From an economic historian, a timely look at the evolution of consumer debt in the United States.
Staggering debt, specifically in the form of student loans, accounts for many of the numbers swelling today’s Occupy Wall Street movement. Having graduated into a market where there are no jobs, young Americans feel bitterly duped at having pointlessly incurred the sort of “good” debt traditionally assumed by previous generations, confident that dividends would be forthcoming. How did we reach this pass? Hyman (Industrial and Labor Relations/Cornell Univ.; Debtor Nation: The History of America in Red Ink, 2011) takes us almost decade by decade through the history of consumer debt, beginning just prior to the 1920s when individual borrowing still carried a moral stigma. The advent of the automobile changed all that. Soon, buying cars and houses on credit—all OK according to sophisticated financial advisors as long as the purchases conformed to a “budget” easily calculated when incomes were rising and jobs rarely lost—became a mark, not of being unable to pay, but rather of trustworthiness and stalwart character. Properly understood, borrowing is neither good nor bad in itself. Rather, it’s a part of American capitalism, “more than numbers, it is a set of relationships between people and institutions” well within our power to regulate. From the time when lenders and borrowers stared at each other across a desk to today’s impersonal transactions where debt can be traded “like any other commodity,” Hyman fills his narrative with a variety of tales that help us put the current economic turmoil in perspective. Confirmed free-marketeers will balk at portions of his analysis, thinking he’s gone too easy, for example, on Fannie Mae and Freddie Mac, and hold his big-picture solutions—new federal agencies to evaluate businesses the same way the FHA created standards for homes and to coordinate the secondary market for securitization of business loans—at arm’s length, even if they agree with his goal of stimulating business investment. For the most part, however, this is an evenhanded account aimed at the general reader baffled by today’s economic crisis.
From Model-Ts to TVs to McMansions, Hyman uncovers the credit story behind all the glittering prizes and offers a prescription to prevent the American Dream from turning into the American Nightmare.
