Debtor Nation: How Consumer Credit Built Postwar America

It is difficult to consider debt as having a history, because it seems like debt might be, as one popular historian of money in 1917 described it, a “semi-slavery . . . [which] existed before the dawn of history, and it exists to-day.”¹ People, in a certain sense, have always lent money to one another: to a wayward brother, across a saloon bar, to a co-worker. But even by 1917, as that popular history was written in the midst of world war, the ancient personal relationship of personal debt was changing into a modern impersonal one. My dissertation is about how what we call personal debt, that is debt incurred by individuals and not by businesses, went from being owed to other people to being owed to institutions, and what this has meant at the largest level about American capitalism. In the dissertation, Debtor Nation: How Consumer Credit Built Postwar America, I wanted to know how personal debt, which was at the end of the nineteenth century illicit, illegal, and always personal, became by the end of the twentieth century legal, institutional, and shockingly condoned. How did it move from the smoky backrooms of loan sharks to the brightly lit boardrooms of multinationals? How did it move from the margin of capitalism to its center? How did consumer credit become a site of investment and profit, and by the choice of these investments, what was left out? What other investments did consumer credit lending crowd out? How did this growth of consumer credit reframe the largest business narratives of the twentieth century—the second industrial revolution at the beginning of the century and so-called “deindustrialization” at its end?

Since we each only have a few minutes, I thought I would quickly explain the purpose of my project, a few of the analytic highpoints, and how it relates to the existing historiography. These are big questions and it took a while, and lots of pages, to piece together. The narrative attests that this debt economy, though not accidental, did not spring forth one day fait accompli. Business choices, institutional contexts, and government policies converged to produce a world for which no one planned but nonetheless came to be. The institutions that lent, governed, and enforced the repayment of debt coalesced haphazardly, responding to business pressures and government policies in addition to consumer demands. Consumer debt’s explosion was not the natural expression of the market nor was it the hegemonic will of a master planner, but was instead the historically contingent creation of financial institutions, the state, and the American people all struggling to make ends meet within the volatile circumstances of an industrial economy becoming post-industrial. How profits were made and what political policies were needed changed from moment to moment. Rather than inevitable, consumer credit was promoted, was created, to meet specific events at specific moments.

Before World War II, I show how an assemblage of newly legal debt institutions set the stage for the massive expansion of postwar debt use. In the postwar period, even though Americans began to borrow so much more than they had earlier, they were able, at the same time, through the good jobs of the period, to pay back what they had borrowed. Outstanding debt levels exploded in the 1970s, not because consumer borrowing grew at a faster pace, but because consumer repayment began to fall. Americans learned to borrow in the midst of prosperity, but only learned the consequences of that borrowing after the prosperity ended. Debtor Nation argues personal debt was at the core of both the postwar’s affluence and its decline, demanding a reconsideration of that period’s nostalgic economic legacy. The long-term persistence of debt is the key difference between the debt of today and the postwar period, when the amount of debt extended by lenders reached its most brisk expansion in the context of stable, widely distributed income growth. People borrowed because they believed that their income would continue to grow in the future—and they were right. Using debt, many Americans in the postwar United States achieved a...