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Nineteenth-century America was a society at odds with itself, and nowhere was its penchant for self-deception more enthusiastically indulged than in the era's polemics excoriating consumer credit. There is "no excuse for going into debt for the ordinary necessities of life," proclaimed Harper's Weekly. "Debt is an inexhaustible fountain of dishonesty," insisted Henry Ward Beecher, while Reverend Daniel Wise feared that "debt destroys more than the cholera." Even self-promoting circus man P. T. Barnum felt compelled to warn that "debt robs a man of his self-respect, and makes him almost despise himself."
This fin de siècle angst about debt now seems positively quaint. Today, it's odd if you don't have a credit card. Yet recast around the moral drama of personal bankruptcy, the debate over consumer credit still roils. Confronted with the explosion of personal bankruptcies (more than 1.3 million in 1998), conservatives tell a narrative of cultural declension from the thrifty, God-fearing, Puritans. Liberals, meanwhile, blame the credit explosion on ruthless advertising tactics that target the young, the helpless, and the destitute. Both sides assume that Americans have been led astray from their native frugality by the smoke and mirrors of credit.
In Financing the American Dream: A Cultural History of Consumer Credit, the historian Lendol Calder calls the entire idea of a fall from financial grace into question. Calder, having paged through a century's worth of screeds denouncing debt, is blasé: "The historian who reads in his newspaper 'Credit-Card Debt Could be the Plastic Explosive that Blasts the Economy in 1997' can be forgiven for calmly turning to the sports page." His thesis is simple: consumer credit has been in widespread use ever since the late nineteenth century, and even before that, Americans were in the habit of borrowing to "finance their dreams." In other words, there never really was a time when Americans were the tightwads conservatives wish we still were.
Financing the American Dream should be mandatory reading for anyone who harbors wistful thoughts about the good old days when folks were moral in their spending and listened to the parson. Despite its evident correctness, though, the thesis that credit has been around for a while isn't really surprising if you don't have a professional stake in waxing lachrymose about the collapse of American civilization. Calder is certainly right on the narrow point
that people used installment plans and small loan shops to get credit
a hundred years ago. (And to be fair, the book also makes some less well substantiated arguments about credit, mostly to the effect that it doesn't unleash hedonistic consumption-à la Norman O. Brown-because it forces people to budget.) But this is an area in which, to use the hoary old dichotomy beloved by historians, change counts for a lot more than does continuity.
Credit-financed consumption is vastly more important to the economy today than it was in the late nineteenth century, and the perception of credit has changed in ways that reflect its centrality to our economic system. Nineteenth-century America was heavily commercial and rapidly industrializing and land speculation was rampant even among Jefferson's tillers of the earth. But vestiges yet remained of an older bourgeois ideology that championed the dignity of labor and the value of independence-attained, of course, by owning property. The popular mistrust of credit reflected the ambivalence of American society toward the world it was creating, one in which nearly everybody would work for wages and be dependent on an employer for both livelihood and identity. Because we live today in that world, the ambivalence can be hard for us to understand.
The intense political emotions aroused by debt in the nineteenth century were just one dimension of the era's obsession with filthy lucre-and not just with acquiring it, either. "What was money?" asked the hero of an 1892 novel by William Dean Howells. "The idea of it seemed to go to pieces, as a printed word does when you look too steadily at it, and to have no meaning. It affected him as droll, fantastic, like a piece of childish make-believe."
The mutability of money seemed symbolic of its deeper nature, for in the early 1800s, money was a solvent of all kinds of traditional relationships. It linked the familiar, stable present to a dramatically altered future. It could transform a farm into a mill village, a hamlet into a city, a peddler into a rich man. While holding great allure, it also promised terrible instability. The popularity of hard money and the general antipathy toward paper currency reflected the sense that money, "the fruit of many years' industry," as Tom Paine put it, "has something in it sacred that is not to be sported with, or trusted to the airy bubble of paper currency." Paper was the money of the stockjobber and the frivolous debtor; gold, the currency of the productive citizen.
