Many people maintained consumption when they could not afford it, and therefore their status in the community, using hire purchase schemes or by payment instalments. By 1932, more than half the furniture, cars and household appliances and three quarters of the radios in the US were bought using hire purchase. Fifteen percent of goods were purchased on instalment plans.
The availability of consumer credit, particularly credit cards, which enable people to spend beyond the money they actually have available, was a huge inducement to spending. It enabled consumers to make purchases easily without worrying about the consequences which seemed to be far off. Credit was used as “an active sales tool”. Those buying on credit were less indecisive and less concerned about the price tag.
John Kenneth Galbraith has noted that indebtedness provides the means for those who cannot afford coveted goods to keep up with those who can, and it is in the interests of marketers to encourage them to do so.
With those who lack the current means it is a brief and obvious step from stimulating their desire by advertising to making it effective in the market with a loan.... The process of persuading people to incur debt, and the arrangements for them to do so, are as much a part of modern production as the making of the goods and nurturing of the wants.
The advantages to employers of having employees who want to save money to buy things, or who need to pay off debts from purchases already made, are that those employees will be more willing to please. In his 1982 study of BHP workers in Whyalla, South Australia, R. J. Kriegler found that the company encouraged workers to buy goods on credit or hire purchase. The workers then had to do overtime and shift work to pay off these debts. When BHP reduced production and overtime was cut for a long period of time, some families had to sell their cars, freezers or television sets.
Kriegler noted: “One cannot stress enough the indirect industrial control that an employer can have over a work-force that is deeply entrenched in time payments of one kind or another. Strikes, lay-offs, lock-outs, or simple cutbacks in overtime loom as serious threats to the livelihoods of workmen’s families and they are easily encouraged to join the ranks of the other hard-working, obedient and industrially docile instruments of production.”
As ‘Tennessee’ Ernie Ford’s song “Sixteen Tons’, says:
You load sixteen tons, and what do you get?
Another day older and deeper in debt
St. Peter don’t you call me, ‘cause I can’t go
I owe my soul to the company store.
Hire purchase and installment selling went against traditional values of thrift and frugality. There was an odium attached to debt. In order to get middle-class consumers to take advantage of such schemes the salespeople used the word ‘credit’ instead of ‘debt’. Debt was associated with usury and poverty and lack of thrift. Getting credit was a mark of respect and esteem and a sign of confidence in one’s ability to make good money in the future. Billing was made by way of a mailed invoice each month and the whole thing took on the flavour of a business transaction. Later, in the 1960s, banks made overdrafts available to these customers so they didn’t have to worry about cheques bouncing.
Daniel Bell noted that the installment plan was “the most ‘subversive’ instrument that undercut the Protestant ethic”:
Aided and abetted by advertising and the installment plan, the two most fearsome social inventions of man since the discovery of gunpowder, selling has become the most striking activity of contemporary America. Against frugality, selling emphasizes prodigality; against asceticism, the lavishness of display.
By 1960 credit (debt) was becoming “a way of life” in the US. Consumer debt had increased three times as fast as personal income during the preceding decade. Between 1950 and 1990 consumer debt had increased by 3,400 percent from $23 billion to $794 billion, much of it installment payments. The total household debt in the US at the beginning of the 1990s was 10 percent higher than the total household income. A decade earlier it had been 20 percent lower.
The demand for consumer credit was still rising rapidly in the late 1990s, rising in the UK by 16.3 percent in the financial year 97/98 to £1.33 billion and in Australia total household debt (including home loans) increased by 136% in the same year to $290 billion. Debt had been made easier by low interest rates, easy access to credit, higher limits on credit cards, bigger personal loans and more use of overdrafts. Additionally most credit cards today offer loyalty points which provide ‘rewards’ according to how much a consumer spends on their cards.
Along with increased debt has come increased banckruptcies. In 1997 well over one million Americans were unable to meet their debts and became bankrupt, three times the figure in 1981. In Australia bankruptcies were up 13% in the financial year ending 1998 from the year before which was also a record year for bankruptcies, and up another 8.5% in 1999. Eighty percent of these bankruptcies are the result of personal debt rather than business-related and almost half of them are under 35 years of age.