The Myth of Lost Financial Virtue:

One of my favorite books on consumer credit–and one that dramatically reshaped the way I think about policy questions involving consumer credit–is Lendol Calder’s marvelous book, “Financing the American Dream.”  Among Calder’s insights is his observation that every generation of Americans has believed that the current generation wasn’t as frugal and financially responsible as earlier generations–regardless of what “current” and “earlier” describes, and going back until at least the mid-19th century.  I thought of Calder as I was recently reading an article by F.B. Hubachek on usury regulations and small-loan laws:

The phenomenal increase in small loans to consumers by banks is too well known to require elaboration.  Retail instalment credit selling had its original impetus earlier but it also has shown in the last decade a constantly increasing volume.  There has resulted not only a staggering aggregate per capita consumer debt but a revolution in the public attitude toward owing money.  The far-reaching consequences on the national economy extend into the production and distribution system and exert heavy influence on real wages….

The attitude of the average man toward indebtedness and thrift has been changed.  He has been beset on every side by selling pressure calculated to make him want to enjoy today the benefits of tomorrow’s earnings and minimizing the weight of the resulting debt burden.  Where once he had to obtain money in order to obtain goods, there are now several commercial sources of credit not only willing but anxious to accept his promise to pay.  This complete revolution in the consumer’s attitudy toward borrowing has been too gradual to be detected during any one year, but comparison of today with 1920 makes the extent of the change dramatic.

The year this pining for the good old days of frugal America? 1941.  And I’ll be if you went back to 1920 you could find similar groans about the “staggering” amount of consumer debt being layered on and the negative effect on consumer morality.  (From Law and Conemporary Problems, 1941).

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