The politics of debt reached a fever pitch during the long deflation of the late nineteenth century, when hard money lost its shimmer for all but the rich. Historians today differ about the exact causes of the agricultural crisis, even questioning whether it was really as bad as farmers at the time said it was. What is undeniable, though, is the intensity of feeling, hardly imaginable today, about staid financial topics like interest rates and the banking system.
The autonomy small businessmen cherished as men and citizens-not to mention the profits they expected as hard-working subscribers to the American dream-appeared to them threatened by tight money that could drive them into bankruptcy and the humiliation of wage labor, while for creditors, soft money represented nothing less than expropriation. The 1950s economic historian Bray Hammond, whose father was a gold bug, recalls wearing a vest covered with gold medallions at a pro-gold rally he went to as a child. Today, business journalists have a nice little industry interpreting the runes Alan Greenspan casts down, but certainly no one would dream of trying to influence the Fed chairman through something as crude as a demonstration.
For nineteenth-century Americans, obsessed with the potential limitations on freedom implied by debt, consumer credit appeared especially threatening. Owing money to the creditor was like owing time to the boss, and small producers prided themselves on doing neither. More fundamentally, consumption itself seemed suspect. A genuinely prosperous member of the middle class did not merely possess an elegant house, proper china, and other bits of finery: he ran a business. Having the accoutrements of a middle-class identity but not producing anything made someone seem like a sham.
Today, though, consumption is viewed as a noble social contribution in its own right. It is the heroic shoppers of the United States, after all, who keep the global economy afloat. And credit keeps animal spirits high: it has accounted for roughly a quarter of the growth in consumption during most of America's economic expansions since World War II. To finance the national shopping spree of the 1990s, Americans have borrowed against everything ranging from houses to future stock market earnings and have charged to the max. And even though interest payments (on all kinds of debt) siphon off about 16 percent of personal income, people are a lot more willing to complain about paying their taxes than they are about paying their creditors. For yesteryear's critique of credit was really a condemnation of a world based on wage labor and consumption, and the old fear that debt gave creditors too much power over one's livelihood no longer resonates in a world in which most people are already dependent on the market and the boss.
This is not to say we should all just flip to the sports page; there remain plenty of good economic reasons to worry about credit. Since credit-financed consumption is so important to the overall economy, a recession could be exacerbated if bad times made shoppers less willing or able to borrow. The reduction in federal borrowing over the 1990s has been compensated for by increased personal and corporate debt-far less stable than the government variety. And even in such balmy economic climes as these, easy credit lessens pressure on employers to grant wage increases, masking income inequality.
Heavy loads of business debt can also cause problems, of course. Financial firms, in particular, borrowed at record levels during the 1990s, more than doubling their debt levels, while nonfinancial firms increased indebtedness by only one-third. This means that tremendous amounts of money are being used to bankroll securities trading and investment in stocks, as Jane D'Arista pointed out in a recent issue of the Financial Market Center Alert. So what will happen to the bubbly bull market if a recession makes it more difficult for these firms to borrow money?
For decades, Jeremiahs have been predicting that the expansion of debt would bring down the economy and it hasn't happened yet. So is it empty moralism to worry about credit? I don't think so. Debt, as it always has, raises questions beyond the purely economic. Small farmers and artisans in the late nineteenth century lived in a world that-for all its injustices, stifling provincialism, and deep insecurity-seemed to offer real independence, at least for men. (Women, of course, were subordinates by definition.) The identity of the autonomous producer, beholden to no one, living by rules he freely accepted, was the basis for the early labor movement and for Populism. The desire to protect small property and craft labor is what lends these early "radical" movements their curiously conservative character; any modern political movement clearly must draw on some other source of solidarity. One shouldn't glorify nineteenth-century politics or despair of political life in a consumer society. Precisely because it destroys small property and encourages cultural homogeneity, such a society offers the possibility for building a movement based on common, social identities, rather than on each individual's desire to have a bit of land to call his own.
But at the same time, it's hard not to feel nostalgic for the worldview of the independent producer, which informed the turn of the century hatred of credit and which motivated the first great political movements against concentrated wealth and power in the United States. The seductive promise of credit is that it makes people feel, at the point of purchase, like they can have everything they want in a flash of plastic. If promises of instant wealth seemed like a swindle a hundred years ago, it was for very good reason.
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