Devising Consumption

Cultural Economies of Insurance, Credit and Spending

Liz Mcfall

• Publisher: Taylor & Francis
• Year: 2014
• eBook ISBN: 9781136511783
• Edition: 1
• Topic: Business
• Subtopic: Finance
• Index: Business

The book explores the vital role played by the financial service industries in enabling the poor to consume over the last hundred and fifty years. Spending requires means, but these industries offered something else as well – they offered practical marketing devices that captured, captivated and enticed poor consumers. Consumption and consumer markets depend on such devices but their role has been poorly understood both in the social sciences and in business studies and marketing.

While the analysis of consumption and markets has been carved up between academics and practitioners who have been interested in either their social and cultural life or their economic and commercial organisation, consumption continues to be driven by their combination. Devising consumption requires practical mixtures of commerce and art whether the product is an insurance policy or the next gadget in the internet of things. By making the case for a pragmatic understanding of how ordinary, everyday consumption is orchestrated, the book offers an alternative to orthodox approaches, which should appeal to interdisciplinary audiences interested in questions about how markets work and why it matters.

5 The practical heart of markets

DOI: 10.4324/9780203147870-6

Now we must not claim too much for sentiment. It does not go a great way in deciding questions of arithmetic, or algebra, or geometry. Two and two will undoubtedly make four, irrespective of the emotions or other idiosyncrasies of the calculator; and the three angles of a triangle insist on being equal to two right angles, in the face of the most impassioned rhetoric or the most inspired verse. But inasmuch as religion and the law and the whole social order of civilised society, to say nothing of literature and art, are so founded on and pervaded by sentiment that they would all go to pieces without it, it is not a word to be used lightly in passing judgement, as if it were an element to be thrown out with the smallest consideration. Reason may be the lever but sentiment is the fulcrum and the place to stand on if you want to move the world.

(Holmes, 1872: 159)

The last sentence of this nugget led a column in the Prudential Bulletin (1930b) that pronounced the reliance on reason as the cause of many failures to close business. In the absence of the ‘illuminating power of sentiment, the quickening force of emotion’ (1739) the prospect ‘remains cold’. Warming up prospective buyers with an emotional appeal was an established sales strategy long before the early twentieth-century boom in salesmanship literature. Appeals based on fear, flattery, envy and love can be found in the promotional relics that have survived three centuries or more and it is certainly the case that the role of sentiment in market action was apprehended long before Keynes remarked on animal spirits. Still, as Oliver Wendell Holmes warns, sentiment only gets you so far, and it’s an appalling substitute for algebra, engineering or sound actuarial calculation.

This may make it sound as though the place for sentiment in markets opens up only after the goods and services, the stock in trade, have been properly calculated, designed and engineered. Sentiment, then, would act like a dressing, a superficial coating that ‘glamours’ marketed things. Such a view of market architecture, where sentiment provides the final touches, the paint finishes and soft furnishings that showcase how a home might be lived in, is almost banal. Just as mechanical imitation has been read as the degraded human response to advertising, generations of critics have regarded marketing as a professionalisation of emotional manipulation techniques designed to allow ‘make believe’ needs to be produced and pacified more efficiently.¹ This basic premise has persuaded not just the Marxist left; all manner of moderates, conservatives and environmentalists have complained that the skill of image-makers fuels the excessive over-consumption of things people don’t need and don’t really want.

Surely this happens. Sometimes it is the work of a market professional, whether a sales coach, merchandiser or copywriter or some combination of the three and others besides, that makes something more deeply ‘wantable’ out of a mundane object through the sheer artistry of its sentimental veneer – we have probably all been dazzled this way by something that on a closer reckoning was unfit for purpose – but this is not the only, or most important, way sentiment works in markets. As Holmes warns, sentiment goes so much deeper than that in holding together the pieces that make social order. This is true, too, of the markets for doorstep finance. These were markets that, deep in their fabric, were constituted by sentiment. In different ways, the demand for both insurance and credit is driven first, by relations and relationships, by ties of duty, love, care, obligation and fear. People insure, by custom and law, those people and those things that they have an intimacy with and a demonstrable interest in. Credit similarly is a way of providing oneself and one’s dependants with those necessary, or longed for, things that define kinds of living. This places sentiment at the heart of markets because it is at the heart of the relationships that – despite the persuasive characterisation of markets as purified, stripped-down economic calculation – drive market activity.

