattan, the brand-new Stars & Stripes
boutique drew crowds eager to buy Ralph Lauren coffee mugs
(price: $40), leather bomber jackets ($500) and  beach towels
sporting Old Glory. Suddenly teenagers are wearing camouflage
pants.

    Aside from spurts of patriotic shopping, many Americans were
holding onto their wallets. In a TIME/CNN poll conducted last
week by Yankelovich Clancy Shulman, 56% of the 1,000 adults in
the survey said they believe the war against Iraq will hurt the
U.S. economy. Asked whether the recession has influenced their
spending habits, 34% said they were spending less, while 64%
professed no change.

    The fresh wave of sobriety among many consumers is likely
to speed the shrinking of overbuilt parts of the economy,
including retailing, real estate and car dealerships. Pleading
for more money last week, officials in charge of the S&L
bailout warned the Senate Banking Committee that real estate
values are in a "free fall" that makes a mockery of attempts
to estimate the total cost of the rescue. Meanwhile, the
National Automobile Dealers Association predicted that 1 out of
5 car dealers may go out of business in the next two years.

    Of all the industries reeling under the one-two punch of
recession and war, none have been hit as hard as the travel
business. Across the U.S. last week, airports were eerily
quiet. Rumors of terrorist plots were rife; some companies took
the opportunity to cut back on travel in the midst of the
recession, knowing that the competition would be following
suit. This week, in an unprecedented move, most U.S.
department-store fashion directors, magazine fashion editors
and Seventh Avenue buyers will stay home from the annual couture
collections in Paris. The shutdown of European travel may cut
off Pan Am's last hope of surviving Chapter 11 proceedings.
Last week TWA laid off 1,360 of its 6,800 flight attendants and
about 100 of its 3,300 pilots. Companies are even curbing
travel to innocuous U.S. destinations. Said a Manhattan
businessman: "I wouldn't even fly to Kansas or Fort Worth right
now. I simply don't believe in taking unnecessary risks."

    Travel cutbacks are hitting hotels and restaurants in
Washington, Tokyo, Paris and other capitals as well. In Cairo
the Egyptian government shut down the Pyramids and other
monuments -- and thus most of the tourism industry -- to
protect against terrorist threats. "It's a disaster. Because
of the war, we are at a standstill," said Elhamy El Zayat,
owner of one of Egypt's largest travel agencies. In Anaheim,
Calif., Disneyland cut ticket prices for the first time ever,
reducing one-day rates temporarily to $20 from $27 for people
who live in Southern California. At a time when people are
canceling vacations, local residents may help pick up the
slack.

    Besides acting as a damper on business, the war and
recession have shifted fortunes from one industry to another.
The travel business's loss, for example, is the telephone
industry's gain. Video conferencing and faxing are booming as
executives shift to meeting electronically instead of in
person. Since the war started, AT&T's video-conferencing
traffic has doubled, while U.S. Sprint's has tripled.

    Some retailers are benefiting from overheated fears. Panicky
consumers have rushed to military-surplus stores to buy gas
masks. Many people want the masks for protection in case
terrorists blow up chemical plants and oil refineries near
them. Richard Muerdter, owner of the Eagle Army & Navy store
in Louisville, says one frightened woman told him: "They're
going to send terrorists over here to gas all of us." Some
stores reported calls from anxious customers who wanted to know
if Iraq's Scud missiles (top range: 560 miles) could reach the
U.S. mainland. From California to Western Europe, there were
scattered reports of people stockpiling such staples as flour,
sugar and rice.

    Most Americans focused on products and services delivering
news and information about the gulf. In Maplewood, N.J., the
Hammond map company was working to fill 70,000 orders for a
Middle East Crisis map published in October. Cable-TV companies
have enjoyed a surge in business too, largely because many
viewers suddenly feel they must have CNN. Travel agents
reported that customers were demanding hotels with cable TV.
Said Michael Arrington, chairman of a chain of travel agencies
based in Chicago: "Getaway from it all is no longer a draw."

    Eager to tune in the overseas news, Americans bought
shortwave radios and small portable TVs. Bookstores were
jammed, their customers snapping up almost anything about
Saddam and the Middle East. In Arlington, Va., Roy's Hobby &
Craft Shop was selling the new $16 board game, Kuwait War.
Superstitious types were buying crystals and such books as
Nostradamus and Armageddon, Oil and the Mideast Crisis.

    Patriotism was everywhere. Tattoo parlors were overwhelmed
with orders for eagles and Old Glory. In some cities, even the
antiwar protesters sported American flag lapel pins next to
their peace pins. Said Greg Wald, owner of the All Nations Flag
Company in Kansas City: "The first week of the war was like
Memorial Day and the Fourth of July combined. It hit like an
earthquake." Consumer-watchdog groups, though, warned of con
men already hatching heartless schemes. Swindlers in Hauppauge,
N.Y., pretending to be cemetery employees, were urging veterans
last week to buy graveyard plots before fresh war casualties
filled up the best spots.

    For the millions of Americans who just want to send letters
to loved ones on the front lines, Hallmark has introduced a
homey new line of cards. One of them begins: "It takes a
special person to serve our country . . ." Next, maybe the
writers at the Kansas City firm will work on a set of soothing
homilies for the 200 million anxious consumers on the home
front. Having grown accustomed to the sudden scream of air-raid
sirens in the darkness 7,000 miles away, they still have no
idea how this war is going to change their lives and their
economic futures.