Credit and Consumer Society

Dawn Burton

• Publisher: Routledge
• Year: 2012
• eBook ISBN: 9781134136186
• Topic: Business
• Subtopic: Business General
• Index: Business

The language of credit and debt is almost ubiquitous in daily life. In advanced modern societies, financial institutions and other organizations have become increasingly active in lending money to consumers, and consumers apparently more than willing to take advantage. This groundbreaking new book offers an analysis of this important phenomenon, arguing that we have entered an era in which credit and debt are sanctioned, delivered and collected through new cultural and economic mechanisms.

Written in an accessible and straightforward style, the book takes a multi-disciplinary approach, examining consumer credit and debt in both societal and economic contexts. It explores key topics such as:

• the historical context of credit and debt
• current theories of a consumer-centred society
• the credit industry
• attempts at government regulation.

Credit and Consumer Society establishes the wider analysis of consumer credit and debt as a discipline in its own right. It is important reading for students and researchers in business and management, finance, public policy and sociology, as well as for policy makers and consumer groups working directly in this field.

1 Consumer credit

Historical approaches

Consumer credit has a long history, as old as civilization itself. However, the nature of consumer credit has changed over time and space. Strasser (2003: 376) maintains that incorporating historical perspectives in discussions of consumer culture has a range of advantages:

Historical accounts illuminate the abundance of our choices, help us understand that to be human is not necessarily to be like us, it provides insights into other cultures that facilitate a process of self-reflection and an awareness of alternative futures. History is often relegated to the ‘background’ – a static stage set, in front of which the ‘real’ action takes place. Such representations of historical experience trivialize the past. They justify the world as we know it now.

The reading and re-reading of history in the way described by Strasser is especially valuable in our understanding of credit and consumer society. So endemic has credit become that one could be forgiven for believing that credit and debt were always part of society in much the same way as they are today. However, an understanding of historical scholarship enables us to understand continuities and changes in the role of credit and debt in society.

Traditionally, access to credit has been deeply fractured along the lines of social class, gender and, more recently, ethnicity. Large numbers of working-class consumers have been denied, or had limited access to, mainstream credit and instead have been forced to deal with an alternative range of suppliers. The relationship between women and credit is particularly complex. Women were forbidden to enter into economic transactions in their own right, yet

long before Thorstein Veblen had pronounced his now classic formation of the central role of leisured ladies in capitalist consumption, successive generations of English observers had condemned women's increasingly visible and voluminous acquisitive activities as prime catalyst of financial ruin.

(Finn 1996: 703)

An overarching issue that has informed attitudes to credit for centuries, and in fact still does, is the role of religion.

This chapter will provide a broad overview of some of the contemporary historical scholarship in the field of consumer credit and debt. It is not the intention to provide a history of credit since time began, since other scholars have covered aspects of this material with respect to credit (Gelpi and Julien-Labruyere 1999; Thomas, Edelman and Crook 2002; Vukowich 2002; Peterson and money (Davies 1996). The purpose of this chapter is to provide an important touchstone for the subsequent discussion of credit in contemporary society by illustrating some salient themes in the debate. Historians have not paid a great deal of attention to consumption, but the recent heightened profile of credit and debt has prompted many more historical studies that have served to enrich the field. The sub-specialism can be best described as work in progress. Nevertheless, some fascinating historical insights have already been uncovered.

The chapter will begin with a discussion of methodological issues that have informed scholarship in this area. The second theme is the role of religion on developments in credit and debt in different countries. The third part of the chapter will discuss the complex relationship between social class and consumer credit. The final section will explore the relationship between gender and consumer credit and debt.

Credit, historical sources and research methodology

Historical scholarship presents some interesting methodological issues in connection to our study of credit. The relative merits of a variety of different sources are at the heart of the debate, especially concerning what they tell us and what they leave out. Lewis (1992) speculates that the earliest formal record of credit dates from around 2000 BC and is inscribed into a stone tablet bearing the following promise: ‘Two shekels of silver have been borrowed by Mas-Schamach, the son of Adadrimeni, from the Sun Priestess Amat-Schamach, the daughter of Warad-Enlil. He will pay the Sun-God's interest. At the time of the harvest he will pay back the sum and the interest upon it.’ Opposition to usury in the Roman Republic was enshrined in laws in which those guilty of theft were fined double the amount taken, whereas for usury the figure was fourfold (Brunt 1971).