That doesn’t mean that markets are truly, in essence, made out of sentiment. It means that sentiment should be accorded its proper place amidst the engineering, manufacturing and calculation of production. Insurance responds to the deep-seated human longing to live within a stable, pleasant, recognisable world by supplying products that promise to restore value should the worst happen. Fulfilling that promise demands a reliable calculator. Sentiment may be the place that insurance stands on, but without sufficiently accurate actuarial calculation, without secure and predictable organisation, it cannot stand there long. Safety, including financial safety, requires the establishment of technical rules, protocols and routines. The trick is all in the arrangement, the orchestration of practical technique and sentiment, it is in how sentiment is put into relation with products and in how relations are transformed into sentiment for products. Relationality, Callon argues, is the constitutive condition of all value, whether economic or not, because value supposes the establishment of ‘a connective link that puts things into relation with each other and calculates this relationship in the form of a ratio’ (in Trompette, 2013: 381).

This business of putting things into relation with one another is what really marks the achievement of doorstep finance companies. Industrial assurance offices in particular were selling something that it was accepted before doorstep delivery emerged, had to be sold, and sold hard. Life insurance in the 1850s was an expensive, difficult, complicated product with a reputation for failure. A succession of companies had collapsed as a result of actuarial incompetence, corruption or both, and those that survived did not always settle claims as easily as public confidence required. This got worse as the nineteenth century progressed, and the new generation of industrial assurance offices navigated their way between one moral hazard and the next public scandal. The sins offices were accused of accumulated: over- and wrongful selling of unnecessary, worthless or illegal policies; poaching and transferring business between offices resulting in undeclared losses to policyholders; encouraging sentimental extravagance amongst those who could least afford it; inducement to speculation on other lives; and, worst of all, providing incentives to neglect or harm insured dependants. While any one of these scandals might have been expected to derail a fledgling business, a long combination of them scarcely paused the appetite for policies in households that commonly bought several, often as many as there were mouths to feed, since in an era of high infant mortality, mouths might also become bodies to bury.

The ease with which this gigantic industry established itself is at odds with the long struggle to secure markets for ordinary life assurance. It’s an ease that marks how closely, and how successfully, companies managed the fit between their products and the relations and relationships that mattered most to their customers. In insurance, what began as a means of covering the expense of funerals and providing the expensive pomp necessary to mark a ‘decent burial’ quietly morphed into provision for the various contingencies of living: as a family man, a breadwinner, the responsible head of a growing household, or in the demographically modernising aftermath of the First World War, ‘a bachelor girl or a bride’. This expansion of purpose very slowly began to collapse after the Second World War. It took a long time, but a gap began to open up between what industrial assurance companies had to offer and the lives of a less poor, poor. In the doorstep-credit sector, companies expanded just as insurance offices were beginning their decline, by adjusting their offer from the means to bare subsistence to the means to having now all the things that began to appear necessary to a bright, modern way of living. Both sectors grew by extending their product portfolios in line with an ongoing definition, or qualification and requalification, of the relations and relationships that their products worked within. This was a matter of translating back and forth between customers’ lived circumstances and the actuarial, administrative and organisational bases of company experience.

The creation of market value depends on this traffic. Financial products have to be designed with customers’ lived experience in mind, but they also have to be designed in line with company experience. In insurance companies, the population insured is never identical to the general population from which mortality tables are drawn. This means that company experience of mortality must be continually measured against the expectations on which prices were based and adjusted accordingly. A similar process has also to take place in credit companies, where actual default has to be measured against anticipated default. The need to always connect corporate and customer experience is obvious in theory. In practice, however, enduring alignment is a rare and difficult accomplishment. To design a market object that succeeds is, as Akrich et al. (2002) put it, an ‘adventure’ in diffusion, in summoning more and more interest, from customers and other actors, whose interactions are allowed to shape the object. All the strategies described in the last chapter – the talking, listening in and reporting back on customers – were efforts to capture these interactions and feed them back into production. Doorstep finance companies were for a long time adept at this, using interactions to inform constant modifications, adaptations and extensions to product lines.

