Welcome to the Frozen Economy

Not since the Depression have financial difficulties so immobilized spending and credit. Listen to the talk at a diner in Maine

by Shoshana Zuboff

The polar ice cap may be melting, but the U.S. economy is frozen, starting right here in my small town. Gradually rising levels of dismay at the gas pump and in the supermarket gave way to paralytic shock last week when "lock-in" notices from the local fuel company arrived. This year's advance price for home heating oil is nearly twice what people paid last year. A collective gasp of disbelief from my tough, resourceful Maine neighbors echoed across the meadows and up the rocky coast. Many claimed they would never sign the contract. "What's your alternative?" I asked a friend.

"I don't have one," he muttered.

In the days that followed, a new quality of dread settled over the place like soot, as people weighed their options. Heat or food? Gas or electricity? Medicine or mortgage payments? What to give up? What to cut back? The conversations were everywhere. In the supermarket, I heard one man tell another: "When I was a kid, you woke up, went into the bathroom, and broke up the ice in the toilet. Now my kids will have to do the same. America is moving backward."

My neighbors are like deer caught in the headlights: frozen in fear as something sinister, implacable, and wholly unanticipated lurches toward them. A reckoning has begun to unfurl like a dark flower, slowly at first, then gathering urgency and force. This is not a short detour after all, but an untraveled road to an unknown place from which there is no return, no escape…and we are not prepared.

Spending Paralysis

The economic crisis has been triggered by what economists call "structural shifts" in the global supply and demand for commodities, coupled with the meltdown in the mortgage markets and the ensuing credit squeeze. But this crisis is now moving into a whole new gear, creating a new set of economic conditions that have yet to be named. Call it "the frozen economy."

As pain reaches deep into the daily lives of ordinary Americans—irrespective of their creditworthiness—it will trigger unforeseen consequences for every corner of the marketplace. Nearly two-thirds of Americans already say they are cutting back on nonessentials, according to a new survey by Information Resources. But what's nonessential? Heat? Asthma medication? Shoes for your kids? A new yoga mat? At the same time, 57% of Americans interviewed last month by the Survey of Consumer Confidence reported that their financial situation had worsened—the poorest response since 1946, when the survey began. More than two-thirds of gross domestic product depends on consumer spending. But when the grass roots are frozen, nothing can grow.

The statistics tell a dramatic story, but people tell it better. So I went to Moody's Diner to listen.

Comfort Food

Moody's is our sanctuary of sameness, where regulars come for the $3.89 breakfast special—two pancakes, two eggs, two links—and tourists to satisfy a hunger for something that goes beyond food. Built in the 1920s on Maine's principal north-south route, it was a haven for loggers, truckers, and rusticators in an age before cholesterol. Now it's a fold in time. The yellowed linoleum counter, green vinyl swivel seats, scarred wooden booths, and worn tabletops have welcomed countless stacks of blueberry pancakes, thousands of fragrant chicken croquettes with gravy-covered mashed potatoes, a sea of shrimp stew, and enough chocolate cream pie to feed a small country.

Moody's welcomes us back to the world of childhood, of Grandma's kitchen, when all was innocence and order. This is no postmodern nostalgic wink, just the healing comfort of a nearly complete absence of change. Only the Support Our Troops in Iraq poster, with photos of local boys, suggests a new century.

At least, that's what I thought until the other day, when I sat down at the counter. Three working men in the booth behind me wondered about alternative energy. Wind? Solar? Pellets? The very notion was mysterious, and it wasn't clear how to figure it out. "We have to do something," they said. "But what?"