Postan (1924) provides a valuable framework of historical sources pertaining to the nature of credit transactions that includes registers of debt held by official institutions, pleas, and a non-specific/miscellaneous category that included private archives, inventories and accounts. Rents and leases recorded credit agreements, with arrears serving as de facto credit agreements. Of equal relevance were records of purchases that remained unpaid until the consumer's death. Wills and probates were valuable for just this reason, especially from the fifteenth century onwards, since they provide information on the size of outstanding debts and the names of creditors and debtors. However, even this range of documentary evidence could grossly underestimate the amount of credit that was used. Muldrew (1998) maintains that because of literacy problems some credit agreements were verbal affairs in which the two parties would agree to the transaction in front of witnesses.

Latterly, analytical insights of credit and debt through the reading of fictional writing have provided new avenues of inquiry. Literary texts offer an important way of making private credit relations visible and therefore provide a vehicle for challenging economic theory since they provide examples of the day-to-day experiences of consumers (Finn 2003; Livesey 2004). Business failures were a major theme in many nineteenth-century novels and plays (Weiss 1986; Scheuermann 1993; Posner 1998). Victorians viewed debt as a national economic problem, and not just for creditors, since ultimately merchants had to pass losses from bad debt on to customers in the form of higher prices. Literature of the time that highlights debt includes Thackeray's Vanity Fair and The Newcomes. Charlotte Brontë’s Shirley and Trollope's The Way We Live Now are other examples. Charles Dickens’ father was imprisoned for debt, and Dickens chose debt as themes in some of his novels, such as Little Dorrit and Dombey and Son. Lawyers and failed lawyers were prolific writers of fiction, thus highlighting legal themes within novels for a wide audience (Brooks and Gewirtz 1996).

Other literary sources have included diaries and autobiographies that report on the ‘mundane practices and affective meanings of the market’ and the ‘interpenetration of social relations and economic exchange’ (Finn 2003: 64). Diaries often reflected themes that the writers had read about in novels and helped them construct their sense of self. Because diaries were written by individuals from all social backgrounds, they provide a rich data source of patterns of credit and debt. Copeland (1995) provides revealing insights about credit and debt by examining correspondence sent to the Royal Literary fund, a charity that was established during the 1890s to provide financial assistance to destitute authors. The inability to pay corner shops or pay the rent, and tales of those who had gone into hiding to avoid prison, were recurrent themes raised by female authors.

The language of credit and debt were also incorporated in drama, an obvious example being the work of Shakespeare (Woodbridge 2003). The most famous play on the theme is The Merchant of Venice, whose central character is Shylock the moneylender, but there were many others. Nugent (2003) explores depictions of usury and counterfeiting in Robert Wilson's The Three Ladies of London and The Three Lords and Three Ladies of London, and in Shakespeare's Measure for Measure. She notes that although some of the early modern dramas depicted usurers as ‘malevolent parasites on society’, there was also evidence to suggest that moneylending ‘created constructive communal bonds within an emerging culture of credit’ (2003:202). Jowett (2003) analyses Timon of Athens, a collaborative effort by William Shakespeare and Thomas Middleton, which portrays social relations built on greed and self-interest and credit networks that were in a state of collapse. Others plays include Philip Massinger's comedy about miserliness, A New Way to Pay Old Debts, and Webster's tragedy about uncharitable litigation, The Devil's Law Case (Muldrew 1998). Art history provides another, although much more marginalized, area of data on attitudes to credit and debt. The painter William Hogarth highlighted the plight of debtors who were tortured in prison by depicting a debtor showing the prison committee the manacles and shackles that he has been forced to wear by Bambridge, the jailer at Fleet jail (Aris 1985).

