walkitout (walkitout) wrote,

_Financing the American Dream_, Lendol Calder

Subtitled: A Cultural History of Consumer Credit

I bought this about a year and a half ago, used, from Amazon (Powell's Chicago, is what I've written inside). I remember buying it -- it was during a time frame that I was carefully calculating shipping on in-really-good-shape used books to see if I could noticeably beat new-with-Prime. I _think_ this is also about why I was buying _Cradle of the Middle Class_ and _Just a Housewife_ and similar, but I'm not entirely sure.

In any event, I pulled this off the shelf in response to the following question:

When did we get to a point where people really and truly believed they couldn't live a decent life without access to credit?

And the answer to that question is not to be found in this book, other than to note, probably a lot longer ago than you might think, unless you understand this aspect of financial history really well.

Calder acknowledges up front the serious difficulty presented by the patchy source material on this subject. There's quite a lot of documentation on mortgages and virtually none on installment purchases. To the extent that companies/banks still exist that might have documentation, he was unable to get access to their archives. So he was stuck with contemporary studies (rare), commentary and so forth. He does a lot with a little.

Calder ably charts the ancient nature of "book credit" (running a tab at the grocer, butcher, dry goods store, etc., generally paid off at harvest), describes the "straight" mortgage, the building and loan societies, and the innovations of the FHA. He spends a good chunk of space on the urban borrower and how the payment structures appropriate to farming (note due at harvest) had to be replaced with a weekly/monthly setup to match the urban workers paycheck. He describes the difference in the credit needs of a farmer vs. an urban worker, and how the income lapses are predictable within a group, but different between groups.

He does a sweet job of summarizing the combine, and how installments were used to make it available to farmers who otherwise couldn't afford it (and some would argue, couldn't afford it anyway), and, in the same time, the use of installment payments for sewing machines. That description is particularly fascinating as a sidelight into how patent-pools and licensing was initially developed. His historic notes on hire-purchase are weak, in that he treated countesses and similar doing rent-to-own furniture suites as people with a known ability to pay. The nobility were infamous for being highly resistant to dunning, particularly during the time frame hire-purchase started (first and second decades of the 19th century), but hey, it's a minor complaint, and getting it right would only have supported his thesis.

After covering the reform efforts in small lending, the rest of the book is devoted to installment payments (buying on time). I was a little surprised that layaway didn't get mentioned in this section; to some degree it weakens his argument. Calder has a very straightforward point that he hammers at repeatedly. A big chunk of America buys-by-payment and essentially devotes their entire current and immediate future income to payments because they are pulling control (not his term). Victorian exhortations to self-discipline are inadequate in the face of an advertising driven culture of abundance, but if your money is entirely spent before you lay hands on it, that'll provide the structure necessary to live a good life without getting into too much trouble.

This is kind of a weird idea, but it might qualify as one of those really useful insights that helps me understand other people when my own approach is woefully inadequate as a yardstick. Unlike my father, I am congenitally indisposed to ledgers and hardcore budgeting in the Victorian manner. It's not that I've never run the numbers on where the money goes or laid out spending targets (lower or even higher, for that matter, when I experimented with spending more money on art and presents for a few years because I thought it might make me happier). But in general, my spending habits have been along the lines of the pinball in a pinball machine, heavily tilted towards hoarding whenever something makes me nervous (and believe me, a _lot_ of things make me nervous). As a result, my overarching strategy has been to keep my run rate substantially lower than what I could "afford" to spend, rather than what Calder argues is the standard approach, which is to pre-spend the next several years income.

Just the idea makes me nauseous.

But I've seen enough people come into enough money in a variety of ways to know that Calder's spend-up-to-the-limit and then be very disciplined about payments is, in fact, _really_ typical.

Given that Calder's time frame ends before revolving credit accounts, it's tough to say just how interesting this would be to the general reader. Are you _really_ that interested in consumer credit from the middle of the 1800s to just before WW2? He's a good writer -- concise, but readable, with an interesting but not particularly intrusive voice. It's well researched and I think just about anyone would learn a lot by reading it, and not just about consumer finance. It's a fascinating sidelight into American moral/ethical culture and rhetoric and the people who shaped it. Some of the earlier sections about reforming small lenders offer an eye-opening perspective on microlending (which Calder never mentions, but which the reader can bring to the reading), particularly in terms of where that might well lead.

I do sort of wonder, tho. I understand that consumer credit is used in different ways and different amounts in other countries. I'm now somewhat curious about a comparative history, which I feel confident does not exist.

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