I don't think it's the economy. My guess is it's a building "fast food mentality" saturating the culture ( at least here in the States ). Now, the attitude has spread into the hobbying community. People want things to be easier and easier, mentally and physically, to the point that patience and perseverance are limited to how big of a crowd you're willing to deal with at the store, not how much hands-on work you're willing to put into something.
In the case of "models," this has led to pre-painted kits you can assemble in 15 minutes and, more recently, ones that are all ready to display ( "collectibles," not "models,"IMHO ) being categorized with kits from Revell, etc. in catalogs and websites. This helps spread the idea of "why build it when you can just buy it" that has contributed to the decline of the hobby.
Another factor is that a lot of parents don't bother spending time with their kids. From what I've read, the people here would be thrilled to fit helping their kids into their kitbuilding time, so I'm not including anyone of you fine people. What I'm talking about is the difference between parenting approaches when I was growing up and today. My father wasn't even into building models, but he took the time to introduce me to the hobby, make sure I knew the safety issues, and even helped me with the first few kits as best he could ( the only goof was his assumprion that Elmer's School Glue was just as good as cement
). Non-kitbuilding parents today usually just settle for getting the kids simple things to basically distract their kids and some even actively oppose the idea of their kids getting into model building because "it's too dangerous with the fumes and all." My question is this: if they can't take the time to deal with the "huffing" issue, how are they going to make time or build lines of communication to deal with things that have much greater consequences ( not to minimize the potential problems of "huffing," but there are more common problems )? "Fast-food parenting" at its best.
( Steps down from soapbox...)
On a "misery loves company" note, we modellers aren't alone. The fine art of tabletop strategy gaming ( Axis and Allies, Battletech, etc. ) and roleplaying games have been dumbed down ( IMHO ) for easier consumption as well. Most of these are being replaced by collectible card games and "click" games. Next thing you know, Axis and Allies will come out with a new version that's even simpler than Risk
.
The economy's not the cause. The collectibles and other related industries are just getting the money that the scale modelling industry's losing.
Sorry for the rant.
I couldn't even find my way back to "normal" with the Hubble!