This constant monitoring helped fit and refit product lines into shifting patterns of living, but the process was fraught. The lesson of history is not that nothing ever really changes, but that everything changes all the time. In insurance and in credit, products were revised and re-versioned to stay in step with these changes, with impressive results in product persistency. Still, even constant revisions have their limits. Innovation in doorstep finance tended to take place across the sector and although constant it was slow, incremental and generally shallow. Product change often consisted of the type of imitative, ‘cut and paste’ bricolage that Lopes (2013) reports as still typical of product development in retail credit. So new policies might cover new risks, like life and endowment or fire and burglary but their core design and distribution method changed little. This style of innovation was insufficient when it was the ‘doorstep’ mechanism itself that began to disconnect companies from the practices and sentiments of their customers. Just as offices sought to improve their sales prospecting in the late 1950s, so the appetite for doorstep insurance products began an irresistible decline. This decline can be traced to the shifts in fashions, beliefs and desires about what the working poor should have, and how they should go about getting it, that accompanied their new affluence. That even when companies could see this coming they could do little to avoid it short of getting out of the market, illustrates how perplexing the deliberate, that is, the planned, alignment of sentiment and practice can be. It is one thing to appreciate that moving the world means combining the lever of reason with the fulcrum of sentiment, but it is another to keep coming up with substantially new recipes when an existing combination starts to fail. The accomplishment of doorstep finance companies is that they succeeded, for a very long time, in doing precisely that by shaping their products to fit the events that defined their customers’ lives.

Part 1: Building the Industrial Assurance Portfolio

Saving for death: industrial assurance, the poor and their children

Much to the consternation of middle class observers who thought there were better uses for hard-earned surplus income, if the Victorian working class saved for anything it saved for death.

(Laqueur, 1983: 110)

For social investigators like Charles Booth and Seebohm Rowntree, the percentage of income spent in even the poorest households on insurance was a matter of grave welfare concern. That concern stemmed from the discovery that the poor were intent on saving for death even when they could scarcely afford the stuff necessary to live. From the 1750s, this saving was done through the various collective insurance mechanisms on offer in friendly societies and burial clubs. Many of these were precarious enough to have prompted a series of parliamentary investigations and enactments throughout the nineteenth century, but this did little to disturb the death-saving impulse. By the second half of the century, there were millions of savings policies and contracts in a field proliferating with organisations offering assorted forms of provision.² The industrial offices quickly became by far the biggest players, controlling more than two-thirds of the market by 1910, with almost half of that in the hands of Prudential. Even where reformers, philanthropists and legislators were sympathetic to the impulse to provide for a ‘respectful’ death – and many of them weren’t – the funeral insurance industry had a dreadful reputation.

Aversion to the industry came in many forms, but it often started from the sheer expense, of the policies of course, but also of the funeral itself. After the 1750s, according to Laqueur (1983), funerals began to offer the final, determinate reckoning of social distinction. The quiet ascendance of what Trompette (2013) calls the ‘hush-hush atmosphere’ of contemporary Western funerals obscures the scale, variety and extravagance of funereal pomp and mourning paraphernalia as late as the 1950s. In the nineteenth century the manner in which funerals were conducted really mattered. Funerals became consumption occasions, with an industry of metal-workers, mourning-jet jewellery-makers, ostrich-feather dressers and sad-looking mute pa...

Table of contents

• Cover Page
• Half-Title Page
• Series Page
• Title Page
• Copyright Page
• Dedication Page
• Front-ch Page
• Table Of Contents
• List of figures
• List of tables
• Acknowledgements
• Chronological list of key reports and legislation
• Note on terminology
• List of abbreviations
• Part 1: Building the Industrial Assurance Portfolio
• Epilogue
• Bibliography
• Index