Researching the history of credit behaviour among consumers within various social classes is fraught with difficulties. The wealthiest groups in society have left far more documentary evidence than those lower down the social scale. For example, Owens et al. (2006) use probate valuations of the estates of aristocratic families in England to provide some insights into the credit–debt relationship. Equivalent records were not applicable for working-class people since they did not leave personal accounts, and historians have had to rely on other sources, including court records on small debtors, insolvents and bankrupts (Jones 1989; McIntosh 2005). Using this data presents a methodological problem since these sources provide data about people who have run into trouble and as a consequence are the exception rather than the rule. Another source of information about the credit habits of the poor comes from the accounts of charitable institutions that helped those in need, as demonstrated by Galvin's (2002) account of parochial charity in fifteenth-century Brugge (Bruges), Briggs’ (2004) examination of the operation of manorial law in later thirteenth- and fourteenth-century rural England, and Livesey's (2004) account of case notes about people applying for relief from the Charity Organisation Society in late Victorian and Edwardian London.

Credit, debt and religion

Some of the earliest accounts of the role of credit in society are biblical references that focus on the religious prohibition of usury. The debate over usury has a long pedigree dating back to the book of Exodus (22:25), in which it was condemned by God. This view was reinforced in Deuteronomy (23:20–1), in which the Hebrews were told not to lend to their brethren at interest, while Ezekiel (18:7–8, 13) took a stronger line and argued for the execution of individuals who engaged in usury. In Leviticus (25:35–36) the concern for one's brother was reinforced by urging believers not to revert to usury. Psalms (15:5) states that the godly will aid their neighbours and not lend at interest. The case for usury being ungodly was strengthened in Luke (6:35), which urges that individuals who lend to others should do so without any hope of return. Christian theologians built on the teachings of the Old and New Testaments to create a Christian view which denounced all lending with the intent to secure a return over the principal sum loaned. The conclusion was clear: God does not permit usury.

This view of moneylending existed until the middle of the sixteenth century. Up until this period, economics remained a branch of theology which regarded human activities within one central schema determined by the spiritual destiny of humankind. Tawney (1926:272) maintains that economic transactions were judged by the way they conformed to ‘the moral standards derived from the traditional teaching of the Christian Church’ and not the movements of markets. The strict biblical interpretation of moneylending began to be reassessed by European reformers in the light of their education and experience. At the crux of the debate was clarifying how usury was defined, and how and when it occurred. The biblical passages make clear that God does not permit usury, but an alternative reading would be that you should not lend at interest to your brother or the needy, but charging interest to everyone else is permitted.

Jones (1989) uses the English Act against Usury of 1571 to demonstrate the shift away from a theologically dominated interpretation of usury to one that focused on individual conscience. The supporters of the original Act were at pains to ‘place secular law in proper relationship to God's law without serious regard for the economic effects of the law’ (Jones 1989:197). By 1624 a widely held view was that the state had a right to, and should, regulate usury, but for secular and economic reasons rather than because it was forbidden by God. The reasons for this change in attitude, which spanned three-quarters of a century, were a complex interaction of economics, law and theology. In part it was due to a more widespread awareness of the uses and abuses of money.

In Elizabethan society the view that only the needy borrowed and the borrower always oppressed the lender began to be questioned by large sections of the population, for whom this position was not part of their life experience. The terms of the 1571 Act allowed usury interest rates of up to 10 per cent to be charged. Anyone found guilty of lending at a higher rate was faced with a triple forfeiture of the principal. The statute was enforced by informers who were willing to accuse usurers. In this respect the market ‘was shaped within and by the legal structure: not just by the statute law, but by techniques of enforcement, contracts, and judicial decisions’ (Jones 1989: 4) As a consequence, usury became defined more narrowly as lending at rates over 10 per cent, and there was a prevalent view that not all usury was against God's law. Interest rates at 10 per cent came to be considered legal and normal. The widely held view was that lending at interest could have positive and negative effects and it need not be forbidden unless it was clearly causing harm to the community. This opened up the space for an emphasis on the concept of freedom of conscience and ethics relating to individual agency.

Jones maintains that the Act on Usury provides an important link between the Reformation and the rise of capitalism in England. In this respect his work supports the main tenets of Max Weber's work on the relationship between religion and the rise of capitalism set out in The Protestant Ethic and the Spirit of Capitalism (1999). Weber's thesis advocates that the economic doctrines of the Catholic Church delayed the advent of modern capitalism, owing to their strict adherence to the biblical views on usury. In contrast to the high-minded and controlling Catholic approach, Calvinism morally embraced the accumulation of wealth in the context of promoting the merits of an industrious career, work as an end in itself, thrift and self-discipline. Wealth was condemned only when it was associated with a life of idle luxury or self-indulgence. According to Weber, Calvinism furnished the moral energy and drive of the capitalist entrepreneur. Moreover, although Weber uses Calvinism to illustrate the relationship between religion and capitalism, his interpretation extends to other Puritan sects.

