Charge It!

Luxury Fever: Why Money Fails to Satisfy in an Era of Excess. (See "Purchase Disorder," June.)

This heavenly vision, this American Dream, must be restrained, say such commentators. After all, Missy and Buck can't really want--ugh!--such vulgar things. These things are not necessities, say the descendants of Thorstein Veblen via Galbraith; they are merely unneeded "luxuries." To such well-cosseted and well-remunerated academic critics, Missy and Buck can do very well with a rusted-out Volvo, a used Kenmore, no TV, and some sensible tie-up shoes. As important, Missy and Buck should never go into debt in order to get this kind of stuff.

Indeed, puritanical economists such as Schor and Frank love to speak of the almost $2 trillion of consumer debt flowing up into the heavens (or down the drain), while neglecting to tell you that the real explosion has been precisely in the variety of things that can be bought on credit (almost everything), the new and efficient means of using credit (the card), and, especially, the vast expansion of people who are now offered credit (the young and the lower classes).

Calder focuses precisely on such developments and how they have come to shape our times. The rise of consumer credit is a fascinating story because one gets a chance to observe human desire equilibrate between difficult choices: spend/save, now/later, have/want, and especially luxury/necessity. Although from time to time people are duped into debt, more often consumer debt results from an often crafty, often intelligent, navigation between these polarities. It is, in Calder's felicitous term, "disciplined hedonism," or what used to be called "budgetism."

Of course, that's not the view from the shame-on-you wing of academia, which sees consumer debt as a great snake about to poison us all. But in point of fact, consumer debt has been with us for a long time; we just haven't seen it on monthly statements. In the early part of this century, for instance, this kind of debt was held inside families. As Calder says, America has always been awash in red ink. And, interestingly enough, well over 95 percent of consumer debt is not just repaid but promptly repaid. In fact, given the choice of holding corporate debt or consumer debt, you'd be much better off lending to consumers.

Our language carries our judgment and, as Calder notes, the language of consumer debt comes out of Victorian moral pieties--hence the "myth of lost economic virtue." Nowhere is this anxiety better seen than in the 1920s, as the syntax of individual debt was rejiggered in more positive terms.

A central figure in articulating the linguistic changes was the economist E.R.A. Seligman, whose groundbreaking The Economics of Installment Selling revolutionized how we calibrated debt in words. Seligman recast what used to be called consumptive debtors and consumptive lenders (phrases fraught with tubercular overtones) as productive debt and productive credit. Essentially, he argued, if you were going to buy a sewing machine, or a car, or especially a house, then you were going to have to get close to the demonic snake of debt. The only real question was how venomous the snake should be.

Simon Patten, who went on to found the University of Pennsylvania's Wharton School, showed that consumption need not be onerous and that a sense of controlled hedonism is healthy for individuals as well as markets. Veblen, it turned out, had told only half the story: Sometimes consumption is a path to satisfaction. Even more important, the inability to consume is an almost certain path to unhappiness.

What Seligman, Patten, and others did, in modern parlance, was to show that terms such as luxury, saving, thrift, necessity, and the rest were social constructs and that they could be redefined in all sorts of ways. What would happen, for instance, if you called debt consumer's credit and aligned it with the morally acceptable producer's credit? Seligman knew full well that this was "just" semantics, but he also knew that having the machine-made thing was becoming central to the creation of self.

There is, to be sure, a crucial difference between "buy now, pay later" and "pay as you use." There is wise debt and foolish debt. In fact, Seligman argued that you can actually view some debt as a kind of savings. "The ultimate aim of all economic activity," he argued, "was the `production' of satisfactions." Debt, he pointed out, was often an efficient shortcut to satisfaction. (Try buying a house in cash sometime.)

This is Puritan heresy, of course, but capitalist truth. Let's return to the cover art and ponder an irony worthy of note--and one lost on those who dislike "luxuries." These things are within reach of Missy and Buck not because of their willingness to go into debt in order to have them but because of the willingness of others to do it first.

Take any of those heavenly objects--the washer/dryer, for instance. At first, this object was obtainable only by the rich. All you have to do is look at early advertising and you will see that the machinery is positioned as something the maid can use not for herself but for her employer. Thanks to mass production and mass marketing, unit costs decrease and the retail price falls. Eventually, Missy and Buck can get in on the act. They may have to borrow to do it but, if they do, the price may go lower still. Those kids of theirs--the ones currently playing baseball and the piano and being pushed in the pram--will pay even less for even better versions. (See "Buying Time," August/September 1998.)

This is a story, of course, not told by the thrift-minded critics. There is a weird kind of welfare system at work in the heart of a market economy. Name the current "necessity"--indoor plumbing, telephone, refrigeration, automobile, and especially the single-family house itself--and you will see that not only was it introduced as a luxury item, but that it was often financed by--aargh!--that Janus-faced god, consumer debt.

Since we usually are treated to only the bad side of that deity, Lendol Calder is to be commended for showing us the other side--the side that, more often than not, has made Missy and Buck's dream possible. The myth that consumer debt is evil is as suspect as the bromide that you can't judge a book by its cover.