The 90% Economy: Indefinitely Temporary?

Why human psychology might prolong social restrictions and economic decline.


Carter Kilmann

2 years ago | 8 min read

This year continues to make a compelling case for the most bizarre year ever. We entered unfamiliar territory. Governments mandated social distancing and ordered citizens to stay home. Society’s rules changed.

Businesses were “temporarily” divided into two: essential and non-essential. Companies, large and small, have scrapped to stay alive amidst unprecedented social restrictions, leading to a steep increase in layoffs.

As a result, we’ve endured historical levels of unemployment that have prompted a scary number of comparisons to the Great Depression.

The scariest part? We don’t know for sure when it will end. We’ve been pulled into a whirlwind of uncomfortable uncertainty.

What if our “temporary” society isn’t so temporary? Who’s to say that people, despite being social by nature, will revert to pre-pandemic customs?

If we base the answer on human psychology, we won’t be returning to our old normal anytime soon.

If that’s the case, what can we expect?

The 90% Economy

Per The Economist, the “90% economy” represents an environment in which people avoid arms-length interactions, effectively reducing economic output (GDP) by 10%. Industries like travel and entertainment would bear the brunt of this reduction, as people prioritize safety over other needs and recreational activities.

Further, many occupations would no longer be feasible, leading to a smaller workforce and higher unemployment.

In five weeks, the U.S. lost all of its employment gains since 2009. In April alone, over 20 million Americans lost their primary source of income. Job loss is a significant financial stressor. The mere thought of losing one’s job is enough to change lifestyle decisions. Layoffs and salary cuts shake consumer confidence to the core.

For proof, look no further than the Consumer Confidence Survey, which measures 5,000 random Americans’ perceptions of present and future business conditions.

The survey results generate the Consumer Confidence Index (CCI) — which is a numerical representation of consumers’ economic outlooks. Increasing consumer confidence suggests economic growth, while decreasing consumer confidence implies that people are less likely to spend their money — and that the economy is declining. The CCI’s benchmark score is 100, which indicates neutral sentiment towards the economy.

April’s survey was particularly grim.

The Consumer Confidence Index declined from 130.7 in February to 118.8 in March to 86.9 in April. For reference, the lowest score since the CCI launched in 1977 was 25.3 in February 2009. So, consumer confidence is far from Great Recession levels.

Data Source

But we’re not trending in the right direction; people’s confidence in the present economy plummeted in April.

The Present Situation Index, a component of the Consumer Confidence Index that assesses consumer confidence in the present business and labor market (excluding future expectations), declined from 166.7 in March to 76.4 in April.

According to Lynn Franco, Senior Director of Economic Indicators at The Conference Board, “The 90-point drop in the Present Situation Index, the largest on record, reflects the sharp contraction in economic activity and surge in unemployment claims brought about by the COVID-19 crisis.”

Franco continued, “Consumers were less optimistic about their financial prospects and this could have repercussions for spending as the recovery takes hold. The uncertainty of the economic effects of COVID-19 will likely cause expectations to fluctuate in the months ahead.”

What does this tell us about the likelihood of a 90% economy?

The 90% economy operates on the assumption that the current uncertainty engulfing the world will remain for the foreseeable future. That uncertainty will incite fear and doubt within the minds of many people — not everyone, but enough to rewrite our social norms.

The collective need for safety combined with long-term financial uncertainty will drive people to adjust their lifestyles.

The idea is that many people’s views of reality have been altered forever. Bars and restaurants will reopen, but when will the masses feel comfortable in a public setting? Just because social establishments reopen doesn’t mean people will visit.

Offices and nonessential businesses will return, but will people feel confident enough to spend their money? During an economic decline, people feel driven to focus on savings, not spending.

Instead of quantitative metrics (like the percentage decline of production), we might need to worry about a less tangible consequence — the disruption of social norms and the establishment of a “new normal.”

This is the true threat of a 90% economy, that we will adjust to this new normal rather than wait for the return of the old normal. It’s speculative, but, so long as uncertainty persists, it’s not impossible.

At least, according to human psychology.

Safety trumps our social needs

Humans are needy — arguably more so than any other species. Beyond basic needs, such as nourishment, shelter, and social acceptance, we also have more complicated needs like status and self-accomplishment.

In 1943, Abraham Maslow proposed a hierarchy of needs that capture the movement and progression of human motivation. This hierarchy (i.e. Maslow’s hierarchy of needs) is segmented into five tiers of needs:

  1. Physiological: physical requirements for survival (food, water, sleep, warmth, shelter)
  2. Safety: security and health needs (financial security, emotional security, physical wellbeing)
  3. Belongingness and Love: interpersonal needs (intimacy, relationships)
  4. Esteem: the need for status and respect (recognition, respect from others, self-respect)
  5. Self-actualization: the need to reach one’s full potential (this is more subjective, but it could be mastering a creative talent or being an ideal parent)

Maslow’s Hierarchy of Needs

In concept, lower needs must be relatively satisfied before higher needs can be attended to. For example, Maslow’s hierarchy implies that we cannot concentrate on Esteem needs (like the feeling of independence) until we satisfy each level below it.