There have been a number of criticisms of Weber's work (see Tawney 1926; Gilchrist 1969). Of particular relevance to our theme of consumer credit is the work of medievalists, who have long questioned the reported intransigence on the part of the Catholic Church with respect to usury, arguing that the Church had adapted to meet the needs of changing economic circumstances in which usury became established at every level of society (Nightingale 2002). Gilchrist (1969) provides evidence that the Catholic Church did in fact make exceptions to the biblical interpretation on usury on thirteen different counts. These included the lender's sharing of the risk, the loss of profit on the capital, and a new emphasis on the intention of lenders. Gelpi and Julien-Labruyere (1999) have recently provided an analysis of six centuries’ worth of the Catholic Church's rhetoric on the issue of usury, and conclude that the Church was hypocritical. It condemned usury but was simultaneously participating in the activity.

The role of the English parochial clergy as investors and creditors in the first half of the fourteenth century provides some important insights into the attitudes towards usury within the Church and community (Nightingale 2002). If the clergy were to seek out usurers within the community because this activity was condemned by God, they would be highly unlikely to engage in the practice themselves. The parochial clergy were well placed to become moneylenders within their own communities. While there were variations in their income, most had a standard of living in excess of that of the richer peasants, and many received additional revenues which gave them a surplus to invest. Furthermore, there was a long medieval tradition of the clergy providing safe deposit services and acting as executors of wills, and therefore they may have had access to money to invest on behalf of others. Celibacy also had financial advantages. In theory, the clergy had no wives or children to provide for, and thus were under no pressure to invest in property or land to meet their dependants’ needs. Their main interest was to provide for themselves in retirement, so they had every incentive to make investments for the future.

Certificates exist that indicate that parochial clergy (rectors, parsons, vicars, chaplains) from all over England lent money, the average loan being £20, which was substantial (1,600 days’ wages for a skilled craftsman). The loans tended to be over relatively short timescales of four to five months, and the clergy took action to chase their defaulting debtors in much the same way as other lenders. However, there were geographical variations in lending behaviour. Areas that were poverty-stricken, remote or small in size tended to have few loans provided by the clergy. The same was true of large towns where there was a wealthy merchant class. Nightingale (2002: 101) concludes: ‘thus economic interests, rather than the moral influence or local needs of the community seem to have motivated the parochial clergy as creditors and investors in the first half of the fourteenth century’.

Despite the controversy over the precise relationship between religion and capitalism established by Weber, what is not at issue is Protestantism's influence on attitudes to credit and debt. Calder (1999) maintains that at the close of nineteenth century in America, moralistic ways of thinking about finance were reasonably well established. The underlying theme was that the power of money could be mastered by adhering to moral laws of money management. Positive aspects of money were that it was the basis for careers and businesses, and could be used to help the poor obtain medical treatment. Language of the day emphasized the view that people did not borrow; they were trusted. Credit was character, credit was trust, credit was good. But debt, the necessary analogue to credit, was an entirely different matter. According to Victorian moralists, debt was ‘a calamity’, ‘an oppressive and degrading incubus’, ‘an inexhaustible fountain of dishonesty’. Protestant moralists counselled against ‘wasteful expenditures’ and ‘present gratification’ (Calder 1999: 93).

A common way of talking about money had been established by the political, literary and religious elite and was disseminated through the popular media. The literature appeared in a variety of forms, including sermons, pamphlets, textbooks on political economy, gift books for young men and women, didactic short stories, financial advice books, and guides to domestic economy. Similar messages were propagated to children via Sunday schools, since these were some of the main distributors of children's literature. In the United States, McGuffey Readers were first publishe...

Table of contents

• Front Cover
• Half Title
• Title Page
• Copyright
• Contents
• Dedication
• List of tables
• Introduction
• 1 Consumer credit: historical approaches
• 2 Consumption, credit and consumer society
• 3 Credit and the production of trust
• 4 Making credit markets
• 5 The marketing of consumer credit
• 6 Credit and consumer misbehaviour
• 7 Consumer credit and the politics of consumption
• Bibliography
• Index