Time and again, the history of consumer debt in the United States has been given the time and attention of many researchers although not too many have looked into the state of personal debts in the country and its evolution. In his book, Louis Hyman attempts to resolve this case, looking back into the personal credit of the Americans for the past 200 years. Hyman checks the four connecting themes: the many that consumers make their purchases, the institutions that grant personal loans, the government’s role in personal financing, and the development of technology that has paved the way to the modern forms of credit. As Hyman connects the roles of businessmen, consumers and politicians, he provides an explanation of how personal lending works how on earth did it become a part of the American life. Furthermore, the book offers an informative, engaging, and useful insight of the American way of debt, providing a reflection on how did American fall into the 2008 financial crisis in a manner that almost slammed moralists and monocausalists.
Debtor Nation, though, it not just all about personal debt, the rise of the financing sector, the popularization of home mortgages and consumer credit. Hyman also touches and connects social history, business history and economic history, which makes it easy for him to become both quantitative and qualitative in his discussions of consumer debt.
Hyman explicates that the consumer finance took off in the 1930s and is less about commodity group expenditures or the morality of spending that is about the consequences-often unintended-of decisions made by firms, governments, and investors (92, 81-83). In Hyman's view, the history of consumer finance focus on the changing movement of money and not about the declining savings-savvy households (12).
Writing this book led Hyman to pour his time and effort to a number of corporate and foundation archives. He also scoured the Harvard University Business School's Baker Library, Federal Reserve records, among other possible sources. This led him to discover relevant information that explained why Americans are so much stuck in debt. The story of how business and government worked reciprocally to make personal debt legal, sellable, and profitable begins after World War I after usury laws were lightened to bring about the legal basis for consumer finance. Hyman moves to more original ground in six additional chapters, explaining how the American economy became dependent on credit through home mortgages and personal loans from commercial banks (during the 1930s), revolving credit (during World War II and the Korean War), and profit-oriented department store credit (in the 1950s).
The book also looks into how capitalists, homeowners, and the government take care of the debts no matter how volatile the economy may seem. Hyman’s discussion regarding the mortgage-financed securities in the late 1960s, the use of assets as collateral, and the coming of subprime lending, according to Koehn (2011), served as a premonition to the financial crisis that was 2008. Home-equity loans were also used to fund individual shopping sprees. Of course, credit-card debt coming at usurious rates, resulted to the purchase of goods and services. Legislators and the Federal Reserve, meanwhile, justified that Americans plunge themselves into debt to justify “income inequality.” (19)
According to Hyman, “credit appeared to close the material gap between the American reality and the American Dream, but without rising real wages the debts remained.” (220) Hyman, therefore, highlight that the 100 years preceding the present economic condition of America began from innovations and development in the country’s financial system, weak government policymaking, and increasing household loans. Indeed, “the relative danger of relying on consumer credit to drive the economy” still “remains a macroeconomic puzzle to be solved,” Hyman emphasized (284).
Furthermore, Hyman makes the call: “American capitalism is America, and we can choose together to submit to it, or rise to its challenges, making what we will of its possibilities.” (290). That is, will Americans reinvest the returns of productive borrowing to steer the economy, generate job opportunities and ensure the sustainability of the household’s purchasing power? Or will Americans recklessly swipe their credit cards and bury themselves in debts to enrich those on top of the economic chain?
Hyman’s book is stuffed with the information that any reader will close it wealthier in knowledge and wiser in terms of incurring credit. Nevertheless, the book is sparse on cold data to the point of inconsistency in statistics that will readers make want for more. Nevertheless, the shortcomings will not deter from making readers want to read it.
References
Debtor Nation: The History of America in Red Ink: Book Review. The American Historical Review (2012) 117 (2): 566-567.
Debtor Nation: The History of America in Red Ink: Book Review. Journal of American History (2012) 98 (4): 1211-1212.
Hyman, L. Debtor Nation: The Red History of America in Red Ink. Oxfordshire: Princeton University Press.
Koehn, N.F. Devoted to Debt. Harvard Magazine. http://harvardmagazine.com/2011/07/devoted-to-debt, retrieved June 16, 2016.