Note that Maslow suggested that it’s not an all-or-none system. We’re not focused on one particular need at any given time; rather, we’re constantly attending to several needs.

Needs, by nature, oscillate back-and-forth. But, as Maslow argued, we are “dominated” by a particular need. One might be focused on fulfilling their need for respect — but, if their safety is jeopardized, that will become the predominant need until it’s reasonably satisfied.

Safety rests near the bottom of this pyramid, meaning the need for safety takes priority over the need to belong.

Regarding present circumstances, our collective question shifts from “when will the pandemic end?” to “when will people feel safe again?”

When will people feel comfortable waiting in a normally-spaced line or in a crowded lobby? There’s a segment of the population that won’t think twice about returning to old ways — but there’s another segment that will.

Using our hierarchy of needs as a guide, so long as we don’t feel safe, our need for security will trump needs for belongingness. If and when society reopens, there will be people that won’t feel comfortable enough to resume their pre-pandemic lifestyle. There isn’t a universal “need for safety” threshold to appease.

If one fears that their safety could be jeopardized, they will choose to fulfill this need rather than fulfill another. As long as the need for safety dominates a person’s mind, said person will primarily focus on satisfying this human requirement.

Whether you fit this description or not, there are people that fear public settings like the grocery store or public parks. They treat essential trips like they’re entering a warzone.

They take social-distancing recommendations to heart. “Six feet means six feet.” Removing social restrictions will not cause that fear to subside. Even with a vaccine, this way of thinking will take time to defuse. That fear is a defense mechanism.

Thus, the timetable for our return to the old normal is impossible to set.

Is our new normal permanent?

It’s not a question of if we return to our old normal, it’s when. The challenge (or, potentially, unfortunate inevitability) is that the economic repercussions of a delayed return to our old normal could be devastating for a sizable portion of the population.

Social restrictions keep the full labor force from working, which means a lot of businesses and people aren’t making money. This problem gradually trickles up the economic food chain.

Lack of income leads to the inability to make loan payments. In turn, loan defaults increase in frequency (and aggregate size). Then banks must bear the financial burden of these bad loans, which may cause them to fail.

When our financial infrastructure fails, consumer confidence erodes, business developments and investments diminish, unemployment climbs, and the economy shrinks.

It’s not a pretty picture. That chain-of-events is hypothetical, but it’s happened before. That being said, it’s far too early (and irrational) to predict a downturn of epic proportions.

What we do know is that our makeshift, stay-at-home economy is a feat in and of itself.

It’s easy to forget that the Internet commercialized roughly 25 years ago. An entire generation of Americans (Gen Z) has never known a life without it. Society could not have sustained such wide-sweeping social restrictions earlier this century.

Teleworking, smartphones, food delivery apps, streaming platforms — global quarantining wasn’t feasible. Now, it’s not only possible, but it’s also somewhat tolerable.

The issue is that quarantining, while feasible with today’s technology, is not a viable long-term option. People and businesses alike cannot survive forever with reduced or nonexistent income.

With every passing day, bankruptcies and unemployment figures will continue to grow. Government intervention (such as stimulus checks and small business loans) can’t keep the economy afloat forever.

So, what happens next?

There are two forces to consider: the need for safety and the need for financial security.

Ultimately, we may face one of two situations:

  1. A head-to-head battle between two needs within the same level of Maslow’s hierarch — physical safety and financial security. Will the collective fear of financial loss prompt society to shun physical safety?
  2. A two-headed, compounding threat that stifles economic growth. In other words, these two forces work in tandem, rather than against one another. Will unease limit consumer spending and social interaction (which, by default, also limits spending)?

Several state governments took the first approach by reopening businesses and public areas, despite the lingering uncertainty surrounding COVID-19. If this approach backfires (i.e. COVID-19 cases spike and social restrictions return again), the second situation could become the default scenario, as consumer confidence and social interaction (and spending) shrink even further.

Prolonged periods of social restrictions (and uncertainty) create a more and more tenuous economy. It’s not unreasonable to expect consumer confidence to remain shaky until the uncertainty clears.

There’s no way to know for sure when it will end, but the strangeness of today’s environment will persist, to some degree, for the foreseeable future.

The best we can hope for is clarity. An invisible threat is the most dangerous kind. But, if cases taper off or a vaccine develops, the veil of uncertainty that’s plaguing our world will be lifted — and we can begin our gradual return to our old normal.


Created by

Carter Kilmann







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